FIXED INCOME CLEARING CORPORATIONGOVERNMENT SECURITIES DIVISION RULEBOOKEFFECTIVE AS OF JUNE 21, 2024

TABLE OF CONTENTS
RULE 1 – DEFINITIONS .............................................................................................................. 6
RULE 2 – MEMBERS.................................................................................................................. 75
RULE 2A – INITIAL MEMBERSHIP REQUIREMENTS......................................................... 76
RULE 3 – ONGOING MEMBERSHIP REQUIREMENTS ....................................................... 87
RULE 3A – SPONSORING MEMBERS AND SPONSORED MEMBERS ............................ 101
RULE 3B – CENTRALLY CLEARED INSTITUTIONAL TRIPARTY SERVICE............... 122
RULE 4 – CLEARING FUND AND LOSS ALLOCATION .................................................... 142
RULE 5 – COMPARISON SYSTEM ........................................................................................ 157
RULE 6A – BILATERAL COMPARISON ............................................................................... 160
RULE 6B – DEMAND COMPARISON.................................................................................... 162
RULE 6C – LOCKED-IN COMPARISON ............................................................................... 165
RULE 7 – REPO TRANSACTIONS ......................................................................................... 170
RULE 8 – EXECUTING FIRM TRADES ................................................................................. 171
RULE 9 – YIELD TO PRICE CONVERSION .......................................................................... 173
RULE 10 – ENHANCED COMPARISON PROCESSES PRESUMED MATCH DATA ...... 175
RULE 11 – NETTING SYSTEM ............................................................................................... 178
RULE 11A – RESERVED.......................................................................................................... 185
RULE 12 – SECURITIES SETTLEMENT................................................................................ 186
RULE 13 – FUNDS-ONLY SETTLEMENT ............................................................................. 193
RULE 14 – FORWARD TRADES............................................................................................. 205
RULE 15 – SPECIAL PROVISIONS FOR CERTAIN NETTING MEMBERS ...................... 206
RULE 16 – NETTING OF LOCKED-IN TRADES .................................................................. 207
RULE 17 – NETTING AND SETTLEMENT OF NETTING-ELIGIBLE AUCTION
PURCHASES ............................................................................................................................. 208
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RULE 18 – SPECIAL PROVISIONS FOR REPO TRANSACTIONS ..................................... 210
RULE 19 – SPECIAL PROVISIONS FOR BROKERED REPO TRANSACTIONS ............. 213
RULE 20 – SPECIAL PROVISIONS FOR GCF REPO TRANSACTIONS ............................ 215
RULE 21 – RESTRICTIONS ON ACCESS TO SERVICES .................................................... 221
RULE 21A – WIND-DOWN OF A NETTING MEMBER ....................................................... 224
RULE 22 – INSOLVENCY OF A MEMBER ........................................................................... 226
RULE 22A – PROCEDURES FOR WHEN THE CORPORATION CEASES TO ACT ........ 228
RULE 22B – CORPORATION DEFAULT ............................................................................... 236
RULE 22C – INTERPRETATION IN RELATION TO THE FEDERAL DEPOSIT
INSURANCE CORPORATION IMPROVEMENT ACT OF 1991 .......................................... 238
RULE 22D – WIND-DOWN OF THE CORPORATION ......................................................... 239
RULE 23 – FINE PAYMENTS .................................................................................................. 249
RULE 24 – CHARGES FOR SERVICES RENDERED ........................................................... 250
RULE 25 – BILLS RENDERED................................................................................................ 251
RULE 26 – RESERVED ............................................................................................................ 252
RULE 27 – ADMISSION TO PREMISES OF THE CORPORATION, POWERS OF
ATTORNEY, ETC. .................................................................................................................... 253
RULE 28 – FORMS.................................................................................................................... 254
RULE 29 – RELEASE OF CLEARING DATA ........................................................................ 255
RULE 30 – LISTS TO BE MAINTAINED ............................................................................... 256
RULE 31 – RESERVED ............................................................................................................ 257
RULE 32 – SIGNATURES ........................................................................................................ 258
RULE 33 – PROCEDURES ....................................................................................................... 259
RULE 34 – INSURANCE .......................................................................................................... 260
RULE 35 – FINANCIAL REPORTS ......................................................................................... 261
RULE 36 – RULE CHANGES ................................................................................................... 262

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RULE 37 – HEARING PROCEDURES .................................................................................... 263
RULE 38 – GOVERNING LAW AND CAPTIONS ................................................................. 266
RULE 39 – LIMITATIONS OF LIABILITY ............................................................................ 267
RULE 40 – GENERAL PROVISIONS ...................................................................................... 269
RULE 41 – CROSS GUARANTY AGREEMENTS ................................................................. 270
RULE 42 – SUSPENSION OF RULES ..................................................................................... 272
RULE 43 – CROSS-MARGINING ARRANGEMENTS .......................................................... 273
RULE 44 – ACTION BY THE CORPORATION ..................................................................... 276
RULE 45 – NOTICES ................................................................................................................ 277
RULE 46 – INTERPRETATION OF TERMS ........................................................................... 278
RULE 47 – INTERPRETATION OF RULES ........................................................................... 279
RULE 48 – DISCIPLINARY PROCEEDINGS ......................................................................... 280
RULE 49 – DTCC SHAREHOLDERS AGREEMENT ............................................................ 282
RULE 50 – MARKET DISRUPTION AND FORCE MAJEURE ............................................ 284
RULE 50A – SYSTEMS DISCONNECT: THREAT OF SIGNIFICANT IMPACT TO THECORPORATION’S SYSTEMS ................................................................................................. 287
SCHEDULE OF TIMEFRAMES ............................................................................................... 289
SCHEDULE OF GCF REPO TIMEFRAMES ........................................................................... 291
SCHEDULE OF SPONSORED GC TRADE TIMEFRAMES ................................................ 292
SCHEDULE FOR THE DELETION OF TRADE DATA ......................................................... 293
SCHEDULE OF REQUIRED MATCH DATA ......................................................................... 294
SCHEDULE OF REQUIRED DATA SUBMISSION ITEMS .................................................. 295
SCHEDULE OF REQUIRED AND ACCEPTED DATA SUBMISSION ITEMS FOR A
SUBSTITUTION OF EXISTING SECURITIES COLLATERAL .......................................... 296
SCHEDULE OF REQUIRED AND ACCEPTED DATA SUBMISSION ITEMS FOR A
SUBSTITUTION FOR NEW SECURITIES COLLATERAL .................................................. 297

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SCHEDULE OF REQUIRED AND OTHER DATA SUBMISSION ITEMS FOR GCF REPOTRANSACTIONS ...................................................................................................................... 298
SCHEDULE OF MONEY TOLERANCES ............................................................................... 300
SCHEDULE OF GC COMPARABLE SECURITIES ............................................................... 301
FEE STRUCTURE ..................................................................................................................... 304
FINE SCHEDULES.................................................................................................................... 314
CROSS-MARGINING AGREEMENTS ................................................................................... 318
BOARD STATEMENTS OF POLICY ...................................................................................... 319
INTERPRETIVE GUIDANCE WITH RESPECT TO WATCH LIST CONSEQUENCES .... 320
INTERPRETIVE GUIDANCE WITH RESPECT TO SETTLEMENT FINALITY ............... 322
BY-LAWS AND RESTATED CERTIFICATE OF INCORPORATION ................................. 325

5RULE 1 – DEFINITIONS*
Unless the context requires otherwise, the terms defined in this Rule shall, for all purposesof these Rules, have the meanings herein specified.
Account
The term “Account” means any account maintained by a Member.
Accrued Repo Interest-to-Date
The term “Accrued Repo Interest-to-Date” means, on a particular Business Day, as regards
an outstanding Repo Transaction, the product of: (1) the original Contract Value of theStart Leg, (2) the Contract Repo Rate, and (3) the number of days between the next
Scheduled Settlement Date and the Start Leg Date, divided by 360.
Acknowledgement Cutoff TimeThe term “Acknowledgement Cutoff Time” shall have the meaning given to that term in
Section 5(b) of Rule 13.
Actual Deposit
The term “Actual Deposit” shall have the meaning given that term in Section 4 of Rule 4.
Actual Settlement Date
The term “Actual Settlement Date” means the Business Day on which a Net Settlement
Position is settled.
Affected Member
The term “Affected Member” has the meaning assigned in Section 2a(b)(i)(E) of Rule 22A.
Affected Netting/CCIT Member
The term “Affected Netting/CCIT Member” shall have the meaning given to such term in
Section 3b of Rule 20.
Affiliate
The term “Affiliate” shall have the meaning given that word in SEC Rule 405, promulgatedunder the authority of the Securities Act of 1933.
*

All products and services provided by the Corporation referenced in these Rules are either registered trademarks
or servicemarks of, or trademarks or servicemarks of, The Depository Trust & Clearing Corporation or its
affiliates. Other names of companies, products or services appearing in these Rules are the trademarks orservicemarks of their respective owners.

6Aggregate Regular AmountThe term “Aggregate Regular Amount” means the total dollar amount determined by the
Corporation as a sufficient threshold to capture the majority of all Netting Members’
observed Liquidity Needs.
Aggregate Supplemental AmountThe term “Aggregate Supplemental Amount” means the difference between the Aggregate
Total Amount minus the Aggregate Regular Amount.
Aggregate Total AmountThe term “Aggregate Total Amount” means the sum of the Corporation’s Historical Cover
1 Liquidity Requirement plus the Liquidity Buffer for a given Look-Back Period.
Applicant Questionnaire
The term “Applicant Questionnaire” means the questionnaire required by these Rules to becompleted and delivered to the Corporation by an applicant, as applicable, to become aMember, including a CCIT Member, as applicable.
Appropriate Regulatory Agency
The term “Appropriate Regulatory Agency” shall have the meaning given that term in
Section 3(a)(34)(C) of the Exchange Act.
As-Of Trade
The term “As-Of Trade” means a trade, including an Eligible Conversion Trade, involving
Eligible Securities, the data on which is submitted by Members to the Corporation forcomparison on or after the Scheduled Settlement Date for such trade.
Auction Purchase
The term “Auction Purchase” with respect to Treasury Department auctions means an
Eligible Treasury Security or the Eligible Treasury Securities purchased at auction fromthe Treasury Department by a Netting Member. The sum of all awards made to a Member,as the result of an auction, at a single price and from a single Federal Reserve Bank shallconstitute a separate Auction Purchase.
Average Auction Price
The term “Average Auction Price” with respect to Treasury Department auctions means,on a CUSIP Number-by-CUSIP Number basis, the par-weighted average price at which
Auction Purchases of Netting Members that have been submitted to the Corporation by aFederal Reserve Bank were made at a particular auction.

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Average RFD
The term “Average RFD” shall have the meaning given that term in Section 7 of Rule 4.
Backtesting Charge
The term “Backtesting Charge” means an additional charge that may be added to a Netting
Member’s VaR Charge to mitigate exposures to the Corporation caused by settlement risks
that may not be adequately captured by the Corporation’s portfolio volatility model. The
Corporation may assess this charge on a Netting Member’s start of the day portfolio (the“Regular Backtesting Charge”) and/or its intraday portfolios (the “Intraday Backtesting
Charge”), as needed, to enable the Corporation to achieve its backtesting coverage target.
The Regular Backtesting Charge and the Intraday Backtesting Charge may apply to Netting
Members that have 12-month trailing backtesting coverage below the 99 percent
backtesting coverage target, excluding deficiencies attributable to Blackout Period
exposures. The Regular Backtesting Charge and the Intraday Backtesting Charge, asapplicable, shall generally be equal to the Netting Member’s third largest deficiency that
occurred during the previous 12 months. Deficiencies attributable to Blackout Period
exposures would be included only during the Blackout Period. The Corporation may in its
discretion adjust such charge if the Corporation determines that circumstances particular
to a Netting Member’s settlement activity and/or market price volatility warrant a different
approach to determining or applying such charge in a manner consistent with achieving the
Corporation’s backtesting coverage target.
Bank Netting Member
The term “Bank Netting Member” shall have the meaning given that term in Section 3 ofRule 2A.
Bilateral Comparison
The term “Bilateral Comparison” means the comparison of a trade by the matching by the
Corporation, pursuant to these Rules, of data submitted by two Members.
Bilateral Transaction
The term “Bilateral Transaction” means any transaction, including a Repo Transaction, thedata on which has been submitted to the Corporation by two Members, and is not a
Brokered Transaction.
Blackout Period
The term “Blackout Period” means, with respect to the Blackout Period Exposure Charge,
the period between the last business day of the prior month and the date during the current
month upon which a government-sponsored entity that issues mortgage-backed securities
publishes its updated Pool Factors.

8Blackout Period Exposure Adjustment
The term “Blackout Period Exposure Adjustment” means an additional charge or areduction that may be added to a GCF Counterparty’s VaR Charge to mitigate exposures
to the Corporation that may arise due to potential overvaluation of mortgage-backed
securities pledged to collateralize GCF Repo Transactions during the Blackout Period. The
Blackout Period Exposure Adjustment shall apply to GCF Counterparties that are exposed
to potential overvaluation of mortgage-backed securities pledged as collateral during theBlackout Period. The Blackout Period Exposure Adjustment shall be based on a projected
average pay-down rate of the applicable mortgage-backed securities. The Corporation may
in its discretion adjust or waive such adjustment if the Corporation determines thatcircumstances particular to the GCF Counterparty’s use of mortgage-backed security
pledges or to the mortgage-backed securities so pledged warrant a different approach todetermining or applying such adjustment in a manner consistent with achieving the
Corporation’s backtesting coverage target.
Board or Board of Directors
The terms “Board” or “Board of Directors” mean the Board of Directors of Fixed Income
Clearing Corporation or a committee thereof acting under delegated authority.
Broker
The term “Broker” means a Member that is a Registered Broker or Registered Government
Securities Broker and that is regularly engaged in the business of effecting transactions in
Eligible Securities for the account of other Members.
Broker Account
The term “Broker Account” means an Account maintained for an Inter-Dealer Broker
Netting Member or a Segregated Repo Account of a Non-IDB Repo Broker.
Brokered Repo Transaction
The term “Brokered Repo Transaction” means a Repo Transaction, including a GCF Repo
Transaction, a party to which is a Repo Broker.
Brokered Transaction
The term “Brokered Transaction” means any transaction, including a Repo Transaction,
calling for the delivery of an Eligible Netting Security, or the posting of cash or an Eligible
Netting Security as collateral, the data on which has been submitted to the Corporation by
Members, to which transaction (i) an Inter-Dealer Broker, or (ii) a Non-IDB Repo Broker
with respect to activity in its Segregated Repo Account, is a party. The mere fact that an
Inter-Dealer Broker, or a Non-IDB Repo Broker with respect to activity in its Segregated
Repo Account, has submitted data to the Corporation on a transaction is not, solely of itself,
determinative of whether such Broker is a party to the transaction.

9

Business Day
The term “Business Day” means any day on which the Corporation is open for businessexcept that, for purposes of Rule 11, Rule 12, and Rule 13, “Business Day” means any day
on which both the Corporation and the Federal Reserve Bank of New York are open forbusiness.
Category 1 Sponsoring Member
The term “Category 1 Sponsoring Member” shall have the meaning given that term in
Section 2(a) of Rule 3A.
Category 2 Sponsoring Member
The term “Category 2 Sponsoring Member” shall have the meaning given that term in
Section 2(a) of Rule 3A.
CCIT™ *The term “CCIT” means Centrally Cleared Institutional Triparty.
CCIT Account
The term “CCIT Account” shall have the meaning assigned to it in Section 9(b) of Rule
3B.
CCIT Daily Repo Interest
The term “CCIT Daily Repo Interest” means the interest amount that is collected from orpaid to a Netting Member, as applicable, and collected from or paid to a CCIT Member, as
applicable, on a daily basis resulting from a CCIT Transaction.
CCIT Member Termination Date
The term “CCIT Member Termination Date” shall have the meaning given that term in
Section 6 of Rule 3B.
CCIT Member Voluntary Termination Notice
The term “CCIT Member Voluntary Termination Notice” shall have the meaning giventhat term in Section 6 of Rule 3B.
CCIT MRA Account
The term “CCIT MRA Account” shall have the meaning assigned to it in Section 9(b) of
Rule 3B.
*

CCIT is a trademark of The Depository Trust & Clearing Corporation.

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CCIT Transaction
The term “CCIT Transaction” means a transaction that is processed by the Corporation in
the CCIT Service. Because the CCIT Service leverages the infrastructure and processes of
the GCF Repo Service, a CCIT Transaction must be: (i) in a Generic CUSIP Number
approved for the GCF Repo Service and (ii) between a CCIT Member and a Netting
Member who participates in the GCF Repo Service where the CCIT Member is the cash
lender in the transaction.
CCLF®
The term “CCLF” means the Corporation’s “Capped Contingency Liquidity Facility®” as
more fully described in Section 2a of Rule 22A.
CCLF Event
The term “CCLF Event” means an event declared by the Corporation once it has ceased toact for a Netting Member pursuant to Rule 22A and determines, in its sole discretion, thatit does not have sufficient liquidity to satisfy the obligations of such Netting Member.
CCLF MRA
The term “CCLF MRA” has the meaning assigned in Section 2a(a) of Rule 22A.
CCLF MRA Termination Date
The term “CCLF MRA Termination Date” has the meaning assigned in Section 2a(a)(L)of Rule 22A.
CCLF Transaction
The term “CCLF Transaction” refers to a repurchase transaction entered into subject to the
CCLF MRA.
Centrally Cleared Institutional Triparty Member or CCIT Member
The terms “Centrally Cleared Institutional Triparty Member” and “CCIT Member” meana legal entity other than a Registered Investment Company approved to participate in the
Corporation’s CCIT Service as a cash lender.
Centrally Cleared Institutional Triparty Service or CCIT Service
The terms “Centrally Cleared Institutional Triparty Service” and “CCIT Service” mean theservice offered by the Corporation to clear institutional triparty repurchase agreementtransactions, as more fully described in Rule 3B.

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CET1 Capital
The term “CET1 Capital” means an entity’s common equity tier 1 capital, calculated inaccordance with such entity’s regulatory and/or statutory requirements.
CFTC
The term “CFTC” means the Commodity Futures Trading Commission.
CFTC-Recognized Clearing Organization
The term “CFTC-Recognized Clearing Organization” means a clearing organization thatis affiliated with, or designated by, a contracts market or markets trading specific futures
products, and is under the oversight of the Commodity Futures Trading Commission.
Clearance Difference AmountThe term “Clearance Difference Amount” means the absolute value of the dollar difference
between the Settlement Value of a Deliver Obligation or a Receive Obligation and theactual value at which such Deliver Obligation or Receive Obligation was settled, by thedelivery or receipt of Eligible Netting Securities. Notwithstanding the above, the term
“Clearance Difference Amount” shall not apply to GCF Repo Transactions and CCIT
Transactions.
Clearing Agency
The term “Clearing Agency” shall have the meaning given it in Section 3(a)(23) of the
Exchange Act.
Clearing Agent Bank
The term “Clearing Agent Bank” means a member of the Federal Reserve System that isregularly engaged in the business of providing clearing services in Eligible Securities for
Members and that has agreed to provide the Corporation, upon request, under mutuallyagreeable terms, with clearing services.
Clearing Fund
The term “Clearing Fund” means the Clearing Fund established by the Corporation
pursuant to these Rules, which shall be comprised of the aggregate of all Required Fund
Deposits and all other deposits, including Cross-Guaranty Repayment Deposits, to theClearing Fund.
Clearing Fund Cash
The term “Clearing Fund Cash” shall have the meaning given that term in Section 3a ofRule 4.

12

Clearing Organization
The term “Clearing Organization” means a Clearing Agency, Derivatives Clearing
Organization, Multilateral Clearing Agency, Registered Clearing Agency, CFTC
Recognized Clearing Organization, FCO and/or Self-Regulatory Organization, and anyother organization performing a similar function, whether or not regulated by the SEC or
the CFTC, in which the Member is a member or participant.
Close of Business
The term “Close of Business” means, with respect to a Business Day and as the context
requires, 5:00 p.m. or the Corporation’s deadline for final input of trade data by Members
as noted on the Schedule of Timeframes on such Business Day, unless otherwise
determined by the Corporation as the result of delay in the close of Fedwire.
Collateral Allocation Entitlement
The term “Collateral Allocation Entitlement” means the entitlement of a Netting Member
to have the Corporation allocate securities or cash for its benefit to secure such Member’s
GCF Net Funds Lender Position.
Collateral Allocation Obligation
The term “Collateral Allocation Obligation” means the obligation of a Netting Member toallocate securities or cash for the benefit of the Corporation to secure such Member’s GCF
Net Funds Borrower Position.
Collateral MarkThe term “Collateral Mark” means, on a particular Business Day, as regards any Forward
Trade other than a Forward-Starting Repo Transaction during its Forward-Starting Period,
the absolute value of the difference between the Contract Value of the Forward Trade andthe Market Value of the Forward Trade. If the Contract Value is greater than the Market
Value, then this difference shall be a positive value for a Member with a Net Short Position,
and a negative value for a Member with Net Long Position. If the Market Value is greaterthan the Contract Value, then this difference shall be a positive value for a Member with a
Net Long Position, and a negative value for a Member with a Net Short Position. The
Collateral Mark for a Forward-Starting Repo Transaction during its Forward-Starting
Period shall be Zero. The term “Collateral Mark” means, as regards a Forward Net
Settlement Position, the sum of all of the Collateral Marks on each of the Forward Tradesthat compose such Forward Net Settlement Position. Notwithstanding the above, the term“Collateral Mark” shall not apply to GCF Repo Transactions and CCIT Transactions.
Collected/Paid AmountThe term “Collected/Paid Amount” means, with regard to the calculation of Funds-OnlySettlement Amounts, the aggregate Settlement Amount either received by the Corporationfrom a Member or paid by the Corporation to a Member since the end of the processing
13

cycle immediately prior to the processing cycle during which the Collected/Paid Amountis calculated.
Commodity Exchange Act
The term “Commodity Exchange Act” means the Commodity Exchange Act, as amended.
Comparable Securities
The term “Comparable Securities” means, with respect to a security or securities that are
represented by a particular Generic CUSIP Number, any other security or securities thatare represented by the same Generic CUSIP Number.
Compared Trade
The term “Compared Trade” means a trade, including a Repo Transaction, the data on
which has been compared or deemed compared in the Comparison System pursuant tothese Rules, as the result of any one of the following methods: (1) Bilateral Comparison,
which requires the matching by the Corporation of data submitted by two Members, (2)Demand Comparison, which requires that data to be submitted to the Corporation by a
Demand Trade Source, or (3) Locked-In Comparison, which requires the data to besubmitted to the Corporation by a Locked-In Trade Source.
Comparison System
The term “Comparison System” means the (1) system of services provided by the
Corporation to Persons that are Members thereof, and (2) operations carried out by the
Corporation in the course of providing such services, as provided for in Rules 5 through10.
Comparison-Only Member
The term “Comparison-Only Member” means a Member that is a Member only of theComparison System.
Contract Repo Rate
The term “Contract Repo Rate” means, as regards a Repo Transaction, the contractualinterest rate on which the amount of interest owed by the Repo Party to the Reverse Repo
Party at the close of the Repo Transaction is based, as established by the original parties to
the Repo Transaction.
Contract Value
The term “Contract Value” means, as regards a trade other than a Repo Transaction, thedollar value at which the trade is entered into. The term “Contract Value” means, as regards
a Start or End Leg, the dollar value at which such Leg is to be settled on the Scheduled
Settlement Date. For a GCF Repo Transaction or a CCIT Transaction, the Contract Value

14

of the Start Leg is the principal value, and the Contract Value of the End Leg is the principal
value plus accrued interest.
Controlling Management
The term “Controlling Management” shall mean the Chief Executive Officer, the Chief
Financial Officer, and the Chief Operations Officer, or their equivalents, of an applicant orMember or such other individuals or entities with direct or indirect control over theapplicant or Member; provided that with respect to a Registered Investment Company
Netting Member or an applicant to become a Registered Investment Company Netting
Member, the term “Controlling Management” shall include the investment manager.
Conversion Trade
The term “Conversion Trade” means an Eligible Conversion Trade the data on which has
been compared by the Corporation pursuant to Rule 9 and listed on a Report made available
to Members.
Corporate Contribution
The term “Corporate Contribution” shall have the meaning given that term in Section 7aof Rule 4.
Corporation
The term “Corporation” means Fixed Income Clearing Corporation, the owner of theGovernment Securities Division. Where these Rules refer to action taken by “theCorporation,” the term should be understood to mean the management of Fixed Income
Clearing Corporation, unless otherwise specified.
Coupon Adjustment Payment
The term “Coupon Adjustment Payment” means the coupon payments due and owing oneach Eligible Netting Security that comprises a Coupon-Eligible End Leg, Fail Deliver
Obligation or Fail Receive Obligation. Notwithstanding the above, the term “Coupon
Adjustment Payment” shall not apply to GCF Repo Transactions and CCIT Transactions.
Coupon-Eligible End Leg
The term “Coupon-Eligible End Leg” means an End Leg on a coupon payment date for the
Eligible Netting Securities that comprise it, where such coupon payment date falls after theStart Leg related to the same Repo Transaction from which such End Leg arises has settled
and on or before the Scheduled Settlement Date of the End Leg. Notwithstanding theabove, the term “Coupon-Eligible End Leg” shall not apply to GCF Repo Transactions and
CCIT Transactions.

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Covered Affiliate
The term “Covered Affiliate” means an Affiliate of a Netting Member that: (1) is not itself
a Netting Member; (2) is not a Foreign Person; and (3) is a Broker, Dealer, bank, trust
company, and/or Futures Commission Merchant.
Credit Clearance Difference AmountThe term “Credit Clearance Difference Amount” means, on a particular Business Day, theabsolute value of the dollar difference between the Settlement Value of a Deliver
Obligation or a Receive Obligation and the actual value at which such Deliver Obligation
or Receive Obligation was settled, by the delivery or receipt of Eligible Netting Securities.
Notwithstanding the above, the term “Credit Clearance Difference Amount” shall not apply
to GCF Repo Transactions and CCIT Transactions.
Credit Coupon Adjustment Payment
The term “Credit Coupon Adjustment Payment” means, on a particular Business Day, a
Coupon Adjustment Payment that a Netting Member is entitled to collect from the
Corporation, involving a Member in a Net Long Position with regard to a Coupon-Eligible
End Leg, Fail Deliver Obligation or Fail Receive Obligation.
Credit Delivery Differential Adjustment Payment
The term “Credit Delivery Differential Adjustment Payment” means, on a particularBusiness Day, a Delivery Differential Adjustment Payment, involving a Deliver Obligation
where the Settlement Value is less than the System Value, or a Receive Obligation where
the Settlement Value is greater than the System Value, that the Corporation is obligated tomake to a Netting Member.
Credit Fail Mark Adjustment Payment
The term “Credit Fail Mark Adjustment Payment” means, on a Particular Business Day, aFail Mark Adjustment Payment that a Netting Member is entitled to collect from the
Corporation, involving either: (1) a Fail Deliver Obligation where the Settlement Value ofsuch Obligation has decreased from the immediately previous Business Day, or, (2) a Fail
Receive Obligation where the Settlement Value of Such Obligation has increased from theimmediately previous Business Day.
Credit Forward Mark Adjustment Payment
The term “Credit Forward Mark Adjustment Payment” means, on a particular Business
Day, a Forward Mark Adjustment Payment that is a positive number, and that a Netting
Member is entitled to collect from the Corporation.

16

Credit GCF Forward MarkThe term “Credit GCF Forward Mark” means, on a particular Business Day, a GCF
Forward Mark that is a positive number, and that a Netting Member is entitled to collectfrom the Corporation.
Credit GCF Forward Mark Adjustment Payment
The term “Credit GCF Forward Mark Adjustment Payment” means, on a particularBusiness Day, a GCF Forward Mark Adjustment Payment that is a positive value, and thata Netting Member is entitled to collect from the Corporation.
Credit GCF Interest Adjustment Payment
The term “Credit GCF Interest Adjustment Payment” means, on a particular Business Day,a GCF Interest Adjustment Payment on an associated Debit GCF Forward Mark
Adjustment Payment made on the previous Business Day, which GCF Interest Adjustment
Payment a Netting Member is entitled to collect from the Corporation.
Credit GCF Transaction Adjustment Payment
The term “Credit GCF Transaction Adjustment Payment” means, on a particular Business
Day, as regards the total repo interest accrued on GCF Repo Transactions and CCIT
Transactions, as applicable, the GCF Transaction Adjustment Payment that a Netting
Member is entitled to collect from the Corporation.
Credit Interest Adjustment Payment
The term “Credit Interest Adjustment Payment” means, on a particular Business Day, anInterest Adjustment Payment on an associated Debit Forward Mark Adjustment Payment
made on the previous Business Day, which Interest Adjustment Payment a Netting Member
is entitled to collect from the Corporation.
Credit Interest Rate MarkThe term “Credit Interest Rate Mark” means, on a particular Business Day, an Interest Rate
Mark that is a positive number, and that a Netting Member is entitled to collect from the
Corporation.
Credit Redemption Adjustment Payment
The term “Credit Redemption Adjustment Payment” means on a particular Business Day,a Redemption Adjustment Payment that a Netting Member is entitled to collect from the
Corporation, involving either (1) a Net Settlement Position in an Eligible Netting Security
on the last Business Day before or on the maturity date for such security or (2) a Repo
Transaction where the Scheduled Settlement Date of the End Leg is on the maturity date,after the maturity date or on the last Business Day before the maturity date and the maturity
date is not a Business Day.
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Credit Risk Rating Matrix
The term “Credit Risk Rating Matrix” means a matrix of credit ratings of Members
specified in Section 12 of Rule 3. The matrix is developed by the Corporation to evaluate
the credit risk such Members pose to the Corporation and its Members and is based on
factors determined to be relevant by the Corporation from time to time, which factors aredesigned to collectively reflect the financial and operational condition of a Member. These
factors include (i) quantitative factors, such as capital, assets, earnings, and liquidity, and(ii) qualitative factors, such as management quality, market position/environment, andcapital and liquidity risk management.
Credit Transaction Adjustment Payment
The term “Credit Transaction Adjustment Payment” means, on a particular Business Day
as regards a Net Settlement Position, a Transaction Adjustment Payment that a Netting
Member is entitled to collect from the Corporation, involving either: (1) a Net Long
Position where the aggregate of the Contract Values of the trades that comprise such Net
Long Position is less than the Aggregate of the Market Values of such trades, or (2) a Net
Short Position where the aggregate of the Contract Values of the trades that comprise such
Net Short Position is greater than the Market Values of such trades.
Cross-Guaranty Agreement
The term “Cross-Guaranty Agreement” shall mean any netting contract, limited crossguaranty, or other similar agreement between the Corporation and (i) any clearing agency
registered under Section 17A(b) of the Securities Exchange Act of 1934, (ii) any
organization performing clearing functions for a contract market designated pursuant to the
Commodity Exchange Act or (iii) any other domestic or foreign clearinghouse, clearing
association, clearing corporation or similar organization. The term “Cross-Guaranty
Agreement” shall not include Cross-Margining Agreements.
Cross-Guaranty Beneficiary Member
The term “Cross-Guaranty Beneficiary Member” shall have the meaning given to suchterm in Section 3 of Rule 41.
Cross-Guaranty Counterparty
The term “Cross-Guaranty Counterparty” means any party, other than the Corporation, toa Cross-Guaranty Agreement.
Cross-Guaranty Defaulting Member
The term “Cross-Guaranty Defaulting Member” means a defaulting Member on accountof which the Corporation makes or receives a Cross-Guaranty Payment.

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Cross-Guaranty Payment
The term “Cross-Guaranty Payment” means any payment, other than a Cross-Guaranty
Repayment, that the Corporation makes or receives pursuant to a Cross-Guaranty
Agreement.
Cross-Guaranty Repayment
The term “Cross-Guaranty Repayment” means (i) any amount of a Cross-Guaranty
Payment received by the Corporation that the Corporation (A) repays to a Cross-GuarantyCounterparty pursuant to a Cross-Guaranty Agreement or (B) pays over to a CrossGuaranty Defaulting Member or its legal representative pursuant to a court order or
judgment or (ii) any amount of a Cross-Guaranty Payment made by the Corporation that
the Corporation receives back from a Cross-Guaranty Counterparty pursuant to a CrossGuaranty Agreement.
Cross-Guaranty Repayment Deposit
The term “Cross-Guaranty Repayment Deposit” means the deposit to the Clearing Fundrequired to be made by a Cross-Guaranty Beneficiary Member pursuant to Section 4 ofRule 41.
Cross-Margining Affiliate
The term “Cross-Margining Affiliate” means an affiliate of a Cross-Margining Participantthat is a member of an FCO and has agreed: (i) to have its positions and margin at the FCO
margined together with Eligible Positions of the Cross-Margining Participant at the
Corporation in accordance with the applicable Cross-Margining Agreement, and/or (ii) if
permitted by the applicable Cross-Margining Agreement, to have the positions and marginof Market Professionals cleared by the Cross-Margining Affiliate at the FCO margined
together with Eligible Positions of the Market Professional customers of the CrossMargining Participant at the Corporation.
Cross-Margining Agreement
The term “Cross-Margining Agreement” means an agreement between the Corporation anda particular FCO pursuant to which a Cross-Margining Participant, at the discretion of the
Corporation and in accordance with the provisions of Rule 43, may elect to have its
Required Fund Deposit in respect of Eligible Positions at FICC and its (or its CrossMargining Affiliate’s, if applicable) margin requirements in respect of Eligible Positions
at such FCO calculated by taking into consideration the net risk of such Eligible Positions
at each of the clearing organizations. A Cross-Margining Agreement may include
provisions for the cross-margining by a Netting Member of Eligible Positions held in theaccounts of Market Professionals.

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Cross-Margining Arrangement
The term “Cross-Margining Arrangement” means the arrangement established between the
Corporation and one or more FCOs pursuant to Cross-Margining Agreements and Rule 43.
Cross-Margining Beneficiary Participant
The term “Cross-Margining Beneficiary Participant” shall have the meaning given to suchterm in Section 5 of Rule 43.
Cross-Margining Guaranty
The term “Cross-Margining Guaranty” means a guaranty by an FCO of the obligations ofa Cross-Margining Participant to the Corporation or, as the context requires, a guaranty by
the Corporation of the obligations of a Cross-Margining Participant or its Cross-Margining
Affiliate to an FCO.
Cross-Margining Participant
The term “Cross-Margining Participant” means a Netting Member that is authorized by the
Corporation to, and does, participate in the Cross-Margining Arrangement between the
Corporation and one or more FCOs pursuant to a Cross-Margining Agreement.
Cross-Margining Payment
The term “Cross-Margining Payment” means any payment, other than a Cross-Margining
Repayment, that the Corporation makes or receives pursuant to a Cross-Margining
Guaranty.
Cross-Margining Repayment
The term “Cross-Margining Repayment” means (i) any amount of a Cross-Margining
Payment received by the Corporation that the Corporation (A) repays to an FCO pursuant
to a Cross-Margining Agreement or (B) pays over to a Defaulting Member or its legal
representative pursuant to a court order or judgment or (ii) any amount of a CrossMargining Payment the Corporation receives back from an FCO pursuant to a CrossMargining Agreement.
Cross-Margining Repayment Deposit
The term “Cross-Margining Repayment Deposit” means the deposit to the Clearing Fundrequired to be made by a Cross-Margining Beneficiary Participant pursuant to Section 6 ofRule 43.
Current Haircut
The term “Current Haircut” means, as regards any Sponsored Member Trade, the Market
Value of the Sponsored Member Trade, as of the time of the Corporation’s determination20

of the relevant Funds-Only Settlement Amount, minus the Contract Value of the End Legof the Sponsored Member Trade.
Current Net Settlement Positions
The term “Current Net Settlement Positions” means those Net Settlement Positions that arescheduled to settle on the Business Day with respect to which the calculation is made.
CUSIP Number
The term “CUSIP Number” means the Committee on Uniform Securities Identification
Procedures identifying number for an Eligible Security or an Eligible Netting Security.
The term CUSIP Number includes, as the context may indicate, either a Generic CUSIP
Number or a Specific CUSIP Number, or both.
Cybersecurity Confirmation
The term “Cybersecurity Confirmation” means a written document provided to the
Corporation by all Members, Sponsoring Members and CCIT Members (for purposes ofthis definition, collectively referred to as “Members”) and applicants for such membershipthat confirms the existence of an information system cybersecurity program and includes
the representations listed below.
Each Cybersecurity Confirmation shall (1) be on a form provided by the Corporation;(2) be signed by a designated senior executive of the Member or applicant who isauthorized to attest to these matters; and (3) include the following representations, madewith respect to the two years prior to the date of the Cybersecurity Confirmation:
1. The Member or applicant has defined and maintains a comprehensive cybersecurity
program and framework that considers potential cyber threats that impact theirorganization and protects the confidentiality, integrity and availability requirements of
their systems and information.
2. The Member or applicant has implemented and maintains a written enterprisecybersecurity policy or policies approved by senior management or the organization’sboard of directors, and the organization’s cybersecurity framework is in alignment withstandard industry best practices and guidelines, as indicated on the form ofCybersecurity Confirmation.
3. If using a third party service provider or service bureau(s) to connect or transact
business or to manage the connection with the Corporation, the Member or applicant
has an appropriate program to (a) evaluate the cyber risks and impact of these thirdparties, and (b) review the third-party assurance reports.
4. The cybersecurity program and framework protect the segment of the Member’s orapplicant’s system that connects to and/or interacts with the Corporation.
5. The Member or applicant has in place an established process to remediate cyber issues
identified to fulfill the Member’s or applicant’s regulatory and/or statutory
requirements.

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6. The cybersecurity program’s and framework’s risk processes are updated periodically
based on a risk assessment or changes to technology, business, threat ecosystem, and/or
regulatory environment.
7. A comprehensive review of the Member’s or applicant’s cybersecurity program andframework has been conducted by one of the following:•

The Member or applicant, if that organization has filed and maintains a current
Certification of Compliance with the Superintendent of the New York State
Department of Financial Services pursuant to 23 NYCRR 500;•

A regulator who assesses the program against a designated cybersecurity
framework or industry standard, including those that are listed on the form of the
Cybersecurity Confirmation and in an Important Notice issued by the Corporationfrom time to time;•

An independent external entity with cybersecurity domain expertise, including
those that are listed on the form of the Cybersecurity Confirmation and in an
Important Notice issued by the Corporation from time to time; and•An independent internal audit function reporting directly to the board of directors
or designated board of directors committee of the Member or applicant, such thatthe findings of that review are shared with these governance bodies.

Dealer
The term “Dealer” means a Member that is a Registered Dealer or Registered Government
Securities Dealer.
Dealer Account
The term “Dealer Account” means an Account maintained by a Netting Member that is
not a Broker Account.
Dealer Netting Member
The term “Dealer Netting Member” shall have the meaning given that term in Section 3of Rule 2A.
Debit Clearance Difference AmountThe term “Debit Clearance Difference Amount” means, on a particular Business Day, theabsolute value of the dollar difference between the Settlement Value of a Deliver
Obligation or a Receive Obligation and the actual value at which such Deliver Obligation
or Receive Obligation was settled, by the delivery or receipt of Eligible Netting Securities.
Notwithstanding the above, the term “Debit Clearance Difference Amount” shall not apply
to GCF Repo Transactions and CCIT Transactions.

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Debit Coupon Adjustment Payment
The term “Debit Coupon Adjustment Payment” means, on a particular Business Day, a
Coupon Adjustment Payment that a Netting Member is obligated to make to the
Corporation, involving a Member in a Net Short Position with regard to a Coupon-Eligible
End Leg, Fail Deliver Obligation or Fail Receive Obligation.
Debit Delivery Differential Adjustment Payment
The term “Debit Delivery Differential Adjustment Payment” means, on a particularBusiness Day, a Delivery Differential Adjustment Payment, involving a Deliver Obligation
where the Settlement Value is greater than the System Value, or a Receive Obligation
where the Settlement Value is less than the System Value, that a Netting Member isobligated to make to the Corporation.
Debit Fail Mark Adjustment Payment
The term “Debit Fail Mark Adjustment Payment” means, on a particular Business Day, aFail Mark Adjustment Payment that a Netting Member is obligated to make to the
Corporation, involving either: (1) a Fail Deliver Obligation where the Settlement Value ofsuch Obligation has increased from the immediately previous Business Day, or, (2) a Fail
Receive Obligation where the Settlement Value of such Obligation has decreased from theimmediately previous Business Day.
Debit Forward Mark Adjustment Payment
The term “Debit Forward Mark Adjustment Payment” means, on a particular Business
Day, a Forward Mark Adjustment Payment that is a negative number, and that a Netting
Member is obligated to make to the Corporation.
Debit GCF Forward MarkThe term “Debit GCF Forward Mark” means, on a particular Business Day, a GCF Forward
Mark that is a negative number, and that a Netting Member is obligated to pay to the
Corporation.
Debit GCF Forward Mark Adjustment Payment
The term “Debit GCF Forward Mark Adjustment Payment” means, on a particular Business
Day, a GCF Forward Mark Adjustment Payment that is a negative value, and that a Netting
Member is obligated to pay the Corporation.
Debit GCF Interest Adjustment Payment
The term “Debit GCF Interest Adjustment Payment” means, on a particular Business Day,a GCF Interest Adjustment Payment on an associated Credit GCF Forward Mark
Adjustment Payment made on the previous Business Day, which GCF Interest Adjustment
Payment a Netting Member is obligated to make to the Corporation.
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Debit GCF Transaction Adjustment Payment
The term “Debit GCF Transaction Adjustment Payment” means, on a particular Business
Day, as regards the total repo interest accrued on GCF Repo Transactions and CCIT
Transactions, as applicable, the GCF Transaction Adjustment Payment that a Netting
Member is obligated to pay to the Corporation.
Debit Interest Adjustment Payment
The term “Debit Interest Adjustment Payment” means, on a particular Business Day, anInterest Adjustment Payment on an associated Credit Forward Mark Adjustment Payment
made on the previous Business Day, which Interest Adjustment Payment a Netting Member
is obligated to make to the Corporation.
Debit Interest Rate MarkThe term “Debit Interest Rate Mark” means, on a particular Business Day, an Interest Rate
Mark that is a negative number, and that a Netting Member is obligated to pay to the
Corporation.
Debit Redemption Adjustment Payment
The term “Debit Redemption Adjustment Payment” means, on a particular Business Day,a Redemption Adjustment Payment that a Netting Member is obligated to make to the
Corporation, involving either (1) a Net Settlement Position in an Eligible Netting Security
on the last Business Day before or on the maturity date for such security or (2) a Repo
Transaction where the Scheduled Settlement Date of the End Leg is on the maturity date,after the maturity date or on the last Business Day before the maturity date and the maturity
date is not a Business Day.
Debit Transaction Adjustment Payment
The term “Debit Transaction Adjustment Payment” means, on a particular Business Day
as regards a Net Settlement Position, a Transaction Adjustment Payment that a Netting
Member is obligated to make to the Corporation, involving either: (1) a Net Long Position
where the aggregate of the Contract Values of the trades that comprise such Net Long
Position is greater than the aggregate of the Market Values of such trades, or (2) a Net
Short Position where the aggregate of the Contract values of the trades that comprise such
Net Short Position is less than the Market Values of such trades.
Declared Non-Default Loss Event
The term “Declared Non-Default Loss Event” shall have the meaning given that term in
Section 7 of Rule 4.

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Defaulting Member
The term “Defaulting Member” means a Netting Member that is treated by the Corporation
as insolvent pursuant to Rule 22 or with respect to which it has ceased to act pursuant toRule 22A.
Defaulting Member Event
The term “Defaulting Member Event” shall have the meaning given that term in Section 7of Rule 4.
Deliver Obligation
The term “Deliver Obligation” means a Netting Member’s obligation to deliver Eligible
Netting Securities to the Corporation at the appropriate Settlement Value (i) in satisfactionof all or a part of a Net Short Position, (ii) in satisfaction of a Same-Day Settling Trade or(iii) to implement a collateral substitution in connection with a Repo Transaction with aRight of Substitution.
Deliver Scaling Factor
The term “Deliver Scaling Factor” means the percentage established by the Corporation
which shall be used to calculate a Netting Member’s Individual Regular Amount.
Delivery Differential Adjustment
The term “Delivery Differential Adjustment” means, for a Deliver Obligation or a Receive
Obligation established by the Corporation on a particular Business Day, the dollar
adjustment made by the Corporation (which may be zero) to System Value in order todetermine the Settlement Value for the Delivery Obligation or Receive Obligation. The
Corporation may establish varying Delivery Differential Adjustment amounts for different
Deliver Obligations and/or Receive Obligations of one or more Members involving
Eligible Netting Securities with the same CUSIP Number.
Delivery Differential Adjustment Payment
The term “Delivery Differential Adjustment Payment” means the absolute value of thedollar difference between the System Value and the Settlement Value of a Netting
Member’s Deliver Obligation or a Receive Obligation. Notwithstanding the above, theterm “Delivery Differential Adjustment Payment” shall not apply to GCF Repo
Transactions and CCIT Transactions.
Demand Comparison
The term “Demand Comparison” means the comparison of a Demand Trade by the receipt
by the Corporation of data from a Demand Trade Source.

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Demand Trade
The term “Demand Trade” means a trade, involving Eligible Securities, that is deemed a
Compared Trade once the data on such trade are received by the Corporation from a single,
designated source and meet the requirements for submission of data on a Demand Tradepursuant to these Rules, without the necessity of matching the data regarding the trade withdata provided by each Member that is or is acting on behalf of an original counterparty to
the trade. The data regarding a Demand Trade must be provided to the Corporation by a
Demand Trade Source.
Demand Trade Source
The term “Demand Trade Source” means a source of data on Demand Trades that the
Corporation has so designated, subject to such terms and conditions as to which the
Demand Trade Source and the Corporation may agree.
Derivatives Clearing Organization
The terms “Derivatives Clearing Organization” shall have the meaning given it in Section
1a(9) of the Commodity Exchange Act.
Designated Examining Authority
The term “Designated Examining Authority” shall mean (1) in the case of a Broker or
Dealer, as applicable, that belongs to only one Self-Regulatory Organization, such
Self-Regulatory Organization, and (2) in the case of a Broker or Dealer, as applicable, thatbelongs to more than one Self-Regulatory Organization, the Self-Regulatory Organization
designated by the SEC pursuant to Section 17(d) of the Exchange Act as the entity withresponsibility for examining such Broker or Dealer.
Designee
The term “Designee” means a service provider designated by a Member either orally or inwriting to provide the Corporation with instructions on behalf of the Member.
Direct Affected Member
The term “Direct Affected Member” has the meaning assigned in Section 2a(b)(i)(B) of
Rule 22A.
DK Notice
The term “DK Notice” means a notification that is sent to the Corporation to: (i) cause a
Demand Trade to become uncompared, or (ii) serve as a request for cancellation of a
Locked-In Trade to a Locked-In Trade Source. DK Notices must be sent pursuant tocommunications links, formats, timeframes, and deadlines established by the Corporation
for such purpose.

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DTC
The term “DTC” means The Depository Trust Company.
DTC Settling Bank
The term “DTC Settling Bank” means an entity that qualifies as a settling bank under
DTC’s rules and has been approved as such by DTC.
DTCC
The term “DTCC” means The Depository Trust & Clearing Corporation.
DTCC Confidential Information
The term “DTCC Confidential Information” shall mean all non-public information
provided by DTCC and/or the Corporation that (i) is marked or otherwise identified inwriting prior to disclosure to the recipient as confidential, (ii) is designated by DTCC or
the Corporation as confidential, or (iii) the recipient knows or, under the circumstances
surrounding disclosure, ought to reasonably know is confidential.
Eligible Conversion Trade
The term “Eligible Conversion Trade” means a Yield Comparison Trade that the
Corporation, based on the type of Eligible Security involved, has designated, either on a
product-by-product basis or on a CUSIP-by-CUSIP basis, as eligible for comparison
pursuant to Rule 9.
Eligible Clearing Fund Agency Security
The term “Eligible Clearing Fund Agency Security” means a direct obligation of those U.S.
agencies or government sponsored enterprises as the Corporation may designate from time
to time, and that satisfies such criteria set forth in notices issued by the Corporation fromtime to time.
Eligible Clearing Fund Security
The term “Eligible Clearing Fund Security” means unmatured bonds which are either an
Eligible Clearing Fund Agency Security, an Eligible Clearing Fund Mortgage-Backed
Security or an Eligible Clearing Fund Treasury Security.
Eligible Clearing Fund Mortgage-Backed Security
The term “Eligible Clearing Fund Mortgage-Backed Security” means a mortgage-backed
pass through obligation issued by those U.S. agencies or government sponsored enterprises
as the Corporation may designate from time to time, and that satisfies such criteria set forthin notices issued by the Corporation from time to time.

27

Eligible Clearing Fund Treasury Security
The term “Eligible Clearing Fund Treasury Security” means a direct obligation of the U.S.
government that satisfies the criteria set forth in notices issued by the Corporation fromtime to time.
Eligible Letter of Credit
The term “Eligible Letter of Credit” means a letter of credit that:(i) contains the unqualified commitment of such issuer to pay a specified sum of money
upon demand (properly drawn under the letter of credit);(ii) is irrevocable; and(iii) is in a form, and contains such other terms and conditions, as may be required by the
Corporation.
Eligible Netting Security
The term “Eligible Netting Security” means an Eligible Security that the Corporation has
designated as eligible for netting. Notwithstanding the previous sentence, a GCF Repo
Security shall only be deemed to be an Eligible Netting Security in connection with GCF
Repo Transactions. Without limiting the generality of the foregoing, a GCF Repo Security
shall not be an Eligible Netting Security: (i) for comparison, netting and/or settlement inconnection with any transaction other than a GCF Repo Transaction, and (ii) shall not be
eligible for Clearing Fund purposes unless it falls into the definition of an Eligible Clearing
Fund Security
Eligible Position
The term “Eligible Position” means a position in certain Eligible Netting Securities nettedby the Corporation, or certain Government securities futures contracts or interest rate
futures contracts cleared by an FCO, as identified in a Cross-Margining Agreement as
eligible for cross-margining treatment.
Eligible Security
The term “Eligible Security” means a security issued or guaranteed by the United States, aU.S. government agency or instrumentality, a U.S. government-sponsored corporation, or
any other security approved by the Board from time to time, or one or more categories ofsuch securities as represented by a Generic CUSIP Number, that the Corporation has listedon the Eligible Securities master file maintained by it pursuant to Rule 30. Notwithstanding
the previous sentence, a GCF Repo Security shall be deemed to be an Eligible Security
only in connection with a GCF Repo Transaction and a GC Repo Security shall be deemed
to be an Eligible Security only in connection with a Sponsored GC Trade. A security of anissuer that is listed on the Office of Foreign Assets Control (“OFAC”) list of speciallydesignated nationals distributed by the U.S. Department of the Treasury, or of an issuer

28

that is incorporated in a country that is on the OFAC list of countries subject tocomprehensive sanctions, shall not be an “Eligible Security”.
Eligible Treasury Security
The term “Eligible Treasury Security” means an unmatured, marketable debt security inbook-entry form that is a direct obligation of the United States Government.
End Leg
The term “End Leg” means, as regards a Repo Transaction other than a GCF Repo
Transaction (or CCIT Transaction as applicable) or a Sponsored GC Trade, the concluding
settlement aspects of the transaction, involving the retransfer of the underlying Eligible
Netting Securities by the Netting Member that is, or is submitting data on behalf of, thefunds lender (if netting eligible, through satisfaction of the applicable Deliver Obligation
generated by the Corporation) and the taking back of such Eligible Securities by the Netting
Member that is, or is submitting data on behalf of, the funds borrower (if netting eligible,
through satisfaction of the applicable Receive Obligation generated by the Corporation).
The term “End Leg” means, as regards a GCF Repo Transaction (or CCIT Transaction as
applicable), the concluding settlement aspects of the GCF Repo Transaction or CCIT
Transaction, as applicable, involving the retransfer of the underlying Eligible Netting
Securities by the Netting Member that is in the GCF Net Funds Lender Position and thetaking back of such Eligible Netting Securities by the Netting Member that is in the GCF
Net Funds Borrower Position. The term “End Leg” means, as regards a Sponsored GC
Trade, the concluding settlement aspects of the transaction, involving the retransfer of thePurchased GC Repo Securities by the GC Funds Lender and the taking back of such
Purchased GC Repo Securities by the GC Funds Borrower.
EOD Clearing Fund Cash
The term “EOD Clearing Fund Cash” shall have the meaning given to such term in Section
3 of Rule 20.
Event Period
The term “Event Period” shall have the meaning given that term in Section 7 of Rule 4.
Excess Adjusted Net Capital
The term “Excess Adjusted Net Capital” means, as of a particular date, the amount equal
to the difference between the adjusted net capital of a Futures Commission Merchant andthe minimum adjusted net capital that such Futures Commission Merchant must have tocomply with the requirements of 17 C.F.R. Section 1.17(a)(1) or (a)(2), or any successor
regulations.

29

Excess Capital Differential
The term “Excess Capital Differential” means the amount by which a Netting Member’s
VaR Charge exceeds its Netting Member Capital.
Excess Capital Ratio
The term “Excess Capital Ratio” means the quotient, rounded to the nearest two decimal
places, resulting from dividing the amount of a Netting Member’s VaR Charge by theamount of its Netting Member Capital that it maintains.
Excess Clearing Fund Deposit
The term “Excess Clearing Fund Deposit” shall have the meaning given that term in
Section 10 of Rule 4.
Excess Liquid Capital
The term “Excess Liquid Capital” means, as of a particular date, the amount equal to thedifference between the Liquid Capital of a Government Securities Broker or Government
Securities Dealer and the minimum Liquid Capital that such Government Securities Broker
or Government Securities Dealer must have to comply with the requirements of 17 C.F.R.
Section 402.2(a), (b) and (c), or any successor rule or regulation thereto.
Excess Net Capital
The term “Excess Net Capital” means, as of a particular date, the amount equal to thedifference between the Net Capital of a broker or dealer and the minimum Net Capital suchbroker or dealer must have to comply with the requirements of SEC Rule 15c3-1(a), or any
successor rule or regulation thereto.
Exchange Act
The term “Exchange Act” means the Securities Exchange Act of 1934, as amended.
Executing Firm
The term “Executing Firm” means a Non-Member on whose behalf data on trades that it
has engaged in have been submitted to the Corporation by a Submitting Member pursuant
to these Rules.
Existing Securities Collateral
The term “Existing Securities Collateral” means, as regards an outstanding Repo
Transaction with a Right of Substitution, the Eligible Netting Securities or cash that havebeen transferred by the Repo Party to the Reverse Repo Party as collateral in connection
with the Repo Transaction, which Eligible Netting Securities or cash have not yet been30

transferred by the Reverse Repo Party back to the Repo Party as the result of a substitutionof collateral or otherwise.
Fail Deliver Obligation
The term “Fail Deliver Obligation” means a Deliver Obligation that does not settle on its
original Scheduled Settlement Date.
Fail Mark Adjustment Payment
The term “Fail Mark Adjustment Payment” means the absolute value of the dollar
difference between the current Settlement Value of a Fail Deliver Obligation or a Fail
Receive Obligation on the current Business Day, and the previous Settlement Value of such
Deliver Obligation or Receive Obligation. Notwithstanding the above, the term “Fail Mark
Adjustment Payment” shall not apply to GCF Repo Transactions and CCIT Transactions.
Fail Receive Obligation
The term “Fail Receive Obligation” means a Receive Obligation that does not settle on its
original Scheduled Settlement Date.
Fannie Mae
The term “Fannie Mae” means the Federal National Mortgage Association.
FATCA
The term “FATCA” means (i) the provisions of sections 1471 through 1474 of the Internal
Revenue Code of 1986, as amended, (the “Code”) that were implemented as part of The
Foreign Account Tax Compliance Act (or any amendment thereto or successor sections
thereof), and the related Treasury Regulations or other official interpretations thereof, asin effect from time to time, and (ii) the provisions of any intergovernmental agreement toimplement The Foreign Account Tax Compliance Act as in effect from time to time
between the United States and the jurisdiction of the FFI Member’s (or applicant’s)
residency.
FATCA Certification
The term “FATCA Certification” means an executed copy of the relevant tax form requiredby the Internal Revenue Service under FATCA, as in effect from time to time, that each
Member (or applicant to become such) shall provide from time to time to the Corporation
as set forth under these Rules.
FATCA Compliance Date
The term “FATCA Compliance Date” shall mean, as applicable, either (i) January 1, 2014,
with respect to any FFI Member approved for membership by the Corporation on January
1, 2014 or thereafter (or, if the commencement of all FATCA withholding with respect to31such FFI Members is delayed beyond January 1, 2014 under FATCA, two calendar months
plus one day before such delayed effective date), or (ii) May 1, 2014, with respect to any
FFI Member approved for membership by the Corporation at any time prior to January 1,
2014 (or, if the commencement of all FATCA withholding with respect to such FFIMembers is delayed beyond July 1, 2014 under FATCA, two calendar months plus one
day before such delayed effective date).
FATCA Compliant
The term “FATCA Compliant” or “FATCA Compliance” means, with respect to an FFIMember, that such FFI Member has qualified under such procedures promulgated by theInternal Revenue Service as are in effect from time to time to establish exemption fromwithholding under FATCA such that the Corporation will not be required to withhold under
FATCA either (i) on “gross proceeds from the sale or other disposition of any property ofa type which can produce interest or dividends from sources within the United States”
within the meaning of Code section 1473(1)(A)(ii), as may be amended or re-codified fromtime to time, or (ii) on interest, dividends, etc. from sources within the United States within
the meaning of Code section 1473(1)(A)(i), as may be amended or re-codified from time
to time, in each case, paid to such FFI Member.
FCO
The term “FCO” means a clearing organization for a board of trade designated as a contract
market under Section 5 of the Commodity Exchange Act that has entered into a CrossMargining Agreement with the Corporation.
Federal Deposit Insurance Corporation Improvement Act
The term “Federal Deposit Insurance Corporation Improvement Act” means the Federal
Deposit Insurance Corporation Improvement Act of 1991, as amended.
Federal Funds Rate
The term “Federal Funds Rate” means, for each Business Day, the rate reported as such ina publicly available source. If there is a dispute as to the Federal Funds Rate for a particularBusiness Day, it shall be settled by reference to the rate set forth in H. 15(519) for suchBusiness Day opposite the caption “Federal funds (effective).” For this purpose, “H.
15(519)” means the weekly statistical release designated as such, or any successor
publication, published by the Board of Governors of the Federal Reserve System.
FedwireThe term “Fedwire” means the Federal Reserve Wire Transfer System for securities
movements or for funds-only movements, as the context requires.

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FFI Member
The term “FFI Member” means any Person that is treated as a non-U.S. entity for U.S.
federal income tax purposes. For the avoidance of doubt, FFI Member includes any
Member that is a U.S. branch of an entity that is treated as a non-U.S. entity for U.S. federal
income tax purposes.
Final Price Date
The term “Final Price Date” means, as regards an Eligible Security, the Business Day on
which begins the first processing cycle for the Corporation during which the coupon rate
for such Eligible Security is known by the Corporation.
Financed Securities
The term “Financed Securities” has the meaning assigned in Section 2a(b)(i)(C) of Rule
22A.
Financing AmountThe term “Financing Amount” has the meaning assigned in Section 2a(b)(i)(B) of Rule
22A.
Financing MarkThe term “Financing Mark” means, on a particular Business Day, as regards a Repo
Transaction, the product of the Market Value of the Repo Transaction multiplied by System
Repo Rate established by the Corporation for such Repo Transaction, and then multiplied
by a fraction, the numerator of which is the number of calendar days from the current
Business Day until the Scheduled Settlement Date for the Repo Transaction and thedenominator of which is 360. If a Repo Transaction other than a Forward-Starting Repo
Transaction during its Forward-Starting Period comprises a Net Short Position of theMember, then the Financing Mark shall be a negative value. If a Repo Transaction otherthan a Forward-Starting Repo Transaction during its Forward-Starting Period comprises a
Net Long Position of the Member, then the Financing Mark shall be a positive value. The
Financing Mark for a Forward-Starting Repo Transaction during its Forward-Starting
Period, and for any trade other than a Repo Transaction, shall be zero. The term “Financing
Mark” means, as regards a Forward Net Settlement Position, the sum of all the Financing
Marks on each of the Forward Trades that compose such Forward Net Settlement Position.
Notwithstanding the above, the term “Financing Mark” shall not apply to GCF Repo
Transactions and CCIT Transactions.
FOMC
The term “FOMC” means the Federal Open Market Committee as described on the websiteof the FRB.

33

Foreign Member
The term “Foreign Member” (also referred to as “Non-U.S. Member” or “Non-domestic
Member”) means a Foreign Person that is a Member. A foreign Bank Netting Member thatparticipates in the Corporation through a branch or agency located in the U.S. which isregulated by a U.S. and/or state regulatory authority shall not be deemed to be a Foreign
Member for purposes of the Corporation’s Rules and procedures.
Foreign Netting Member
The term “Foreign Netting Member” (also referred to as “Non-U.S. Netting Member” or“Non-domestic Netting Member”) shall have the meaning given that term in Section 3 ofRule 2A.
Foreign Person
The term “Foreign Person” (also referred to as “Non-U.S. Person” or “Non-domestic
Person”) means a Person that is organized or established under the laws of a country otherthan the United States and does not include a foreign Bank Netting Member which is notdeemed to be a Foreign Member pursuant to the definition of that term.
Former Sponsored Members
The term “Former Sponsored Members” shall have the meaning given that term in
Section 2 of Rule 3A.
Forward Mark Adjustment Payment
The term “Forward Mark Adjustment Payment” means, on a particular Business Day, asregards a Member’s Forward Net Settlement Position, the sum of the Collateral Markapplicable to such Forward Net Settlement Position, the Financing Mark applicable to such
Forward Net Settlement Position, and the Interest Rate Mark applicable to such Forward
Net Settlement Position. Notwithstanding the above, as regards an outstanding Repo
Transaction where a request for substitution has been made but New Securities Collateral
has not been received by the Corporation, the term “Forward Mark Adjustment Payment”
means “Forward Unallocated Sub Mark”. Notwithstanding the above, the term “Forward
Mark Adjustment Payment” shall refer to the GC Interest Rate Mark with respect toSponsored GC Trades. Notwithstanding the above, the term “Forward Mark Adjustment
Payment” shall not apply to GCF Repo Transactions and CCIT Transactions.
Forward Net Settlement Position
The term “Forward Net Settlement Position” means, with respect to Forward Trades
involving an Eligible Netting Security with a distinct CUSIP number, the amount of such
Securities that the Netting Member will, on the Scheduled Settlement Date for such
Forward Trades, be obligated, pursuant to Rule 12, to either receive from the Corporationor to deliver to the Corporation, where such Scheduled Settlement Date is one or more

34

Business Days in the future. For purposes of this definition, the Start and End Legs of a
Repo Transaction shall constitute separate Forward Net Settlement Positions.
Forward Period
The term “Forward Period” means, with regard to Forward Net Settlement Positions, thetime period from the comparison on a final price and settlement value basis of the data on
the Forward Trades that comprise such Forward Net Settlement Positions until theprocessing cycle immediately prior to the Scheduled Settlement Date for such Forward Net
Settlement Positions.
Forward-Settling Start Leg
The term “Forward-Settling Start Leg” means, on a particular Business Day, a Start Leg
that is one or more Business Days prior to its Scheduled Settlement Date.
Forward-Starting Period
The term “Forward-Starting Period” means, as regards a Forward-Starting Repo
Transaction, including a GCF Repo Transaction and a CCIT Transaction, the period oftime between the Business Day on which the Transaction is compared by the Corporation
pursuant to these Rules and the Scheduled Settlement Date for the Start Leg of theTransaction.
Forward-Starting Repo Transaction
The term “Forward-Starting Repo Transaction” means a Repo Transaction, including a
GCF Repo Transaction and a CCIT Transaction, that is scheduled to start one or more
Business Days after the date it is submitted to the Corporation.
Forward Trade
The term “Forward Trade” means a trade, including an Eligible Conversion Trade, whose
Scheduled Settlement Date is one or more Business Days after the date it is submitted to
the Corporation. For purposes of this definition, if the trade is a Repo Transaction, theStart and End Legs of the Transaction should be considered as separate trades.
Forward Unallocated Sub MarkThe term “Forward Unallocated Sub Mark” means, on a particular Business Day, as regards
an outstanding Repo Transaction, the sum of: (1) the Accrued Repo Interest-to-Dateapplicable to such transaction and (2) the Repo Interest Rate Differential applicable to suchtransaction.
FRB
The term “FRB” means the Board of Governors of the Federal Reserve System and eachFederal Reserve Bank, as appropriate.

35Freddie Mac
The term “Freddie Mac” means the Federal Home Loan Mortgage Corporation.
Full-Sized Trade
The term “Full-Sized Trade” means a trade that is submitted to the Corporation in the fullsize dollar amount in which it was executed as opposed to being submitted in an equivalentamount of $50 million pieces and a single tail.
Funds-Only Settlement AmountThe term “Funds-Only Settlement Amount” means the net dollar amount of a Netting
Member’s obligation, calculated pursuant to Rule 13, either to make a funds-only payment
to the Corporation or to receive a funds-only payment from the Corporation.
Funds-Only Settlement Payments Procedures Agreement
The term “Funds-Only Settlement Payments Procedures Agreement” means an agreement
among the Corporation, a Netting Member and a depository institution that provides forthe payment and collection of Funds-Only Settlement Amounts by the depository
institution on behalf of the Corporation and the Netting Member.
Funds-Only Settling Bank Member
The term “Funds-Only Settling Bank Member” means a bank, trust company or other entity
specified in Section 4 of Rule 13 which has qualified pursuant to the provisions of Rule 13
and which is a party to an effective “Appointment of Funds-Only Settling Bank and FundsOnly Settling Bank Agreement” whereby the Funds-Only Settling Bank undertakes toperform funds-only settlement services for the Netting Member which also is a party
thereto. The term “Funds-Only Settling Bank Member” shall be used interchangeably withthe term “Funds-Only Settling Bank”
Futures Commission Merchant
The term “Futures Commission Merchant” shall have the meaning set forth in thedefinitions section of the Commodity Exchange Act, except that no entity shall be deemed
to be a Futures Commission Merchant for purposes of these Rules unless it is registered assuch with the CFTC.
Futures Commission Merchant Netting Member
The term “Futures Commission Merchant Netting Member” shall have the meaning giventhat term in Section 3 of Rule 2A.

36

GC Collateral Return Entitlement
The term “GC Collateral Return Entitlement” means the entitlement of a Sponsoring
Member or Sponsored Member, as applicable, to receive the Purchased GC Repo Securities
in exchange for cash at the End Leg of a Sponsored GC Trade.
GC Collateral Return Obligation
The term “GC Collateral Return Obligation” means the obligation of a Sponsoring Memberor Sponsored Member, as applicable, to deliver the Purchased GC Repo Securities inexchange for cash at the End Leg of a Sponsored GC Trade.
GC Comparable Securities
The term “GC Comparable Securities” means, in relation to a Sponsored GC Trade, any
GC Repo Securities that are represented by the same Generic CUSIP Number as the GC
Repo Securities that were transferred in the Start Leg of the Sponsored GC Trade, as set
forth in the Schedule of GC Comparable Securities.
GC Daily Repo Interest
The term “GC Daily Repo Interest” means the daily interest amount that is payable undera Sponsored GC Trade.
GC Funds Borrower
The term “GC Funds Borrower” means a Sponsoring Member or Sponsored Member, as
applicable, that has a GC Collateral Return Entitlement and associated cash payment
obligation.
GC Funds Lender
The term “GC Funds Lender” means a Sponsoring Member or Sponsored Member, as
applicable, that has a GC Collateral Return Obligation and associated cash payment
entitlement.
GC Interest Rate MarkThe term “GC Interest Rate Mark” means, on a particular Business Day as regards any
Sponsored GC Trade where the End Leg is not scheduled to settle on that day, the productof the principal value of the Sponsored GC Trade on the Scheduled Settlement Date for its
End Leg multiplied by a factor equal to the absolute difference between the System Repo
Rate established by the Corporation for such Sponsored GC Trade and its Contract Repo
Rate, and then multiplied by a fraction, the numerator of which is the number of calendar
days from the current day until the Scheduled Settlement Date for the End Leg of theSponsored GC Trade and the denominator of which is 360. If the Sponsored GC Trade’sContract Repo Rate is greater than its System Repo Rate, then the GC Interest Rate Markshall be a positive value for the GC Funds Lender, and a negative value for the GC Funds
37

Borrower. If the Sponsored GC Trade’s Contract Repo Rate is less than its System Repo
Rate, then the GC Interest Rate Mark shall be a positive value for the GC Funds Borrower,
and a negative value for the GC Funds Lender.
GC Repo Security
The term “GC Repo Security” means an Eligible Security that is only eligible forsubmission to the Corporation in connection with the comparison and Novation ofSponsored GC Trades.
GC Start Leg Market Value
The term “GC Start Leg Market Value” means, in relation to a Sponsored GC Trade, themarket value of the GC Repo Securities transferred in the Start Leg of the Sponsored GC
Trade, measured as of the date of the settlement of the Start Leg of such Sponsored GC
Trade.
GCF-Authorized Inter-Dealer Broker
The term “GCF-Authorized Inter-Dealer Broker” means a Repo Broker that the
Corporation has designated as eligible to submit to the Corporation data on GCF Repo
Transactions on a Locked-In Basis. The Corporation may rescind at any time, immediately
effective upon issuance of an Important Notice to the membership, its designation of a
Repo Broker as eligible to submit to the Corporation data on GCF Repo Transactions.
GCF Clearing Agent Bank
The term “GCF Clearing Agent Bank” means a Clearing Agent Bank that has agreed toprovide the Corporation, upon request, under mutually agreeable terms, with clearing
services for GCF Repo Transactions.
GCF Counterparty
The term “GCF Counterparty” means a Netting Member, other than a Repo Broker, that isa counterparty (or is acting as Submitting Member for an Executing Firm that is thecounterparty) to a GCF-Authorized Inter-Dealer Broker with regard to a GCF Repo
Transaction.
GCF Forward MarkThe term “GCF Forward Mark” means, on a particular Business Day as regards any GCF
Repo Transaction that is not scheduled to settle on that day, the sum of the Accrued Repo
Interest-to-Date, the GCF Forward Starting Interest Rate Mark and the GCF Interest Rate
Mark on such GCF Repo Transaction.

38

GCF Forward Mark Adjustment Payment
The term “GCF Forward Mark Adjustment Payment” means, on a particular Business Day,
as regards a Member’s Forward Net Settlement Position in GCF Repo Transactions, thepayment as it relates to the Member’s GCF Forward Mark.
GCF Forward Starting Interest Rate MarkThe term “GCF Forward Starting Interest Rate Mark” means, on a particular Business Day,
as regards a Forward-Starting Repo Transaction that is a GCF Repo Transaction during its
Forward-Starting Period, the product of the principal value of the GCF Repo Transaction
on the Scheduled Settlement Date for its Start Leg multiplied by a factor equal to theabsolute difference between the System Repo Rate established by the Corporation for such
GCF Repo Transaction and its Contract Repo Rate, and then multiplied by a fraction, thenumerator of which is the number of calendar days from the Scheduled Settlement Datefor the Start Leg of the GCF Repo Transaction until the Scheduled Settlement Date for the
End Leg of the GCF Repo Transaction, and the denominator of which is 360. If the GCF
Repo Transaction’s Contract Repo Rate is greater than its System Repo Rate, then the GCF
Forward Starting Interest Rate Mark shall be a positive value for the Reverse Repo Party,
and a negative value for the Repo Party. If the GCF Repo Transaction’s Contract Repo
Rate is less than its System Repo Rate, then the GCF Forward Starting Interest Rate Markshall be a positive value for the Repo Party, and a negative value for the Reverse Repo
Party. The term “GCF Forward Starting Interest Rate Mark” means, as regards a Forward
Net Settlement Position, the sum of all the GCF Forward Starting Interest Rate Marks oneach of the Forward Trades that compose such Forward Net Settlement Position.
GCF Interest Adjustment Payment
The term “GCF Interest Adjustment Payment” means, as regards a GCF Forward Mark
Adjustment Payment, the product of the GCF Forward Mark Adjustment Payment
multiplied by the applicable Overnight Investment Rate multiplied by a fraction, thenumerator of which is the number of calendar days between the previous Business Day andthe current Business Day, and the denominator of which is 360.
GCF Interest Rate MarkThe term “GCF Interest Rate Mark” means, on a particular Business Day as regards any
GCF Repo Transaction that is not scheduled to settle on that day, the product of theprincipal value of the GCF Repo Transaction on the Scheduled Settlement Date for its End
Leg multiplied by a factor equal to the absolute difference between the Repo Rateestablished by the Corporation for such GCF Repo Transaction and its Contract Repo Rate,and then multiplied by a fraction, the numerator of which is the number of calendar days
from the current day until the Scheduled Settlement Date for the End Leg of the GCF Repo
Transaction and the denominator of which is 360. If the GCF Repo Transaction’s Contract
Repo Rate is greater than its System Repo Rate, then the GCF Interest Rate Mark shall bea positive value for the Reverse Repo Party, and a negative value for the Repo Party. If the
GCF Repo Transaction’s Contract Repo Rate is less than its System Repo Rate, then the

39

GCF Interest Rate Mark shall be a positive value for the Repo Party, and a negative value
for the Reverse Repo Party. The term “GCF Interest Rate Mark” means, as regards a GCF
Net Settlement Position, the sum of all the GCF Interest Rate Mark Payments on each of
the GCF Repo Transactions that compose such GCF Net Settlement Position.
GCF Net Funds Borrower Position
The term “GCF Net Funds Borrower Position” means, with respect to a particular Generic
CUSIP Number, both the amount of funds that a Netting Member has borrowed as the net
result of its outstanding GCF Repo Transactions and CCIT Transactions on a particularBusiness Day and the equivalent amount of Eligible Netting Securities and/or cash thatsuch Netting Member is obligated, pursuant to Rule 20, to allocate to the Corporation tosecure such borrowing (such Netting Member holding a GCF Net Funds Borrower
Position, a “GCF Net Funds Borrower”). The GCF Net Funds Borrower Position shallrepresent a Netting Member’s position with respect to GCF Repo Transaction and CCIT
Transaction activity processed by the Corporation on a particular Business Day prior to
net-of-net settlement that occurs pursuant to the applicable paragraph of Section 3 of Rule20.
GCF Net Funds Lender Position
The term “GCF Net Funds Lender Position” means, with respect to a particular Generic
CUSIP Number, both the amount of funds that a Netting Member or CCIT Member haslent as the result of its outstanding GCF Repo Transactions or its outstanding CCIT
Transactions, as applicable, on a particular Business Day and the equivalent amount of
Eligible Netting Securities and/or cash that such Netting Member or CCIT Member, as
applicable, is entitled, pursuant to Rule 20, to be allocated for its benefit to secure suchloan (such Netting Member or CCIT Member holding a GCF Net Funds Lender Position,a “GCF Net Funds Lender”). The GCF Net Funds Lender Position shall represent a Netting
Member’s or CCIT Member’s position, as applicable, with respect to GCF Repo
Transaction and CCIT Transaction activity, as applicable, processed by the Corporation ona particular Business Day prior to net-of-net settlement that occurs pursuant to theapplicable paragraph of Section 3 of Rule 20.
GCF Net Settlement Position
The term “GCF Net Settlement Position” means, on a particular Business Day as regards a
Netting Member’s GCF Repo Transaction activity and CCIT Transaction activity in aparticular Generic CUSIP Number, either a GCF Net Funds Lender Position or a GCF Net
Funds Borrower Position, as the context requires.
GCF Repo Allocation Waterfall MRA
The term “GCF Repo Allocation Waterfall MRA” shall have the meaning given to suchterm in Section 3b of Rule 20.

40

GCF Repo Security
The term “GCF Repo Security” means an Eligible Security or an Eligible Netting Security
that is only eligible for submission to the Corporation in connection with the comparison,
netting and/or settlement of GCF Repo Transactions or CCIT Transactions.
GCF Repo® † Service
The term “GCF Repo Service” means the service offered by the Corporation to compare,
net and settle GCF Repo Transactions.
GCF Repo Transaction
The term “GCF Repo Transaction” means a Repo Transaction involving Generic CUSIP
Numbers the data on which are submitted to the Corporation on a Locked-In-Trade basis
pursuant to the provisions of Rule 6C, for netting and settlement by the Corporation
pursuant to the provisions of Rule 20.
GCF Transaction Adjustment Payment
The term “GCF Transaction Adjustment Payment” means, as regards a Netting Member,the total repo interest on the Netting Member’s GCF Repo Transactions and CCIT
Transactions, as applicable, for which the Scheduled Settlement Date for the End Leg ofsuch GCF Repo Transactions and CCIT Transactions, as applicable, is the next Business
Day.
General Collateral Repo Transaction
The term “General Collateral Repo Transaction” means a Repo Transaction, other than a
GCF Repo Transaction or Sponsored GC Trade (unless the context indicates otherwise),with a Generic CUSIP Number.
Generic CUSIP Number
The term “Generic CUSIP Number” means a Committee on Uniform Securities
Identification Procedures identifying number established for a category of securities, as
opposed to a specific security. The Corporation shall use separate Generic CUSIP Numbers
for General Collateral Repo Transactions, GCF Repo Transactions, CCIT Transactions andSponsored GC Trades.
Ginnie Mae
The term Ginnie Mae means the Government National Mortgage Association.

†

GCF Repo is a registered trademark of the Fixed Income Clearing Corporation.

41

Government Securities Broker
The term “Government Securities Broker” shall have the meaning given that term in
Section 3(a)(43) of the Exchange Act, unless otherwise provided in these Rules.
Government Securities Dealer
The term “Government Securities Dealer” shall have the meaning given that term in
Section 3(a)(44) of the Exchange Act, unless otherwise provided in these Rules.
Government Securities Division or GSD
The term “Government Securities Division” or “GSD” means the division of the Fixed
Income Clearing Corporation that provides clearing and other services related to Eligible
Securities.
Government Securities Issuer
The term “Government Securities Issuer” means an entity that issues “government
securities”, as that term is defined in subparagraphs (A), (B), and (C) of Section 3(a)(42)of the Exchange Act.
Government Securities Issuer Netting Member
The term “Government Securities Issuer Netting Member” shall have the meaning giventhat term in Section 3 of Rule 2A.
Government Sponsored Enterprise
The term “Government Sponsored Enterprise” shall mean Fannie Mae, Ginnie Mae,
Federal Home Loan Banks, or Freddie Mac.
GSD Margin Group
The term “GSD Margin Group” means the GSD Accounts within a Margin Portfolio of a
Member.
Haircut Deficit
The term “Haircut Deficit” means, as regards any Sponsored Member Trade, the amount,
if any, by which the Initial Haircut exceeds the Current Haircut.
Haircut Surplus
The term “Haircut Surplus” means, as regards any Sponsored Member Trade, the amount,
if any, by which the Current Haircut exceeds the Initial Haircut.

42

Historical Cover 1 Liquidity Requirement
The term “Historical Cover 1 Liquidity Requirement” means the largest Liquidity Need ofa Netting Member or family of affiliated Netting Members during the applicable LookBack Period as determined by the Corporation.
Holiday
The term “Holiday” means, with respect to the Holiday Charge, any day on which the
Corporation is closed, but the day is not observed as a holiday by the Securities Industry
and Financial Markets Association and the bond markets are open.
Holiday Charge
The term “Holiday Charge” means an additional charge that may be added to Netting
Members’ VaR Charge on the Business Day prior to a Holiday. The Holiday Charge
approximates the exposure that a Netting Member’s trading activity on the applicable
Holiday could pose to the Corporation. Since the Corporation cannot collect margin on
the Holiday, the Holiday Charge is due on the Business Day prior to the applicable Holiday.
The methodology for calculating a Holiday Charge shall be determined by the Corporationin advance of each applicable Holiday. The Holiday Charge approximates each Netting
Member’s Required Fund Deposit to address the exposure such Netting Member’s trading
activity on the applicable Holiday could pose to the Corporation. The Corporation shallhave the discretion to calculate the Holiday Charge based on its assessment of market
conditions at the time the Holiday Charge is calculated (such as, for example, significant
market occurrences that could impact market price volatility). The Corporation shallinform Netting Members of the methodology it will use to calculate the Holiday Charge by
an Important Notice issued no later than 10 Business Days prior to the day on which theapplicable Holiday Charge is applied. Examples of potential methodologies for theHoliday Charge may include, but shall not be limited to, time scaling of the VaR Charge
or a stress scenario that reflects potential market price volatility on the Holiday.
Indemnified Person
The term “Indemnified Person” shall have the meaning given to that term in Section 9(iii)of Rule 3.
Indirect Affected Member
The term “Indirect Affected Member” has the meaning assigned in Section 2a(b)(i)(E) of
Rule 22A.
Individual Regular AmountThe term “Individual Regular Amount” means the portion of the Aggregate Regular
Amount that is allocated to each Netting Member by the Corporation in accordance with
Section 2a(b)(iii) of Rule 22A.

43

Individual Supplemental AmountThe term “Individual Supplemental Amount” means the portion of the Aggregate
Supplemental Amount that is allocated to each Netting Member by the Corporation inaccordance with Section 2a(b)(iv) of Rule 22A.
Individual Total AmountThe term “Individual Total Amount” means the sum of a Netting Member’s Individual
Regular Amount plus such Netting Member’s Individual Supplemental Amount.
Initial Haircut
The term “Initial Haircut” means, (i) as regards any Sponsored Member Trade that is not a
Sponsored GC Trade, the absolute value of the dollar difference, if any, between the Market
Value of the Sponsored Member Trade, as of the settlement date of the Start Leg, and theContract Value of the Start Leg of the Sponsored Member Trade and (ii) as regards any
Sponsored GC Trade, any difference between (x) the Contract Value of the Start Leg of
the Sponsored GC Trade and (y) the GC Start Leg Market Value.
Insurance Company
The term “Insurance Company” shall have the meaning given that term in Section 2(a)(17)of the Investment Company Act of 1940, as amended.
Insurance Company Netting Member
The term “Insurance Company Netting Member” shall have the meaning given that termin Section 3 of Rule 2A.
Interactive Submission Method
The term “Interactive Submission Method” means a trade submission method that is used
to submit data on individual trades to the Corporation immediately after trade execution
pursuant to communications links, formats, timeframes, and deadlines established by the
Corporation for such purpose. The Interactive Submission Method is a computer-tocomputer interface, where the trade is fed to the Corporation’s computer directly from thesubmitter’s computer.
Inter-Dealer Broker
The term “Inter-Dealer Broker” means a Person which is in the business of buying andselling securities as agent on behalf of dealers and is registered under Section 15 or Section
15C of the Exchange Act.

44

Inter-Dealer Broker Netting Member
The term “Inter-Dealer Broker Netting Member” shall have the meaning set forth in
Section 3 of Rule 2A.
Interest Adjustment Payment
The term “Interest Adjustment Payment” means, as regards a Forward Mark Adjustment
Payment, the product of the Forward Mark Adjustment Payment multiplied by theapplicable Overnight Investment Rate and then multiplied by a fraction, the numerator ofwhich is the number of calendar days between the previous Business Day and the current
Business Day and the denominator of which is 360. The term “Interest Adjustment
Payment” means, as regards a Sponsored GC Trade, the product of the GC Interest Rate
Mark multiplied by the applicable Overnight Investment Rate and then multiplied by afraction, the numerator of which is the number of calendar days between the previous
Business Day and the current Business Day and the denominator of which is 360.
Interest Rate MarkThe term “Interest Rate Mark” means, on a particular Business Day as regards a ForwardStarting Repo Transaction during its Forward-Starting Period, the product of the principal
value of the Repo Transaction on the Scheduled Settlement Date for its Start Leg multiplied
by a factor equal to the absolute difference between the System Repo Rate established by
the Corporation for such Repo Transaction and its Contract Repo Rate, and then multiplied
by a fraction, the numerator of which is the number of calendar days from the Scheduled
Settlement Date for the Start Leg of the Repo Transaction until the Scheduled Settlement
Date for the End Leg of the Repo Transaction and the denominator of which is 360. If the
Repo Transaction’s Contract Repo Rate is greater than its System Repo Rate, then theInterest Rate Mark shall be a positive value for the Reverse Repo Party, and a negativevalue for the Repo Party. If the Repo Transaction’s Contract Repo Rate is less than its
System Repo Rate, then the Interest Rate Mark shall be a positive value for the Repo Party,
and a negative value for the Reverse Repo Party. The Interest Rate Mark for any Repo
Transaction other than a Forward-Starting Repo Transaction during its Forward-Starting
Period, and for any trade other than a Repo Transaction, shall be zero. The term “Interest
Rate Mark” means, as regards a Forward Net Settlement Position, the sum of all the Interest
Rate Marks on each of the Forward Trades that compose such Forward Net Settlement
Position. Notwithstanding the above, the term “Interest Rate Mark” shall not apply to GCF
Repo Transactions or CCIT Transactions.
Interested Person
The term “Interested Person” means a Member or an applicant for membership, in the
Comparison System or in the Netting System.

45

Intraday Supplemental Fund Deposit
The term “Intraday Supplemental Fund Deposit” means the additional deposit to theClearing Fund required by the Corporation from a Member intraday pursuant to theprovisions of Rule 4.
Investment Company
The term “Investment Company” shall have the meaning given that term in Section 3 ofthe Investment Company Act of 1940, as amended.
Invoice AmountThe term “Invoice Amount” means all fee amounts due and owing from a Netting Memberor CCIT Member, as applicable, to the Corporation on a particular Business Day.
Issue Date
The term “Issue Date” means, as regards an Auction Purchase, the date on which the
Eligible Treasury Securities that comprise such Auction Purchase are issued.
Joint Account
The term “Joint Account” means two or more CCIT Members represented by a Joint
Account Submitter.
Joint Account Submitter
The term “Joint Account Submitter” means an authorized entity that (i) is acting as agent
for two or more CCIT Members who are trading and submitting CCIT Transactions as a
Joint Account and (ii) has been appointed by each such CCIT Member pursuant to a Joint
Account Submitter Agreement.
Joint Account Submitter Agreement
The term “Joint Account Submitter Agreement” means the agreement required in Rule 3B
to be signed and delivered to the Corporation by each CCIT Member that elects to appointa Joint Account Submitter.
Legal Entity Identifier
The term “Legal Entity Identifier” means a 20-character reference code to uniquely identify
legally distinct entities that engage in financial transactions. The Legal Entity Identifier isbased on the ISO 17442 standard developed by the International Organization forStandardization and satisfies the standards implemented by the Global Legal Entity
Identifier Foundation.

46

Legal Risk
The term “Legal Risk” shall have the meaning given that term in Section 2 of Rule 4.
Lender
The term “Lender” shall have the meaning given that term in Section 11 of Rule 4.
Liquid Capital
The term “Liquid Capital” means, as of a particular date, the amount equal to the liquid
capital of a Government Securities Broker or Government Securities Dealer as defined in
17 C.F.R. Section 402.2(d), or any successor rule or regulation thereto.
Liquidating Trade
The term “Liquidating Trade” has the meaning assigned in Section 2a(b)(i)(G) of Rule
22A.
Liquidity Buffer
The term “Liquidity Buffer” means the product of the Liquidity Percentage multiplied by
the Historical Cover 1 Liquidity Requirement subject to a minimum of $15 billion.
Liquidity Need
The term “Liquidity Need” means the sum of a Netting Member’s Receive Obligations andFunds-Only Settlement Amounts.
Liquidity Percentage
The term “Liquidity Percentage” means a percentage determined by the Corporation in its
sole discretion. Such percentage will be influenced by the Historical Cover 1 Liquidity
Requirements over various time horizons and business trends related to the Corporation’s
ability to maintain sufficient financial resources.
Liquidity Tier
The term “Liquidity Tier” means a stratum of Liquidity Needs, as determined in the
Corporation’s sole discretion, that the Corporation defines to group Netting Members’liquidity needs into discrete numeric ranges.
Locked-In Comparison
The term “Locked-In Comparison” means the comparison of a Locked-In Trade by thereceipt by the Corporation of data from a Locked-In Trade Source.

47

Locked-In Trade
The term “Locked-In Trade” means a trade, involving Eligible Securities, that is deemed a
Compared Trade once the data on such trade is received from a single, designated source
and meets the requirements for submission of data on a Locked-In Trade pursuant to theseRules, without the necessity of matching the data regarding the trade with data provided
by each Member that is or is acting on behalf of an original counterparty to the trade. The
data regarding a Locked-In Trade are provided to the Corporation by a Locked-In Trade
Source that has been authorized by a Member that is a party to the trade (or that is acting
on behalf of an entity that is a party to the trade) to provide such data to the Corporation.
Locked-In Trade Source
The term “Locked-In Trade Source” means a source of data on Locked-In Trades that the
Corporation has so designated, subject to such terms and conditions as to which the
Locked-In Trade Source and the Corporation may agree.
Look-Back Period
The term “Look-Back Period” means a period of time determined by the Corporation in its
sole discretion over which the Corporation analyzes Netting Members’ Liquidity Needs inorder to determine the Historical Cover 1 Liquidity Requirement.
Long Transaction
The term “Long Transaction” means, with regard to Eligible Netting Securities, a purchase,
Auction Purchase, Start Leg for the Reverse Party, and End Leg for the Repo Party.
Loss Allocation Cap
The term “Loss Allocation Cap” shall have the meaning given that term in Section 7 ofRule 4.
Loss Allocation Notice
The term “Loss Allocation Notice” shall have the meaning given that term in Section 7 ofRule 4.
Loss Allocation Withdrawal Notice
The term “Loss Allocation Withdrawal Notice” shall have the meaning given that term in
Section 7b of Rule 4.

48

Margin Liquidity Adjustment Charge or MLA Charge
The terms “Margin Liquidity Adjustment Charge” or “MLA Charge” mean, with respect
to each Margin Portfolio, an additional charge applied to Net Unsettled Positions of a
Member. The MLA Charge shall be calculated daily and shall be included in each
Member’s Required Fund Deposit.
For purposes of calculating this charge, Net Unsettled Positions shall be categorized into
the following asset groups: (a) U.S. Treasury securities, which shall be further categorized
into subgroups by maturity; (b) Treasury-Inflation Protected Securities (“TIPS”), whichshall be further categorized into subgroups by maturity; (c) U.S. agency bonds; and(d) mortgage pools, which may be further categorized into subgroups by mortgage pooltypes.
The asset groups and subgroups shall be set forth in a schedule that is published on the
Corporation’s website. It shall be the Member’s responsibility to retrieve the schedule.
The Corporation will provide Members with at a minimum 5 Business Days’ advancenotice of any change to the schedule via an Important Notice.
The Corporation shall first calculate a measurement of market impact cost for Net
Unsettled Positions in each of the asset groups/subgroups, as described below:(i)

For Net Unsettled Positions in U.S. Treasury securities maturing in less than one
year and TIPS, the directional market impact cost should be used, which is afunction of the Net Unsettled Position’s net directional market value;(ii)

For all other Net Unsettled Positions, two components shall be added together:(1) the directional market impact cost, as described above, and (2) the basis cost,which is based on the Net Unsettled Position’s gross market value.

For all asset groups/subgroups, the net directional market value and the gross market value
shall be divided by the average daily volumes of the securities in that asset group/subgroupover a lookback period.
The calculated market impact cost for Net Unsettled Positions in an asset group/subgroupshall be compared to a portion of the VaR Charge that is allocated to that asset
group/subgroup. If the ratio of the calculated market impact cost to a portion of the VaRCharge is greater than a threshold, to be determined by the Corporation from time to time,an MLA Charge will be applied to that asset group/subgroup. If the ratio of these two
amounts is equal to or less than this threshold, the MLA Charge will not be applied to that
asset group/subgroup.
When applicable, an MLA Charge for each asset group/subgroup would be calculated as aproportion of the product of (1) the amount by which the ratio of the calculated market
impact cost to a portion of the VaR Charge allocated to that asset group/subgroup exceeds
the threshold, and (2) a portion of the VaR Charge allocated to that asset group/subgroup.
Each applicable MLA Charge for each asset group/subgroup shall be added together toresult in one total MLA Charge.
The Corporation may apply a downward adjusting scaling factor based on the ratio of thecalculated market impact cost to a portion of the VaR Charge to result in a final MLA

49

Charge, where a higher ratio would trigger a larger downward adjustment of the MLA
Charge and a lower ratio would trigger no downward adjustment of the MLA Charge.
If a Sponsored Member clears through multiple accounts sponsored by multiple
Sponsoring Members, for each such account, the Corporation shall calculate both (1) an
MLA Charge for each asset group/subgroup in the account on a standalone basis, as
provided above, and (2) an MLA Charge for each asset group/subgroup in the account as
part of a consolidated portfolio, as provided below, with the higher amount applied as the
MLA Charge for the relevant asset group/subgroup. The applicable MLA Charge for each
asset group/subgroup shall be added together to result in one total MLA Charge for theaccount.
For purposes of calculating the MLA Charge for each asset group/subgroup in the accountas part of a consolidated portfolio, the market impact cost for the asset group/subgroup is
calculated based on the aggregate Net Unsettled Positions of that asset group/subgroup in
the consolidated portfolio.
The calculated market impact cost for each asset
group/subgroup in the consolidated portfolio shall be allocated on a pro rata basis to each
asset group/subgroup in each of the accounts based on the market impact cost of that asset
group/subgroup in the account.
The allocated market impact cost for an asset group/subgroup shall be compared to a
portion of the VaR Charge that is allocated to that asset group/subgroup in the account. If
the ratio of the allocated market impact cost to a portion of the VaR Charge is greater thana threshold to be determined by the Corporation from time to time, an MLA Charge will
be applied to that asset group/subgroup. If the ratio of these two amounts is equal to orless than this threshold, the MLA Charge will not be applied to that asset group/subgroup.
When applicable, the MLA Charge for each asset group/subgroup in the account as part ofa consolidated portfolio would be calculated as a proportion of the product of (1) theamount by which the ratio of the allocated market impact cost for the asset group/subgroupto the portion of the VaR Charge allocated to that asset group/subgroup exceeds athreshold, to be determined by the Corporation from time to time, and (2) a portion of the
VaR Charge allocated to that asset group/subgroup.
Margin Portfolio
The term “Margin Portfolio” means one or more Accounts and, as applicable, a Market
Professional Cross-Margining Account, as a Netting Member shall designate in accordancewith the provisions of Rule 4 and/or any applicable Cross-Margining Arrangement for the
purpose of calculating the Member’s Required Fund Deposit and, as applicable, theMember’s Market Professional Required Fund Deposit.
Margin Proxy
The term “Margin Proxy” means, with respect to each Margin Portfolio, an alternative
volatility calculation for specified Net Unsettled Positions of a Netting Member, calculatedusing historical market price changes of such U.S. Treasury and agency pass-throughmortgage-backed securities indices determined by the Corporation. The Margin Proxy
would be applied by the Corporation as an alternative to the model-based volatility

50

calculation of the VaR Charge for each Netting Member’s Margin Portfolio. The Margin
Proxy shall cover such range of historical market price moves and parameters as the
Corporation from time to time deems appropriate.
Market Professional
The term “Market Professional” means an entity, other than a Non-Customer, that is a party
to a Market Professional Agreement for Cross-Margining.
Market Professional Agreement for Cross-Margining
The term “Market Professional Agreement for Cross-Margining” means an agreement, inthe form approved by the Corporation and the relevant FCO, pursuant to which a Market
Professional authorizes its Eligible Positions and margin to be carried in a Market
Professional Cross-Margining Account.
Market Professional Cross-Margining Account
The term “Market Professional Cross-Margining Account” means, as applicable: (i) across-margined Account that is carried for a Netting Member by the Corporation and thatis limited to Eligible Positions and margin of Market Professionals; or (ii) an Account thatis carried by a Netting Member for, and that is limited to, Eligible Positions and margin of,Market Professionals that are party to a Market Professional Agreement for CrossMargining.
Market Value
The term “Market Value” means, on a particular Business Day, the amount in dollars equalto: (1) as regards a trade other than a Repo Transaction, the System Price established by
the Corporation for the underlying Eligible Netting Securities, multiplied by the par valueof such Securities, plus accrued coupon interest that has accrued with regard to such
Securities calculated to their Scheduled Settlement Date, (2) as regards a Repo Transaction
other than a GCF Repo Transaction, the System Price established by the Corporation for
the underlying Eligible Netting Securities, multiplied by the par value of such Securities,
plus accrued coupon interest that has accrued with regard to such Securities calculated tothat Business Day, and (3) as regards a GCF Repo Transaction, the principal value of the
GCF Repo Transaction.
Maturity Value
The term “Maturity Value” means, as regards a Net Settlement Position or Deliver
Obligation, the Redemption Value of the Eligible Netting Securities that comprise such
Net Settlement Position or Deliver Obligation.
Member
The term “Member” means a Comparison-Only Member or a Netting Member. The term
“Member” shall include a Sponsoring Member in its capacity as a Sponsoring Member and51

a Sponsored Member, each to the extent specified in Rule 3A. The term “Member” shall
include a CCIT Member to the extent specified in Rule 3B.
Minimum Charge
The term “Minimum Charge” means the minimum amount of each Member’s Required
Fund Deposit, as applicable, before application of special premiums and amounts
applicable under these rules.
Miscellaneous Adjustment AmountThe term “Miscellaneous Adjustment Amount” means the net total of all miscellaneous
funds-only amounts that, on a particular Business Day, are required to be paid by a Netting
Member or CCIT Member, as applicable, to the Corporation and/or are entitled to becollected by a Member (including a CCIT Member, as applicable) from the Corporation.
Money Tolerance
The term “Money Tolerance” means the amount, as stated in the Schedule of Money
Tolerances, by which Data for a Required Match Data item involving dollar amounts
submitted by two Members can differ and still be compared by the Corporation pursuant
to these Rules.
Mortgage-Backed Securities Division
The term “Mortgage-Backed Securities Division” means the division of the Fixed Income
Clearing Corporation that provides clearing and other services related to mortgage-backed
securities.
Mortgage-Backed Securities Division Cash Settling Bank Participant
The term “Mortgage-Backed Securities Division Cash Settling Bank Participant” meansan entity that qualifies as a Mortgage-Backed Securities Division cash settling bankparticipant under the rules of the Mortgage-Backed Securities Division and has been
approved as such by the Corporation.
Mortgage-Backed Securities Division Participant
The term Mortgage-Backed Securities Division Participant means a participant, limited
purpose participant or an EPN user utilizing the services of the Mortgage-Backed
Securities Division.
Multilateral Clearing Agency
The term “Multilateral Clearing Agency” shall have the meaning given to it in Section
408(1) of the Federal Deposit Insurance Corporation Improvement Act.

52

Multiple Batch Submission Method
The term “Multiple Batch Submission Method” means a trade submission method that isused to submit multiple batches of trade data to the Corporation throughout the day
pursuant to communications links, formats, timeframes, and deadlines established by the
Corporation for such purpose.
Net Assets
The term “Net Assets” shall mean the difference between the total assets and the total
liabilities of a Netting Member or CCIT Member, as applicable.
Net Capital
The term “Net Capital” means, as of a particular date, the amount equal to the net capitalof a broker or dealer as defined in SEC Rule 15c3-1(c)(2), or any successor rule orregulation thereto.
Net Clearance Difference AmountThe term “Net Clearance Difference Amount” means the absolute value of the dollar
difference on a particular Business Day for a Netting Member between the total of all
Credit Clearance Difference Amounts and the total of all Debit Clearance Difference
Amounts. If the total of all of the Credit Clearance Difference Amounts is greater than of
all of the Debit Credit Difference Amounts, then the Net Clearance Difference Amountshall be a positive dollar amount owing from the Corporation to the member. If the totalof all the Credit Clearance Difference Amounts is less than the total of all of the Debit
Clearance Difference Amounts, then the Net Clearance Difference Amount shall be anegative dollar amount owing from the Member to the Corporation.
Net Coupon Adjustment Payment
The term “Net Coupon Adjustment Payment” means the absolute value of the dollar
difference on a particular Business Day for a Netting Member between the total of all
Credit Coupon Adjustment Payments and the total of all Debit Coupon Adjustment
Payments. If the total of all of the Credit Coupon Adjustment Payments is greater than of
all of the Debit Coupon Adjustment Payments, then the Net Coupon Adjustment Payment
shall be a positive dollar amount owing from the Corporation to the member. If the totalof all the Credit Coupon Adjustment Payment is less than the total of all of the Debit
Coupon Adjustment Payments, then the Net Coupon Adjustment Payment shall be anegative dollar amount owing from the Member to the Corporation.
Net Delivery Differential Adjustment Payment
The term “Net Delivery Differential Adjustment Payment” means the absolute value of thedollar difference, for a particular Member and Business Day, between the total of all the
Credit Delivery Differential Adjustment Payments and the total of all the Debit Delivery
Differential Adjustment Payments. If the total of all of the Credit Delivery Differential
53

Adjustment Payments is greater than the total of all of the Debit Delivery Differential
Adjustment Payments, then the Net Delivery Differential Adjustment Payment shall be apositive dollar amount owing from the Corporation to the Member. If the total of all of theCredit Delivery Differential Adjustment Payments is less than the total of all of the Debit
Delivery Differential Adjustment Payments, then the Net Delivery Differential Adjustment
Payment shall be a negative dollar amount owing from the Member to the Corporation.
Net Fail Mark Adjustment Payment
The term “Net Fail Mark Adjustment Payment” means the absolute value of the dollar
difference on a particular Business Day for a Netting Member between the total of all
Credit Fail Mark Adjustment Payments and the total of all Debit Fail Mark Adjustment
Payments. If the total of all of the Credit Fail Mark Adjustment Payments is greater than
the total of all of the Debit Fail Mark Adjustment Payments, then the Net Fail Mark
Adjustment Payment shall be a positive dollar amount owing from the Corporation to theMember. If the total of all of the Credit Fail Mark Adjustment Payments is less than the
total of all of the Debit Fail Mark Adjustment Payments, then the Net Fail Mark
Adjustment Payment shall be a negative dollar amount owing from the Member to the
Corporation.
Net Forward Mark Adjustment Payment
The term “Net Forward Mark Adjustment Payment” means the absolute value of the dollar
difference on a particular Business Day for a Netting Member between the total of all
Credit Forward Mark Adjustment Payments and the total of all of the Debit Forward Mark
Adjustment Payments. If the total of all of the Credit Forward Mark Adjustment Payments
is greater than the total of all of the Debit Forward Mark Adjustment Payments, then the
Net Forward Mark Adjustment Payment shall be a positive dollar amount owing from the
Corporation to the Member. If the total of all of the Credit Forward Mark Adjustment
Payments is less than the total of all of the Debit Forward Mark Adjustment Payments,
then the Net Forward Mark Adjustment Payment shall be a negative dollar amount owing
from the Member to the Corporation.
Net Funds Payor Position
The term “Net Funds Payor Position” means, with respect to a particular Generic CUSIP
Number, the funds amount equal to the difference between the previous Business Day’s
GCF Net Settlement Position (which includes CCIT Transaction activity as applicable) andthe current Business Day’s GCF Net Settlement Position (which includes CCIT
Transaction activity as applicable), where the difference results in a cash obligation for the
Netting Member or CCIT Member after net-of-net settlement occurs pursuant to theapplicable paragraph of Rule 20 (such Netting Member or CCIT Member holding a Net
Funds Payor Position, a “Net Funds Payor”).
Net Funds Receiver Position
The term “Net Funds Receiver Position” means, with respect to a particular Generic CUSIP
Number, the funds amount equal to the difference between the previous Business Day’s
54

GCF Net Settlement Position (which includes CCIT Transaction activity as applicable) andthe current Business Day’s GCF Net Settlement Position (which includes CCIT
Transaction activity as applicable), where the difference results in a cash credit for the
Netting Member or CCIT Member after net-of-net settlement occurs pursuant to theapplicable paragraph of Rule 20 (such Netting Member or CCIT Member holding a Net
Funds Receiver Position, a “Net Funds Receiver”).
Net Funds-Only Settlement Figure
The term “Net Funds-Only Settlement Figure” means the net amount of the Funds-OnlySettlement Amounts of the Netting Members for which a Funds-Only Settling Bank
Member is acting.
Net GCF Forward Mark Adjustment Payment
The term “Net GCF Forward Mark Adjustment Payment” means the absolute value of thedollar difference on a particular Business Day for a Netting Member between the total of
all of the Credit GCF Forward Mark Adjustment Payments and the total of all of the Debit
GCF Forward Mark Adjustment Payments. If the total of all of the Credit GCF Forward
Mark Adjustment Payments is greater than the total of all of the Debit GCF Forward Mark
Adjustment Payments, then the Net GCF Forward Mark Adjustment Payment shall be apositive dollar amount owing from the Corporation to the Member. If the total of all of theCredit GCF Forward Mark Adjustment Payments is less than the total of all of the Debit
GCF Forward Mark Adjustment Payments, then the Net GCF Forward Mark Adjustment
Payment shall be a negative dollar amount owing from the Member to the Corporation.
Net GCF Interest Adjustment Payment
The term “Net GCF Interest Adjustment Payment” means the absolute value of the dollar
difference on a particular Business Day for a Netting Member between the total of all of
the Credit GCF Interest Adjustment Payments and the total of all of the Debit GCF Interest
Adjustment Payments. If the total of all of the Credit GCF Interest Adjustment Payments
is greater than the total of all of the Debit GCF Interest Adjustment Payments, then the Net
GCF Interest Adjustment Payment shall be a positive dollar amount owing from the
Corporation to the Member. If the total of all of the Credit GCF Interest Adjustment
Payments is less than the total of all of the Debit GCF Interest Adjustment Payments, thenthe Net GCF Interest Adjustment Payment shall be a negative dollar amount owing from
the Member to the Corporation.
Net GCF Transaction Adjustment Payment
The term “Net GCF Transaction Adjustment Payment” means, on a particular Business
Day, the absolute value of the dollar difference between the total of all of the Credit GCF
Transaction Adjustment Payments and the total of all of the Debit GCF Transaction
Adjustment Payments for a Netting Member. If the total of all of the Credit GCF
Transaction Adjustment Payments is greater than the total of all of the Debit GCF
Transaction Adjustment Payments, then the Net GCF Transaction Adjustment Payment
shall be a positive dollar amount owing from the Corporation to the Member. If the total
55

of all of the Credit GCF Transaction Adjustment Payments is less than the total of all of
the Debit GCF Transaction Adjustment Payments, then the Net GCF Transaction
Adjustment Payment shall be a negative dollar amount owing from the Member to the
Corporation.
Net Interest Adjustment Payment
The term “Net Interest Adjustment Payment” means the absolute value of the dollar
difference on a particular Business Day for a Netting Member between the total of all of
Credit Interest Adjustment Payments and the total of all Debit Interest Adjustment
Payments. If the total of all of the Credit Interest Adjustment Payments is greater than the
total of all of the Debit Interest Adjustment Payments, then the Net Interest Adjustment
Payment shall be a positive dollar amount owing from the Corporation to the Member. If
the total of all of the Credit Interest Adjustment Payments is less than the total of all of the
Debit Interest Adjustment Payments, then the Net Interest Adjustment Payment shall be anegative dollar amount owing from the Member to the Corporation.
Net Long Position
The term “Net Long Position” means, with respect to each type of Eligible Netting
Security, the amount of Eligible Securities that a Netting Member either: (1) is obligated,pursuant to Rule 12, to receive from the Corporation, or (2) will, on the Scheduled
Settlement Date for such Net Long Position, be obligated to receive from the Corporation,
as the context requires.
Net Redemption Adjustment Payment
The term “Net Redemption Adjustment Payment” means the absolute value of the dollar
difference on a particular Business Day for a Netting Member between the total of all
Credit Redemption Adjustment Payments and the total of all Debit Redemption
Adjustment Payments. If the total of all Credit Redemption Adjustment Payments isgreater than all of the Debit Redemption Adjustment Payments, then the Net Redemption
Adjustment Payment shall be a positive dollar amount owing from the Corporation to theMember. If the total of all the Credit Redemption Adjustment Payments is less than the
total of all of the Debit Redemption Adjustment Payments, then the Net Redemption
Adjustment Payment shall be a negative amount owing from the Member to the
Corporation.
Net Settlement Position
The term “Net Settlement Position” means either a Net Short Position or a Net Long
Position, as the context requires.
Net Short Position
The term “Net Short Position” means, with respect to each type of Eligible Netting
Security, the amount of Eligible Netting Securities that a Netting Member either: (1) is
obligated, pursuant to Rule 12, to deliver to the Corporation, or (2) will, on the Scheduled56

Settlement Date for such Net Short Position, be obligated to deliver to the Corporation, as
the context requires.
Net Transaction Adjustment Payment
The term “Net Transaction Adjustment Payment” means the absolute value of the dollar
difference on a particular Business day for a Netting Member between the total of all Credit
Transaction Adjustment Payments and the total of all Debit Transaction Adjustment
Payments. If the total of all of the Credit Transaction Adjustment Payments is greater than
the total of all of the Debit Transaction Adjustment Payments, then the Net Transaction
Adjustment Payment shall be a positive dollar amount owing from the Corporation to theMember. If the total of all of the Credit Transaction Adjustment Payments is less than the
total of all of the Debit Transaction Adjustment Payments, then the Net Transaction
Adjustment Payment shall be a negative dollar amount owing from the Member to the
Corporation.
Net Unsettled Positions
The term “Net Unsettled Positions” means Current Net Settlement Positions and Forward
Net Settlement Positions.
Net Worth
The term “Net Worth” means, as of a particular date, the amount equal to the excess of theassets of a Person over the liabilities of such Person, computed in accordance withgenerally accepted accounting principles, including liabilities that are subordinated to theclaims of creditors pursuant to a satisfactory subordination agreement, as defined inAppendix D of 17 C.F.R. Section 240.15c3-1d for registered brokers and dealers, in 17
C.F.R. Section 1.17(h) for a Futures Commission Merchant that is not a registered brokerdealer, and in 17 C.F.R. Section 402.2(d) for Government securities brokers and dealers.
Netting-Eligible Auction Purchase
The term “Netting-Eligible Auction Purchase” with respect to Treasury Department
auctions means any Auction Purchase other than an Auction Purchase of Eligible Treasury
Securities that are auctioned and issued on the same date.
Netting Member
The term “Netting Member” means a Member that is a Member of the Comparison Systemand the Netting System.
Netting Member Account
The term “Netting Member Account” shall mean an Account maintained by the Netting
Member that contains the activity of the Netting Member that is submitted to the
Corporation. A Netting Member may elect to establish one or more Netting Member
Accounts.
57

Netting Member Capital
The term “Netting Member Capital” means Net Capital, net assets or equity capital asapplicable, to a Netting Member based on its type of regulation.
Netting System
The term “Netting System” means the (1) system of services provided by the Corporation
to Persons that are Members thereof, and (2) operations carried out by the Corporation in
the course of providing such services, as provided for in Rules 11 through 18.
New Securities Collateral
The term “New Securities Collateral” means, as regards an outstanding Repo Transaction
with a Right of Substitution, the Eligible Netting Securities or cash that are beingtransferred by the Repo Party to the Reverse Repo Party as collateral in connection with
the Repo Transaction, in replacement of Existing Securities Collateral.
New York TimeThe term “New York Time” means the time in New York City.
Non-Customer
The term “Non-Customer” means, with respect to a Netting Member, such Netting Memberor other Person whose account with such Netting Member would not be the account of a“customer” within the meaning of SEC Rules 8c-1 and 15c2-1.
Non-IDB Repo Broker
The term “Non-IDB Repo Broker” means a Netting Member that is not an Inter-Dealer
Broker Netting Member and that the Corporation has determined: (a) operates in the samemanner as a Broker, with regard to activity in its Segregated Repo Account and (b) has
agreed to, and does, participate in the repo netting service operated by the Corporation
pursuant to the same requirements imposed under the Rules on Inter-Dealer Broker Netting
Members that participate in that service.
Non-Member
The term “Non-Member” means any Person that is not a Member.
Novation or Novate
The term “Novation” means the termination of deliver, receive, and related payment
obligations between Netting Members, or between a CCIT Member (or Joint Account) anda Netting Member, and the replacement of such obligations with identical obligations toand from the Corporation, pursuant to Section 8 of Rule 5. The term “Novate” shall havea corollary meaning.

58

NSCC
The term “NSCC” means the National Securities Clearing Corporation.
NSS
The term “NSS” means the National Settlement Service of the FRB.
NYUCC
The term “NYUCC” means the New York Uniform Commercial Code, as in effect fromtime to time in the State of New York.
Observation
The term “Observation” means a measurement of a Netting Member’s Liquidity Need as
calculated on each Business Day during a Look-Back Period.
Off-the-Market Transaction
The term “Off-the-Market Transaction” means either of the following:
(1)

(2)

A single transaction that is:(i)greater than $1 million in par value; and(ii)

executed at a contract price that is either higher or lower (by a percentage
amount determined by the Corporation based on factors such as market
conditions) than the System Price for the underlying Eligible Netting Security
on the day of the submission of data on the transaction to the Corporation;

A pattern of transactions submitted by two Members that, if looked at as a single
transaction, would be encompassed by subsection (1) of this definition.

An Off-the-Market Transaction includes a Sponsored Member Trade in which theSponsored Member provided an Initial Haircut.
Officer of the Corporation
The term “Officer of the Corporation” means the Chairman of the Board, President,
Managing Director, Executive Director, Secretary, Assistant Secretary, Treasurer, orAssistant Treasurer of the Corporation.
Opening Balance
The term “Opening Balance” means, with regard to the calculation of a Member’s FundsOnly Settlement Amount on a given Business Day, the amount reported to such Member
during the immediately prior processing cycle as the Member’s Funds-Only Settlement
Amount obligation.

59

Overnight Investment Rate
The term “Overnight Investment Rate” means the interest rate earned by the Corporationon the investment of the portion of the cash deposited to its Clearing Fund that is invested
overnight.
Other Acceptable Securities
The term “Other Acceptable Securities” means, with respect to:(an) adjustable-rate mortgage-backed security or securities issued by Ginnie Mae, any
fixed-rate mortgage-backed security or securities issued by Ginnie Mae, or (an) adjustablerate mortgage-backed security or securities issued by either Fannie Mae or Freddie Mac:(a) any fixed-rate mortgage-backed security or securities issued by Fannie Mae and Freddie
Mac, (b) any fixed-rate mortgage-backed security or securities issued by Ginnie Mae, or(c) any adjustable-rate mortgage-backed security or securities issued by Ginnie Mae.
Pair-Off Adjustment Payment
The term “Pair-Off Adjustment Payment” means the absolute value of the dollar difference
between the Settlement Value of a Deliver Obligation and a Receive Obligation, resulting
from the Corporation’s pair-off of Securities Settlement Obligations between the
Corporation and a participating Netting Member. The Corporation may determine, for
operational efficiencies, to collect and/or pay this amount as a Miscellaneous Adjustment
Amount.
Pair-Off Service
The term “Pair-Off Service” means the voluntary service described in Rule 12.
Permitted Margin Affiliate
The term “Permitted Margin Affiliate” means an affiliate of a Member that is also amember of this Government Securities Division of the Corporation and that directly or
indirectly controls such particular Member, or that is directly or indirectly controlled by orunder common control with such particular Member. Ownership of more than 50% of thecommon stock of the relevant entity (or equivalent equity interests in the case of a form ofentity that does not issue common stock) will be conclusively deemed prima facie controlof such entity for purposes of this definition.
PersonThe term “Person” means a partnership, Corporation, limited liability corporation or otherorganization, entity, or individual.
Pool Factor
The term “Pool Factor” means, with respect to the Blackout Period Exposure Charge, thepercentage of the initial principal that remains outstanding on the mortgage loan pool60

underlying a mortgage-backed security, as published by the government-sponsored entitythat is the issuer of such security.
Portfolio Differential Charge or PD Charge
The terms “Portfolio Differential Charge” or “PD Charge” mean, with respect to each
Margin Portfolio, an additional charge to be included in each Member’s Required Fund
Deposit.
The PD Charge shall be calculated twice each Business Day as the exponentially weighted
moving average (“EWMA”) of the historical increases in the Member’s VaR Charge that
occur between collections of Required Fund Deposits over a lookback period of no lessthan 100 days with a decay factor of no greater than 1, times a multiplier that is no lessthan 1 and no greater than 3, as determined by the Corporation from time to time based on
backtesting results. The Corporation will provide Members with at a minimum 10
Business Days advance notice of any change to the lookback period, the decay factor and/or
the multiplier via an Important Notice.
Pre-Netting of Trades
The term “Pre-Netting of Trades” means any trade submission data practice other than thesubmission of data to the Corporation on a trade-by-trade basis as executed in the market
and that identifies the actual parties to each trade.
Procedures
The term “Procedures” means the Procedures of the Corporation adopted pursuant toRule 33.
Purchased GC Repo Securities
The term “Purchased GC Repo Securities” means the GC Repo Securities transferred by
the Sponsoring Member or Sponsored Member, as applicable, in settlement of the Start
Leg of a Sponsored GC Trade, plus all cash and other GC Repo Securities transferred bysuch Sponsoring Member or Sponsored Member pursuant to Sections 8(b)(ii) and 8(b)(v)of Rule 3A, less any GC Repo Securities or cash received by the Sponsoring Member orSponsored Member pursuant to Sections 8(b)(iii) and 8(b)(v) of Rule 3A.
Real TimeThe term “Real Time” means, with respect to a process performed by the Corporation, theperformance of such process by the Corporation upon receipt of the requisite message(s)or instruction(s) from the Member(s) or submitter(s).
Receive Obligation
The term “Receive Obligation” means a Netting Member’s obligation to receive Eligible
Netting Securities from the Corporation at the appropriate Settlement Value (i) in
satisfaction of all or a part of a Net Long Position, (ii) in satisfaction of a Same-Day Settling61

Trade or (iii) to implement a collateral substitution in connection with a Repo Transaction
with a Right of Substitution.
Receive Scaling Factor
The term “Receive Scaling Factor” means the percentage established by the Corporation
which shall be used to calculate a Netting Member’s Individual Regular Amount.
Redemption Adjustment Payment
The term “Redemption Adjustment Payment” means for a Net Settlement Position, thedifference between the Redemption Value and the Settlement Value due and owing on each
Eligible Netting Security that comprises such Net Settlement Position. The term
“Redemption Adjustment Payment” means for the End Leg of a Repo Transaction, thedifference between the Redemption Value and the Contract Value due and owing on each
Eligible Netting Security that comprises such Repo Transaction. Notwithstanding theabove, the term “Redemption Adjustment Payment” shall not apply to GCF Repo
Transactions and CCIT Transactions.
Redemption Value
The term “Redemption Value” means, as regards a Net Settlement Position or a Deliver
Obligation, the principal amount paid to the holder of such Net Settlement Position or
Deliver Obligation in redeeming Eligible Netting Securities at the maturity for suchsecurities.
Registered Broker
The term “Registered Broker” means a broker that is registered with the SEC under Section
15 of the Exchange Act.
Registered Clearing Agency
The term “Registered Clearing Agency” means a Clearing Agency that is registered as suchwith the SEC.
Registered Clearing Agency Netting Member
The term “Registered Clearing Agency Netting Member” shall have the meaning giventhat term in Section 3 of Rule 2A.
Registered Dealer
The term “Registered Dealer” means a dealer that is registered with the SEC under Section
15 of the Exchange Act.

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Registered Government Securities Broker
The term “Registered Securities Broker” means a Government Securities Broker that isregistered with the SEC under Section 15C of the Exchange Act.
Registered Government Securities Dealer
The term “Registered Government Securities Dealer” means either:(i)a Government Securities Dealer that is registered with the SEC under Section 15C of
the Exchange Act or(ii)

a bank or trust company that has filed with the Appropriate Regulatory Authority
under Section 15C of the Exchange Act written notice that it is a Government
Securities Dealer.

Registered Investment Company
The term “Registered Investment Company” means an Investment Company that isregistered as such with the SEC.
Registered Investment Company Netting Member
The term “Registered Investment Company Netting Member” shall have the meaning giventhat term in Section 3 of Rule 2A.
Relative Inter-Tier Frequency
The term “Relative Inter-Tier Frequency” means, for each Liquidity Tier, the quotient of(x) the sum of all Netting Members’ Observations allocable to such Liquidity Tier dividedby (y) the sum of all Netting Members’ Observations.
Relative Intra-Tier Frequency
The term “Relative Intra-Tier Frequency” means, for a certain Liquidity Tier, the quotientof (x) the number of a Netting Member’s Observations within such Liquidity Tier dividedby (y) the sum of all Netting Members’ Observations allocable to such Liquidity Tier.
Relevant Securities
The term “Relevant Securities” has the meaning assigned in Section 2a(a)(H)(1) of Rule
22A.
Remaining Financing AmountThe term “Remaining Financing Amount” has the meaning assigned in Section 2a(b)(i)(E)of Rule 22A.

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Repo Broker
The term “Repo Broker” means (i) an Inter-Dealer Broker Netting Member, or (ii) a NonIDB Repo Broker with respect to activity in its Segregated Repo Account.
Repo Interest Rate Differential
The term “Repo Interest Rate Differential” means, on a particular Business Day, theproduct of: (1) the Contract Value of the Start Leg, (2) the difference between the Contract
Repo Rate and the System Repo Rate, and (3) the number of remaining days until the End
Leg, divided by 360.
Repo Party
The term “Repo Party” means the Netting Member that either is, or has submitted data on
behalf of, the party to a Repo Transaction that has agreed both to transfer Eligible Securities
to another party and, at a later date, to take back either the same securities or other securities
from that party.
Repo Start Date
The term “Repo Start Date” means the settlement date for the Start Leg of a Repo
Transaction.
Repo Transaction
The term “Repo Transaction” means: (1) an agreement of a party to transfer Eligible
Securities to another party in exchange for the receipt of cash, and the simultaneous
agreement of the former party to later take back the same Eligible Securities (or any
subsequently substituted Eligible Securities) from the latter party in exchange for thepayment of cash, or (2) an agreement of a party to take in Eligible Securities from anotherparty in exchange for the payment of cash, and the simultaneous agreement of the former
party to later transfer back the same Eligible Securities (or any subsequently substituted
Eligible Securities)to the latter party in exchange for the receipt of cash, as the context may
indicate, the data on which have been submitted to the Corporation pursuant to these Rules.
A “Repo Transaction” includes a GCF Repo Transaction, unless the context indicatesotherwise.
Report
The term “Report” means any document, record, or other output prepared by the
Corporation and made available to a Member in a format or medium prescribed by the
Corporation, that provides information to such Member with regard to the services
provided by, or the operations of, the Corporation.

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Reportable Event
The term “Reportable Event” means an event that would effect a change in control of a
Netting Member or could have a substantial impact on such Member’s business and/or
financial condition, including, but not limited to: (a) material organizational changes
including mergers, acquisitions, changes in corporate form, name changes, changes in theownership of a Netting Member or its Affiliates, and material changes in management, (b)material changes in business lines, including new business lines undertaken, and (c) status
as a defendant in litigation which could reasonably impact the Netting Member’s financial
condition or ability to conduct business.
Required Attestation
The term “Required Attestation” has the meaning assigned in Section 2a(d) of Rule 22A.
Required Fund Deposit
The term “Required Fund Deposit” means the amount a Netting Member is required todeposit to the Clearing Fund.
Required Fund Deposit Deadline
The term “Required Fund Deposit Deadline” means, the deadline set forth by the
Corporation for such purpose in its procedures, unless the Corporation has issued a noticeextending such deadline pursuant to these Rules.
Required Match Data
The term “Required Match Data” means the data items on each side of a trade involving
an Eligible Security that the Corporation requires, as stated in a schedule published by the
Corporation, be matched in order for the trade to be compared pursuant to these Rules.
Reverse Repo Party
The term “Reverse Repo Party” means the Netting Member that either is, or has submitted
data on behalf of, the party to a Repo Transaction that has agreed both to take in Eligible
Securities from another party and, at a later date, to transfer either the same securities orother securities back to that party at a later date.
Revised Net Long Position
The term “Revised Net Long Position” shall have the meaning given that term in Section
5 of Rule 17.
Right of Substitution
The term “Right of Substitution” means, as regards a Repo Transaction, the right of the
Repo Party, during the period immediately after the Scheduled Settlement Date for the65Start Leg of the Repo Transaction until the day prior to the Scheduled Settlement Date for
the End Leg of the Repo Transaction, to substitute new collateral in replacement of existing
collateral transferred to the Reverse Repo Party.
Rules
The term “Rules” means these Rules of the Government Securities Division, as amended
from time to time.
Same-Day Settling Trade
The term “Same-Day Settling Trade” means (i) a Start Leg of a Netting Member’s Repo
Transaction where the Scheduled Settlement Date of the Start Leg is the current Business
Day, (ii) an As-Of Trade of a Netting Member where the Scheduled Settlement Date of theStart Leg is the previous Business Day and the End Leg is the current Business Day or
thereafter, or (iii) a Sponsored Member Trade within the meaning of section (a)(ii) of thatdefinition that meets the requirements of either (i) or (ii) above.
Scheduled Settlement Date
The term “Scheduled Settlement Date” means, as regards a trade other than a Repo
Transaction compared by the Corporation, the earliest Business Day on which such trade,including a trade underlying a Forward Net Settlement Position, is scheduled to settle,
regardless of whether such trade actually settles on such Business Day. The term
“Scheduled Settlement Date” means, as regards an End Leg or a Start Leg of a Repo
Transaction compared by the Corporation, the earliest Business Day on which such Leg isscheduled to settle, regardless of whether such Leg actually settles on such Business Day.
SEC
The term “SEC” means the Securities and Exchange Commission.
Securities Industry and Financial Markets Association
The term “Securities Industry and Financial Markets Association” (“SIFMA”) means the
Securities Industry and Financial Markets Association or any successor organization.
Securities Intermediary
The term “Securities Intermediary” has the meaning given to the term “securities
intermediary” in Section 8-102(a)(14) of the NYUCC.
Securities Settlement Obligations
The term “Securities Settlement Obligations” means the obligations of a Netting Member,calculated pursuant to Rule 12, to deliver to the Corporation or to receive from the
Corporation Eligible Securities in settlement of Net Settlement Positions.

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Security
The term “Security” shall have the meaning given that term in the Exchange Act and therules and regulations thereunder. The term “Securities” shall mean more than one security.
Segregated Repo Account
The term “Segregated Repo Account” means an Account operated by a Non-IDB Repo
Broker in which all trading is executed on a brokered basis with Netting Members on eachside.
Self-Regulatory Organization
The term “Self-Regulatory Organization” shall have the meaning given that term in Section
3(a)(26) of the Exchange Act. For purposes of these Rules, the term “Self-Regulatory
Organization” shall also include foreign equivalents of those entities listed in Section
3(a)(26).
Settlement Agent
The term “Settlement Agent” means the bank or trust company that the Corporation may,from time to time, designate to act as its agent for purposes of interfacing with NSS forfunds-only settlement pursuant to Rule 13 (and as referenced in the Federal Reserve Banks
Operating Circular 12).
Settlement Value
The term “Settlement Value” means, as regards a Deliver Obligation or a Receive
Obligation, the System Value for such Obligation as adjusted on a particular Business Day
by the Delivery Differential Adjustment or, as regards a Deliver Obligation or a Receive
Obligation for a Same-Day Settling Trade, the Contract Value for such obligation.
Short Transaction
The term “Short Transaction” means, with regard to Eligible Netting Securities, a sale, Start
Leg for the Repo Party, and End Leg for the Reverse Repo Party.
SIFMA MRA
The term “SIFMA MRA” means the September 1996 Securities Industry and Financial
Markets Association Master Repurchase Agreement, available at http://www.sifma.org/
services/standard-forms-and-documentation/mra,-gmra,-msla-and-msftas/.
Single Batch Submission Method
The term “Single Batch Submission Method” means a trade submission method that is used
to submit a single batch of trade data to the Corporation at end of day pursuant to67

communications links, formats, timeframes, and deadlines established by the Corporation forsuch purpose.
Specific CUSIP Number
The term “Specific CUSIP Number” means a Committee on Uniform Securities
Identification Procedures identifying number established for a specific security.
Sponsored GC Clearing Agent Bank
The term “Sponsored GC Clearing Agent Bank” means a Clearing Agent Bank that has
agreed to provide the Corporation, upon request, under mutually agreeable terms, withclearing services for Sponsored GC Trades.
Sponsored GC Pre-Payment Assessment
The term “Sponsored GC Pre-Payment Assessment” means a $250,000 assessment thatshall be charged to a Sponsoring Member at the time the Sponsoring Member onboards
into the Sponsored GC Service. Such assessment shall be credited by the Corporation
against the Sponsoring Member’s fees for use of the Sponsored GC Service until the earlierof (i) the assessment being completely depleted and (ii) thirty-six (36) months after theSponsoring Member onboards into the Sponsored GC Service.
Sponsored GC Service
The term “Sponsored GC Service” means the service offered by the Corporation to clear
tri-party repurchase agreement transactions between Sponsoring Members and SponsoredMembers, as described in Rule 3A.
Sponsored GC Trade
The term “Sponsored GC Trade” means, in connection with the Sponsored GC Service, aSponsored Member Trade that is a Repo Transaction between a Sponsored Member and its
Sponsoring Member involving securities represented by a Generic CUSIP Number the dataon which are submitted to the Corporation by the Sponsoring Member pursuant to theprovisions of Rule 6A, for Novation to the Corporation pursuant to Section 7(b)(ii) of Rule
3A.
Sponsored Member
The term “Sponsored Member” means any Person that has been approved by the
Corporation to be sponsored into membership by a Sponsoring Member pursuant to Rule
3A.
Sponsored Member Termination Date
The term “Sponsored Member Termination Date” shall have the meaning given that termin Section 3 of Rule 3A.

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Sponsored Member Trade
The term “Sponsored Member Trade” means (a) a transaction that satisfies therequirements of Section 5 of Rule 3A and that is (i) between a Sponsored Member and its
Sponsoring Member or (ii) between a Sponsored Member and a Netting Member or (b) aSponsored GC Trade.
Sponsored Member Voluntary Termination Notice
The term “Sponsored Member Voluntary Termination Notice” shall have the meaning
given that term in Section 3 of Rule 3A.
Sponsoring Member
The term “Sponsoring Member” means a Netting Member whose application to become aCategory 1 Sponsoring Member or a Category 2 Sponsoring Member has been approvedby the Board pursuant to Rule 3A.
Sponsoring Member Guaranty
The term “Sponsoring Member Guaranty” shall mean a guaranty, stated in a manner
acceptable to the Corporation, that a Sponsoring Member delivers to the Corporation
whereby the Sponsoring Member guarantees to the Corporation the payment andperformance by its Sponsored Members of their obligations under these Rules, including,
without limitation, all of the securities and funds-only settlement obligations of its
Sponsored Members under these Rules.
Sponsoring Member Omnibus Account
The term “Sponsoring Member Omnibus Account” shall mean an Account maintained bya Sponsoring Member that contains the activity of its Sponsored Members that is submitted
to the Corporation. A Sponsoring Member may elect to establish one or more Sponsoring
Member Omnibus Accounts. Each Sponsoring Member Omnibus Account may containall types of Sponsored Member Trades. The Sponsoring Member Omnibus Account shallbe separate from the Accounts associated with the Sponsoring Member’s activity as a
Netting Member except as contemplated by Sections 10, 11 and 12 of Rule 3A and under
the Sponsoring Member Guaranty.
Sponsoring Member Omnibus Account Required Fund Deposit
The term “Sponsoring Member Omnibus Account Required Fund Deposit” shall have themeaning given to that term in Section 10 of Rule 3A.
Sponsoring Member Termination Date
The term “Sponsoring Member Termination Date” shall have the meaning given that termin Section 2 of Rule 3A.

69

Sponsoring Member Voluntary Termination Notice
The term “Sponsoring Member Voluntary Termination Notice” shall have the meaning
given that term in Section 2 of Rule 3A.
Start Leg
The term “Start Leg” means, as regards a Repo Transaction other than a GCF Repo
Transaction (or CCIT Transaction as applicable) or a Sponsored GC Trade, the initial
settlement aspects of the Transaction, involving the transfer of the underlying Eligible
Netting Securities by the Netting Member that is, or is submitting data on behalf of, thefunds borrower (through satisfaction of the applicable Deliver Obligation generated by the
Corporation) and the taking in of such Eligible Securities by the Netting Member that is,
or is submitting data on behalf of, the funds lender (if netting eligible, through satisfactionof the applicable Receive Obligation generated by the Corporation). The term “Start Leg”
means, as regards a GCF Repo Transaction (or CCIT Transaction as applicable), the initial
settlement aspects of the GCF Repo Transaction (or CCIT Transaction as applicable),
involving the transfer of the underlying Eligible Netting Securities by the Netting Memberthat is in the GCF Net Funds Borrower Position and the taking in of such Eligible Netting
Securities by the Netting Member that is in the GCF Net Funds Lender Position. The term“Start Leg” means, as regards a Sponsored GC Trade, the initial settlement aspects of theTransaction, involving the transfer of GC Repo Securities by the Sponsoring Member orSponsored Member, as applicable, that is the GC Funds Borrower and the taking in of such
GC Repo Securities by the Sponsoring Member or Sponsored Member, as applicable, thatis the GC Funds Lender.
Statutory Disqualification
The term “Statutory Disqualification” shall have the meaning given that term in Section
3(a)(39) of the Exchange Act.
Submitting Member
The term “Submitting Member” means a Member of the Comparison System, other than a
Repo Broker, that has submitted to the Corporation pursuant to these Rules data on tradesof an Executing Firm.
System Price
The term “System Price” means the uniform price (expressed in dollars per unit of parvalue), not including accrued interest, established by the Corporation on each Business
Day, based on current market information, for each Eligible Netting Security with aseparate CUSIP Number. Notwithstanding the above, the System Price for the Generic
CUSIP Number that underlies a GCF Net Settlement Position shall be equal to principal
value.

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System Repo Rate
The term “System Repo Rate” means the uniform rate established by the Corporation oneach Business Day, based on current market information, for each Repo Transaction,
involving an Eligible Netting Security. The System Repo Rate for a Repo Transaction
shall be established by the Corporation based on factors such as: (1) the length of time
until Schedule Settlement Date for the End Leg of the Repo Transaction, (2) whether theunderlying collateral is general or specific in nature, and (3) the market demand for suchcollateral.
System Value
The term “System Value” means, as regards a Deliver Obligation (with the exception ofcompared Same-Day Settling Trades settled with the Corporation), a Receive Obligation(with the exception of compared Same-Day Settling Trades settled with the Corporation),a Net Settlement Position, Existing Securities Collateral, or New Securities Collateral, theamount in dollars equal to the par value of each Eligible Netting Security that comprises
such Deliver Obligation, Receive Obligation, Net Settlement Position, Existing Securities
Collateral, or New Securities Collateral, as applicable, multiplied by its System Price, plus
interest that has accrued with regard to each such Eligible Netting Security up to theBusiness Day for which such dollar amount is calculated. The System Value of a Net
Settlement Position that has remained unsettled on the maturity date for the Eligible Netting
Securities that comprise such Net Settlement Position shall be the Redemption Value ofsuch Securities.
Term GCF Repo Transaction
The term “Term GCF Repo Transaction” means, on any particular Business Day, a GCF
Repo Transaction for which settlement of the End Leg is scheduled to occur two or more
Business Days after the scheduled settlement of the Start Leg.
Term Repo Transaction
The term “Term Repo Transaction” means, on any particular Business Day, a Repo
Transaction for which settlement of the End Leg is scheduled to occur two or more
Business Days after the scheduled settlement of the Start Leg.
Termination Date
The term “Termination Date” shall have the meaning given that term in Section 13 ofRule 3.
Tier 1 RBC Ratio
The term “Tier 1 RBC Ratio” means the ratio of an entity’s tier 1 capital to its total riskweighted assets, calculated in accordance with such entity’s regulatory and/or statutory
requirements.

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Tier One Netting Member
The term “Tier One Member” means a Netting Member whose membership category has
been designated as such by the Corporation pursuant to Rule 2A for loss allocation
purposes.
Tier Two Member
The term “Tier Two Member” means a Netting Member whose membership category has
been designated as such by the Corporation pursuant to Rule 2A for loss allocation
purposes or a CCIT Member.
TMPG
The term “TMPG” means the Treasury Market Practices Group as described on the websiteof the Federal Reserve Bank of New York.
Total Invoice AmountThe term “Total Invoice Amount” means the aggregate amount of Invoice Amounts
required to be paid to the Corporation by a Netting Member on a given Business Day.
Transaction Adjustment Payment
The term “Transaction Adjustment Payment” means the absolute value of the dollar
difference between the Contract Values and the Market Values of the trades that comprisea Net Settlement Position that is scheduled to settle on the current Business Day.
Notwithstanding the above, the term “Transaction Adjustment Payment” shall not apply to
GCF Repo Transactions and CCIT Transactions.
Transactions
The term “Transactions” means Brokered Transactions and Bilateral Transactions.
Treasury Department
The term “Treasury Department” means the United States Department of the Treasury.
UMBS
The term “UMBS” means a single-class mortgage-backed security backed by fixed-rate
mortgage loans on one to four unit (single-family) properties issued by either Fannie Maeor Freddie Mac which has the same characteristics (such as payment delay, poolingprefixes and minimum pool submission amounts) regardless of whether Fannie Mae orFreddie Mac is the issuer.

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Unadjusted GSD Margin Portfolio AmountThe term “Unadjusted GSD Margin Portfolio Amount” means, with respect to each Margin
Portfolio, the amount greater than zero determined by the Corporation in accordance withthe provisions of Rule 4.
VaR Charge
The term “VaR Charge” means, with respect to each Margin Portfolio, a calculation of thevolatility of specified Net Unsettled Positions of a Netting Member as of the time of suchcalculation. Such volatility calculations shall be made in accordance with any generally
accepted portfolio volatility model, including, but not limited to, any margining formula
employed by any other clearing agency registered under Section 17A of the Securities
Exchange Act of 1934. Such calculation shall be made utilizing such assumptions(including confidence levels) and based on such observable market data as the Corporation
deems reasonable, and shall cover such range and assessment of volatility as the
Corporation from time to time deems appropriate. To the extent that the primary source ofsuch market data becomes unavailable for an extended period of time, the Corporation shall
utilize the Margin Proxy as an alternative volatility calculation. In its assessment ofvolatility, the Corporation shall calculate an additional bid-ask spread risk charge measured
by multiplying the gross market value of each Net Unsettled Position by a basis point
charge, where the applicable basis point charge shall be reviewed at least annually and shallbe based on the following risk groups: (a) mortgage pool transactions; (b) TIPS; (c) U.S.
agency bonds; and (d) U.S. Treasury securities, which shall be further categorized bymaturity – those maturing in (i) less than five years, (ii) equal to or more than five years
and less than ten years, and (iii) equal to or more than ten years.
If the volatility calculation is lower than an amount designated by the Corporation (the“VaR Floor”) then the VaR Floor will be utilized as such Netting Member’s VaR Charge.
Such VaR Floor will be determined by multiplying the absolute value of the sum of Net
Long Positions and Net Short Positions of Eligible Securities, grouped by product andremaining maturity, by a percentage designated by the Corporation from time to time forsuch group. For U.S. Treasury and agency securities, such percentage shall be a fraction,no less than 10%, of the historical minimum volatility of a benchmark fixed income index
for such group by product and remaining maturity. For mortgage-backed securities, such
percentage shall be a fixed percentage that is no less than 0.05%.
Voluntary Termination Notice
The term “Voluntary Termination Notice” shall have the meaning given that term in
Section 13 of Rule 3.

73

Watch List π
The term “Watch List” means, at any time and from time to time, the list of Members
whose credit ratings derived from the Credit Risk Rating Matrix are 6 or 7, as well as
Members that, based on the Corporation’s consideration of relevant factors, including those
set forth in Section 12(d) of Rule 3, are deemed by the Corporation to pose a heightenedrisk to the Corporation and its Members.
Well Capitalized
The term “Well Capitalized” shall have the meaning given that term in the capital adequacy
rules and regulations of the Federal Deposit Insurance Corporation.
When Issued Transaction
The term “When Issued Transaction” means any trade of an Eligible Treasury Security, thetrade data on which has been submitted to the Corporation prior to the Issue Date.
Yield Comparison Trade
The term “Yield Comparison Trade” means a trade involving Eligible Securities the dataon which have been submitted by Members to the Corporation on a yield basis but have
not yet been compared on a final money basis pursuant to Rule 5 or Rule 9.
Zero
The term “Zero” means an Eligible Netting Security with a maturity at issuance of morethan one year that makes no periodic interest payments and, instead, is sold at a discountfrom its face value.

π

Being placed on the Watch List may result in Clearing Fund-related consequences as well as other consequences
under the Rules. Please refer to the Interpretive Guidance with Respect to Watch List Consequences in thisrulebook.

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RULE 2 – MEMBERS(a)
The Corporation shall make its services, or certain of its services, available to
Persons which (i) apply for membership to the Corporation for the use of its services, (ii) meet theeligibility, qualifications and standards specified in these Rules, (iii) are approved by the
Corporation or the Board, as applicable, and (iv) if required, have contributed to the Clearing Fund
as provided in Rule 4.
(b)

The Corporation shall have the following membership types:(i)Comparison-Only Members;(ii)

Netting Members;(iii)

Sponsoring Members and Sponsored Members;(iv)

CCIT Members; and(v)

Funds-Only Settling Bank Members.

With respect to item (ii) above, there shall be the following categories of Netting Members:
Bank Netting Members, Dealer Netting Members, Inter-Dealer Broker Netting Members, Futures
Commission Merchant Netting Members, Foreign Netting Members, Government Securities
Issuer Netting Members, Insurance Company Netting Members, Registered Clearing Agency
Netting Members and Registered Investment Company Netting Members.
With respect to item (iii) above, Sponsored Members and Sponsoring Members shall begoverned by Rule 3A.
With respect to item (iv) above, CCIT Members shall be governed by Rule 3B.
With respect to item (v) above, Funds-Only Settling Bank Members shall be governed byRule 13.
(c)
Except as otherwise provided in these Rules, a Member that compares and nets
through the Corporation any contract or transaction on behalf of a Non-Member shall, so far as therights of the Corporation and all other Members are concerned, be liable as a principal.

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RULE 2A – INITIAL MEMBERSHIP REQUIREMENTS
Section 1 – Eligibility for Membership: Comparison-Only Members(a)

A Person shall be eligible to apply to become a Comparison-Only Member if it:(i)
System; oris a legal entity that is eligible to apply for membership in the Netting(ii)
has demonstrated to the Corporation that its business and capabilities are
such that it could reasonably expect material benefit from direct access to the Corporation’s
services.
(b)
A Person may not be a Comparison-Only Member and a Netting Member at thesame time. The Corporation may require that a Person be a Comparison-Only Member for a time
period deemed necessary by the Corporation before the Person becomes eligible to apply to
become a Netting Member, if, in order to protect itself and its Members, the Corporation believes
that it is necessary to assess the operational soundness of the Person prior to permitting it to apply
to become a Netting Member. The Corporation’s determination to apply such requirement shallbe based on whether one or more of the following conditions exist: (i) the Person is a newly formed
entity with little or no operational history, (ii) the Person’s operational staff lacks significant
experience, (iii) if one or both of the prior two conditions exists, the Person has not engaged aservice bureau or correspondent clearing member with which the Corporation has a relationship,or (iv) any other factor exists that the Corporation believes might suggest that the Person has
insufficient operational capability.
Section 2 – Membership Qualifications and Standards for Comparison-Only Members
The Corporation may approve an application to become a Comparison-Only Member by a
Person that is eligible to apply to become a Comparison-Only Member pursuant to this Rule upona determination that such applicant meets the following requirements:(a)Operational Capability – The applicant must be able to satisfactorily communicate
with the Corporation, fulfill anticipated commitments to and meet the operational requirements of
the Corporation with necessary promptness and accuracy, and conform to any operational
condition and requirement that the Corporation reasonably deems necessary for its protection orthat of its Members. The applicant agrees that it must fulfill, within the timeframes established by
the Corporation, operational testing requirements (the scope of such testing to be determined by
the Corporation in its sole discretion) and related reporting requirements (such as reporting test
results to the Corporation in a manner specified by the Corporation) that may be imposed by the
Corporation to ensure the continuing operational capability of the applicant.
(b)Fees – The applicant agrees to make, and has sufficient financial ability to make,all anticipated fee payments required to be made to the Corporation that may be set forth in theseRules or in the Procedures.

76

(c)
Required Capital – If a regulated entity, the applicant represents and warrants to the
Corporation that it is in compliance (as an applicant) with the capital requirements imposed by its
Designated Examining Authority, Appropriate Regulatory Agency, or other examining authority
or regulator, and any other Self-Regulatory Organizations or self-regulatory organizations towhich it is subject by statute, regulation or agreement.
(d)Disqualification Criteria – The Corporation must have received no substantial
information that would reasonably and adversely reflect on the applicant, or its ControllingManagement, if applicable, to such an extent that the applicant should be denied membership in
the Corporation. The Corporation, in its sole discretion, shall determine whether any of thefollowing criteria should be the basis for denial of the membership application:(i)the applicant is subject to Statutory Disqualification (as defined in Section
3(a)(39) of the Exchange Act), or an order of similar effect issued by a Federal or Statebanking authority, or other examining authority or regulator, including non-U.S. examining
authority or regulator;(ii)
the applicant or its Controlling Management has been responsible for (A)making a misstatement of a material fact or omitting to state a material fact to the
Corporation, in connection with its application to become a Member or thereafter, or (B)fraudulent acts or violation of the Securities Act of 1933, the Exchange Act, the Investment
Company Act, the Investment Advisers Act or the Government Securities Act of 1986, or
any rule or regulation promulgated thereunder;(iii) the applicant or its Controlling Management has been convicted within theten years preceding the filing of the application or at any time thereafter of (A) any criminal
offense involving the purchase, sale or delivery of any security, or bribery, or perjury, orburglary, or conspiracy to commit any offense referred to in this subparagraph (iii), (B) thelarceny, theft, robbery, embezzlement, extortion, fraudulent conversion, fraudulent
concealment, forgery or misappropriation of funds, securities or other property, (C) any
violation of Sections 1341, 1342 or 1343 of Title 18, United States Code, or (D) any othercriminal offense involving breach of fiduciary obligation, or arising out of the conduct ofbusiness as a broker, dealer, investment company, adviser or underwriter, bank, trust
company, fiduciary, insurance company or other financial institution;(iv)
the applicant or its Controlling Management has been permanently or
temporarily enjoined or prohibited by order, judgment or decree of any court or othergovernmental authority of competent jurisdiction from acting as, a broker, dealer,investment company, advisor or underwriter, bank, trust company, fiduciary, insurancecompany or other financial institution, or from engaging or in continuing any conduct orpractice in connection with any such activity, or in connection with the purchase, sale ordelivery of any security, and the enforcement of such injunction or prohibition has not been
stayed; or(v)
the applicant has been expelled or suspended from or had its participation
terminated by a national securities association or exchange registered under the ExchangeAct, a Self-Regulatory Organization or a Corporation that engages in clearance and77settlement activities or a securities depository, or has been barred or suspended from being
associated with any member of such an exchange, association, organization, Corporation,or securities depository.
The Corporation shall retain the right to deny membership to an applicant if the
Corporation becomes aware of any factor or circumstance about the applicant or its ControllingManagement which may impact the suitability of that particular applicant as a Member of the
Corporation.
Section 3 – Eligibility for Membership: Netting Members(a)Eligibility for each category of Netting Member shall be as follows:(i)
Bank Netting Member – A Person shall be eligible to apply to become aBank Netting Member if it is a bank or trust company chartered as such under the laws of
the United States, or a State thereof, or is a bank or trust company established or charteredunder the laws of a non-U.S. jurisdiction and participates in the Corporation through its
U.S. branch or agency. A bank or trust company that is admitted to membership in the
Netting System pursuant to these Rules, and whose membership in the Netting System has
not been terminated, shall be a Bank Netting Member.
(ii)
Dealer Netting Member – A Person shall be eligible to apply to become a
Dealer Netting Member if it is a Dealer and is not a bank or trust company. A Dealer thatis admitted to membership in the Netting System pursuant to these Rules, and whose
membership in the Netting System has not been terminated, shall be a Dealer Netting
Member.
(iii) Futures Commission Merchant Netting Member – A Person shall be eligible
to apply to become a Futures Commission Merchant Netting Member if it is a Futures
Commission Merchant. A Futures Commission Merchant that is admitted to membershipin the Netting System pursuant to these Rules, and whose membership in the Netting
System has not been terminated, shall be a Futures Commission Merchant Netting
Member.
(iv)
Inter-Dealer Broker Netting Member – A Person shall be eligible to apply
to become an Inter-Dealer Broker Netting Member if it is an Inter-Dealer Broker. An InterDealer Broker that is admitted to membership in the Netting System pursuant to theseRules, and whose membership in the Netting System has not been terminated, shall be an
Inter-Dealer Broker Netting Member.
(v)
Foreign Netting Member – A Person shall be eligible to apply to become a
Foreign Netting Member if it is a Foreign Person that the Corporation, in its sole discretion,
has determined: (i) has a home country regulator that has entered into a memorandum of
understanding with the SEC regarding the sharing or exchange of information, and (ii)maintains a presence in the United States, either directly or through a suitable agent, thatboth has available individuals fluent in English who are knowledgeable in the Foreign
Person’s business and can assist the Corporation’s representatives as necessary, andensures that the Foreign Person will be able to meet its data submission, settlement, and78

other obligations to the Corporation as a Member in a timely manner. The Person applying
to become a Foreign Netting Member must represent and certify to the Corporation that it
is in compliance with the financial reporting and responsibility standards of its homecountry and that it is regulated in its home country by a financial regulatory authority inthe areas of maintenance of relevant books and records, regular inspections andexaminations, and minimum capital standards, and make such other representations,certifications or assurances as the Corporation deems necessary to address jurisdictional
and tax concerns. Without limiting the generality of the foregoing, the Corporation shallrequire each applicant that shall be an FFI Member to certify and periodically recertify to
the Corporation that it is FATCA Compliant under such procedures as are set forth under
FATCA, unless such requirements have been explicitly waived in writing by the
Corporation, provided, however, that no such waiver will be issued if it shall cause the
Corporation to be obligated to withhold under FATCA on gross proceeds from the sale orother disposition of any property. In addition, as part of its membership application, eachapplicant that shall be an FFI Member agrees to indemnify each Indemnified Person for
any loss, liability or expense sustained by the Indemnified Person as a result of the applicant
failing to be FATCA Compliant. Except as with respect to FATCA, a foreign Bank Netting
Member that participates in the Corporation through its U.S. branch or agency shall not be
deemed a Foreign Netting Member for purposes of these Rules and the Procedures, unlessotherwise stated by the Corporation.
(vi)
Government Securities Issuer Netting Member – A Person shall be eligible
to apply to become a Government Securities Issuer Netting Member if it is a Government
Securities Issuer or a Government Sponsored Enterprise. A Government Securities Issuer
or a Government Sponsored Enterprise that is admitted to membership in the Netting
System pursuant to these Rules, and whose membership in the Netting System has not been
terminated, shall be a Government Securities Issuer Netting Member.
(vii) Insurance Company Netting Member – A Person shall be eligible to apply
to become an Insurance Company Netting Member if it is an Insurance Company in goodstanding with its primary regulator. An Insurance Company that is admitted to membershipin the Netting System pursuant to these Rules, and whose membership in the Netting
System has not been terminated, shall be an Insurance Company Netting Member.
(viii) Registered Clearing Agency Netting Member – A Person shall be eligible
to apply to become a Registered Clearing Agency Netting Member if it is a Registered
Clearing Agency. A Registered Clearing Agency that is admitted to membership in the
Netting System pursuant to these Rules, and whose membership in the Netting System has
not been terminated, shall be a Registered Clearing Agency Netting Member.
(ix)
Registered Investment Company Netting Member – A Person shall be
eligible to apply to become a Registered Investment Company Netting Member if it is a
Registered Investment Company. A Registered Investment Company that is admitted tomembership in the Netting System pursuant to these Rules, and whose membership in the
Netting System has not been terminated, shall be a Registered Investment Company
Netting Member.

79

(x)
The Corporation shall make its services available to Persons in such othercategories as the Corporation may from time to time determine, subject to approval of such
categories and their minimum membership standards by the SEC.
Applicants in categories (i) through (viii) above that are admitted into membership shall be
Tier One Netting Members. Applicants in category (ix) above that are admitted into membershipshall be Tier Two Members. With respect to applicants in category (x), the Corporation shall makea determination as to whether such applicant shall be a Tier One Netting Member or Tier Two
Member.
(b)
A Person may be only one category of Netting Member at a time. Notwithstanding
anything to the contrary in this Rule, if a Person qualifies for more than one category of Netting
Member, the Corporation, in its sole discretion, may determine the category of Netting Member
for which that Person will be considered.
Section 4 – Membership Qualifications and Standards for Netting Members
Subject to the limitations set forth in this Rule, the Board shall approve an application to
become a Netting Member by a Person that is eligible to apply to become a Netting Member
pursuant to this Rule upon a determination that such applicant meets the following requirements:(a)Comparison System Admission Standards – For an applicant that is already aComparison-Only Member, the applicant continues to meet the requirements for becoming a
Comparison-Only Member set forth in this Rule.
(b)

Financial Responsibility – The applicant shall:(i)have sufficient financial ability to make anticipated required deposits to theClearing Fund as provided for in Rule 4 and anticipated Funds-Only Settlement Amounts,
and to meet all of its other obligations to the Corporation in a timely manner; and(ii)satisfy the following minimum financial requirements:(A)

Bank Netting Member(1)

if the applicant is a bank or trust company chartered under
the laws of the United States, or a State thereof, applying tobecome a Bank Netting Member, it must (i) have CET1
Capital of at least $500 million and (ii) be Well Capitalized;
and

(2)

if the applicant is a bank or trust company established orchartered under the laws of a non-U.S. jurisdiction andapplying to become a Bank Netting Member through its U.S.
branch or agency, it must (i) have CET1 Capital of at least$500 million, (ii) comply with the minimum capitalrequirements (including, but not limited to, any capital80

conservation buffer, countercyclical buffer, and any
domestic systemically important bank (D-SIB) or global
systemically important bank (G-SIB) buffer, if applicable)
and capital ratios required by its home country regulator, or,if greater, with such minimum capital requirements orcapital ratios standards promulgated by the Basel Committeeon Banking Supervision and (iii) provide an attestation foritself, its parent bank and its parent bank holding company(as applicable) detailing the minimum capital requirements(including, but not limited to, any capital conservationbuffer, countercyclical buffer, and any D-SIB or G-SIB
buffer, if applicable) and capital ratios required by theirhome country regulator.
(B)

Dealer Netting Member – If the applicant is registered with the SEC
pursuant to Section 15 or 15C of the Exchange Act and is applying
to become a Dealer Netting Member, it must have (1) Net Worth ofat least $25 million and (2) Excess Net Capital or an equivalent to
Excess Net Capital (e.g., Excess Liquid Capital or Excess Adjusted
Net Capital), depending on what the applicant is required to reporton its regulatory filings, of at least $10 million;(C)

Futures Commission Merchant Netting Member – If the applicant isapplying to become a Futures Commission Merchant Netting
Member, it must have (1) Net Worth of at least $25 million and(2) Excess Adjusted Net Capital or an equivalent to Excess Adjusted
Net Capital (e.g., Excess Net Capital or Excess Liquid Capital),depending on what the applicant is required to report on its
regulatory filings, of at least $10 million;(D)

Inter-Dealer Broker Netting Member – If the applicant is registeredwith the SEC pursuant to Section 15 or 15C of the Exchange Act
and is applying to become an Inter-Dealer Broker Netting Member,it must have (1) Net Worth of at least $25 million and (2) Excess
Net Capital or an equivalent to Excess Net Capital (e.g., Excess
Liquid Capital or Excess Adjusted Net Capital), depending on what
the applicant is required to report on its regulatory filings, of at least$10 million;(E)

Foreign Netting Member – If the applicant is a Foreign Person thatis applying to become a Foreign Netting Member, it must, at aminimum, satisfy its home country regulator’s minimum financial
requirements, in addition to the following:(1)

In the case of a Foreign Person that is a broker or dealer, it
must have total equity capital of at least $25 million; and

81

(2)

In the case of a Foreign Person that is a bank or trust
company established or chartered under the laws of a nonU.S. jurisdiction (and not applying to become a Bank
Netting Member through a U.S. branch or agency), it must(i) have CET1 Capital of at least $500 million, (ii) comply
with the minimum capital requirements (including, but notlimited to, any capital conservation buffer, countercyclicalbuffer, and any D-SIB or G-SIB buffer, if applicable) andcapital ratios required by its home country regulator, or, if
greater, with such minimum capital requirements or capitalratios standards promulgated by the Basel Committee on
Banking Supervision and (iii) provide an attestation for itself
and its parent bank holding company detailing the minimum
capital requirements (including, but not limited to, any
capital conservation buffer, countercyclical buffer, and any
D-SIB or G-SIB buffer, if applicable) and capital ratios
required by their home country regulator;

The Corporation may, based on information provided by orconcerning an applicant applying to become a Foreign Netting
Member, also assign minimum financial requirements for theapplicant based on (i) how closely the applicant resembles anotherexisting category of Netting Member and (ii) the applicant’s risk
profile, which assigned minimum financial requirements will bepromptly communicated to, and discussed with, the applicant;(F)

Government Securities Issuer Netting Member – If the applicant isapplying to become a Government Securities Issuer Netting
Member, it must have equity capital of at least $100 million.

(G)

Insurance Company Netting Member – If the applicant is applying
to become an Insurance Company Netting Member, it must have:(1) an A.M. Best (“Best”) rating of “A-” or better, (2) a rating by atleast one of the other three major rating agencies (Standard & Poor’s(“S&P”), Moody’s, and Fitch Ratings (“Fitch”)) of at least “A-” or“A3”, as applicable, (3) no rating by S&P, Moody’s, and Fitch ofless than “A-” or “A”, as applicable, (4) a risk-based capital ratio(the ratio of the applicant’s adjusted capital to its risk-based capital)of at least 200 percent, and (5) statutory capital (consisting ofadjusted policyholders’ surplus plus the applicant’s asset valuation
reserve) of no less than $500 million;(H)

Registered Investment Company Netting Member – If the applicant
is applying to become a Registered Investment Company Netting
Member, it must have minimum Net Assets of $100 million; and

82

(I)

Other – If the applicant is not otherwise addressed in this Section
4(b)(ii), it must be in compliance with its regulator’s minimum
financial requirements. The Corporation may, based on information
provided by or concerning an applicant, also assign minimum
financial requirements for the applicant based on (i) how closely theapplicant resembles an existing category of Netting Member and(ii) the applicant’s risk profile, which assigned minimum financial
requirements will be promptly communicated to, and discussed
with, the applicant.

The foregoing financial responsibility standards are only the minimum requirements. The
Board, based upon the level of the anticipated positions and obligations of the applicant, theanticipated risk associated with the volume and types of transactions the applicant proposes toprocess through the Corporation, and the overall financial condition of the applicant, may, in its
sole discretion, impose heightened or different financial responsibility standards on any applicant.
If an applicant does not itself satisfy the required minimum financial responsibility standards, theBoard may include for such purposes the financial resources of the parent company of the applicant(including, in the case of an applicant that is a U.S. branch or agency, its parent bank), if the parent
company has delivered to the Corporation a guaranty, satisfactory in form and substance to theBoard, of the obligations of the applicant to the Corporation.
(c)Business History – The applicant must have an established, profitable businesshistory of a minimum of six months or personnel with sufficient operational background andexperience to ensure, in the judgment of the Board, the ability of the firm to conduct its business.
Section 5 – Application Documents
Each applicant to become a Member shall, as required by the Corporation from time totime, complete and deliver to the Corporation an Applicant Questionnaire in such form as may beprescribed by the Corporation. An applicant seeking membership in the Netting System shall alsodeliver to the Corporation the financial reports, other reports, opinions and other information as
the Corporation determines appropriate.
Each applicant to become a Netting Member shall obtain and provide to the Corporation a
Legal Entity Identifier.
As part of its membership application, each applicant (as determined by the Corporation
with regard to membership type) shall complete and deliver to the Corporation (1) a FATCA
Certification, and (2) a Cybersecurity Confirmation.
Each applicant must also have the successful completion of network and connectivity
testing at the current FICC standards (the scope of such testing to be determined by the Corporationin its sole discretion).
Each applicant to become a Member must also fulfill, within the time frames establishedby the Corporation, any operational testing requirements (the scope of such testing to be
determined by the Corporation in its sole discretion) and related reporting requirements (such as83

reporting the test results to the Corporation in a manner specified by the Corporation) that may be
imposed by the Corporation to ensure the operational capability of the applicant.
If the Corporation determines that a legal opinion, or update thereto, submitted by anapplicant, indicates that the Corporation could be subject to Legal Risk (as defined in Section 2 ofRule 4) with respect to such applicant, the Corporation shall have the right to take, and/or require
the applicant to take, appropriate action(s) to mitigate such Legal Risk, including, but not limited
to, requiring the applicant to post additional Clearing Fund as set forth in Section 2 of Rule 4.
Any non-public information furnished to the Corporation pursuant to this Rule shall beheld in confidence as may be required under the laws, rules and regulations applicable to the
Corporation that relate to the confidentiality of records. Each applicant shall maintain DTCC
Confidential Information in confidence to the same extent and using the same means it uses toprotect its own confidential information, but no less than a reasonable standard of care and shallnot use DTCC Confidential Information or disclose DTCC Confidential Information to any third
party except as necessary to perform such applicant’s obligations under these Rules or as otherwise
required by applicable law. Each applicant acknowledges that a breach of its confidentiality
obligations under these Rules may result in serious and irreparable harm to the Corporation and/or
DTCC for which there is no adequate remedy at law. In the event of such a breach by the applicant,the Corporation and/or DTCC shall be entitled to seek any temporary or permanent injunctive orother equitable relief in addition to any monetary damages hereunder.
Section 6 – Evaluation of Applicant
An application to become any type of Member shall first be reviewed by the Corporation.
The Corporation may approve applications for Comparison-Only membership. With regard to
Netting membership, the Corporation shall recommend approval or disapproval of the application
to the Board. Except as otherwise provided in this Rule 2A or in Rule 15, Corporation or Board
approval of an application for membership shall constitute approval only of the type ofmembership specifically applied for.
In evaluating a membership application, the Corporation may:(i)contact the applicant’s Designated Examining Authority, Appropriate
Regulatory Agency, primary regulatory authority (the CFTC and the applicable selfregulatory organization designated under the Commodity Exchange Act in the case of a
Futures Commission Merchant, and the insurance regulator in the company’s state of
domicile in the case of an Insurance Company), or other examining authority or regulator,
or any Self-Regulatory Organization or self-regulatory organization of which the applicant
is a member and request from such authority or organization any records, reports, or otherinformation that, in their judgment, may be relevant to the application;(ii)
examine the books, records, and operational procedures of, and inspect thepremises of, the applicant as they may be related to the business conducted through the
Corporation; and84

(iii) take such other evidence or make such other inquiries as is necessary,
including sworn or unsworn testimony, to ascertain relevant facts bearing upon theapplicant’s qualifications.
The Board or the Corporation, as applicable, shall approve an application to become aMember pursuant to this Rule only upon a determination that the applicant meets such standardsof financial responsibility and operational capability as are set forth in this Rule. In addition, withregard to any applicant that shall be an FFI Member, such applicant must be FATCA Compliant.
Notwithstanding that an application to become a Member shall have been approved by the
Board or the Corporation, if a material change in condition of the applicant occurs which in the
judgment of the Board or the Corporation could bring into question the applicant’s ability toperform as a Member, and such material change becomes known to the Corporation prior to theapplicant’s commencing use of the Corporation’s services, the Corporation shall have the right tostay commencement by the applicant of use of the Corporation’s services until a reconsiderationby the Board or the Corporation of the applicant’s financial responsibility and operational
capability can be completed. As a result of such reconsideration, the Board or the Corporation
may determine to withdraw approval of an application to become a Member or condition theapproval upon the furnishing of additional information or assurances.
Notwithstanding the provisions of this Rule, the Board or the Corporation may determine,after considering the facts and circumstances pertaining to an applicant, not to apply one or moreof the qualifications or standards set forth in these Rules. If the Board or the Corporation
determines that such qualification or standard shall not apply, it shall determine what, if any,
limitation or restriction shall be placed on such applicant. Limitations and restrictions shall beara reasonable relationship to the qualification or standard not applied to such applicant and may
include, but are not limited to, an increased Clearing Fund requirement or a limitation on theapplicant’s activities to be processed through the Corporation. Such determination shall only bemade if the Board or the Corporation concludes that not applying such qualification or standard,
and imposing such limitation or restriction, would not be against the best interests of the
Corporation and its Members. In making such a determination, the Board or the Corporation may
require the applicant to provide additional information or assurances. If the Board or the
Corporation imposes a limitation or restriction pursuant to this provision, the Corporation shallpromptly notify the SEC.
The Board or the Corporation may deny an application to become a Member upon the
Corporation’s determination that it does not have adequate personnel, space, data processing
capacity or other operational capability at that time to perform its services for the applicant without
impairing the ability of the Corporation to provide services for its existing Members, to assure theprompt, accurate and orderly processing and settlement of securities transactions or to otherwise
carry out its functions; provided, however, that any such applications which are denied pursuant
to this paragraph shall be approved as promptly as the capabilities of the Corporation permit.
Upon the Board’s or the Corporation’s denial of an application to become a Member
pursuant to this Rule, the Corporation shall furnish the applicant with a concise written statement
setting forth the specific grounds under consideration upon which any such denial may be based

85and shall notify the applicant of its right to request a hearing before the Board, such request to be
filed by the applicant with the Corporation pursuant to Rule 37.
Section 7 – Membership Agreement
Each Member agrees:(a)to abide by these Rules and to be bound by all the provisions thereof;(b)
to pay to the Corporation in a timely manner the compensation provided for bythese Rules for services rendered and such costs and fines as may be imposed in accordance withthese Rules for the failure to comply therewith;(c)
to be bound by any amendment to these with respect to any transaction occurring
subsequent to the time such amendment takes effect as fully as though such amendment were now
a part of these Rules;(d)to continue to be bound by these Rules, notwithstanding that it may have terminatedits membership, as to all matters and transactions occurring while it was a Member;(e)
if it is a Netting Member, to: (i) submit to the Corporation for comparison, pursuant
to Rule 5, data on all of its eligible trades with other Netting Members, (ii) deliver to the
Corporation or receive from the Corporation the securities underlying all trades that have beenreported as being netted and all monies related thereto, in accordance with these Rules, and (iii) pay
or deliver to the Corporation in a timely manner all amounts due pursuant to Rule 4 with regard to
its Required Fund Deposit and any loss or liability allocated to it;(f)that the determination of the Board as to any questions arising with regard to any
payment, charge, fee, deposit, or fine to which it may be subject shall be final and conclusive,
except as may be otherwise provided in these Rules; and(g)to any other terms and conditions deemed by the Corporation to be necessary inorder to protect itself and its Members, including, for a Foreign Member, all agreements, opinions
of counsel, and other legal documentation required by the Corporation.

86

RULE 3 – ONGOING MEMBERSHIP REQUIREMENTS
Section 1 – Requirements
The eligibility, qualifications and standards set forth in Rule 2A in respect of an applicant
shall continue to be met upon an applicant’s admission as a Member and at all times while aMember. In addition, each Member shall comply with the ongoing requirements set forth below.
Section 2 – Reports by Netting Members
Each Netting Member shall submit to the Corporation the reports, financial or otherinformation set forth below and such other reports, financial and other information as the
Corporation from time to time may reasonably require. Unless specifically set forth below, thetime periods prescribed by the Corporation are set forth in the form of notices posted at the
Corporation’s Website and/or distributed by the Corporation from time to time. It shall be theMember’s responsibility to retrieve all notices daily from the Website.
(a)a copy of the Member’s annual audited Financial Statements for each fiscal year,
certified by the Member’s independent certified public accountants and prepared in accordancewith generally accepted accounting principles;(b)
if the Member is a broker or dealer registered under Section 15 of the ExchangeAct, or a Government Securities Broker or Government Securities Dealer registered under Section
15C of the Exchange Act, (i) a copy of the Member’s Financial and Operational Combined
Uniform Single Report (“FOCUS Report”) or Report on Finances and Operations of Government
Securities Brokers and Dealers (“FOGS Report”), as the case may be, submitted to its DesignatedExamining Authority, (ii) a report of the Member’s independent auditors on internal controls, and(iii) any supplemental reports required to be filed with the SEC pursuant to Exchange Act Rule17a-11 or 17 C.F.R. Section 405.3;(c)
if the Member is a U.S. bank or trust company, a copy of the Member’s
Consolidated Report of Condition and Income (“Call Report”) submitted to its Appropriate
Regulatory Agency and, to the extent not contained within such Call Reports (or to the extent that
Call Reports are not required to be filed), information containing each of the Member’s capitallevels and ratios, as such levels and ratios are required to be provided to the Member’s Appropriate
Regulatory Agency (or, if such Member’s Appropriate Regulatory Agency does not require suchinformation, as would be required to be provided, if such Member’s Appropriate Regulatory
Agency were the Board of Governors of the Federal Reserve System);(d)if the Member is a Futures Commission Merchant and not a broker or dealer
registered with the SEC, (i) a copy of its CFTC Form 1-FR as filed with the CFTC (or copies ofthe equivalent form filed with the CFTC pursuant to CFTC Regulation 1.10(b)(3), (ii) a copy ofthe computation required by CFTC Regulation 1.18, and (iii) a copy of any supplemental reports
filed with the CFTC pursuant to Regulation 1.12 or any successor regulations;

87

(e)
if the Member is a broker, dealer or bank established or organized under the lawsof a non-U.S. jurisdiction and subject to regulation by its home country regulator in suchjurisdiction, a copy of any reports submitted to such home country regulator;(f)
if the Member is a Foreign Netting Member other than one that is a broker, dealer
or bank subject to regulation by its home country regulator in such jurisdiction, financial
information as requested by the Corporation;(g)
if the Member does not fall within clauses (b) through (f) above, a copy of theMember’s unaudited financial information as specified by the Corporation for each quarter; and(h)for any Member which has satisfied the financial requirements imposed by the
Corporation pursuant to these Rules by means of a guaranty of its obligations by its parent
company (including, in the case of a Member that is a U.S. branch or agency, its parent bank),
Financial Statements and/or the reports or information of its parent company meeting therequirements specified in subparagraphs (a) through (g) of this Section 2, as applicable.
With respect to a Member that has received from its regulators an extension of time bywhich one of the above-listed reports or submissions to the regulator is otherwise due, a copy ofthe extension letter or other regulatory communication granting such extension. Moreover, any
Member that has provided to the SEC any notice required pursuant to paragraph (e) of Exchange
Act Rule 15c3-1 shall notify the Corporation of the provision of such notice, and shall furnish the
Corporation with a copy of such notice, by the Close of Business on the day that it so provides
such notice to the SEC.
With respect to subsections (a) and (f) above, the Corporation may accept, in its sole
discretion, consolidated Financial Statements or financial information prepared at a parent level.
In addition to the above, Netting Members must submit to the Corporation, concurrently
with their submission to the relevant regulator or similar authority, copies of any regulatory
notifications required to be made when a Member’s capital levels or other financial requirements
fall below prescribed levels. In addition, Members must submit to the Corporation, concurrently
with their submission to the applicable regulator or similar authority, copies of such filings asdetermined by the Corporation from time to time, which Members are required to file pursuant to
the Sarbanes-Oxley Act of 2002, and any amendments thereunder.
A Member that is a bank or trust company established or chartered under the laws of a nonU.S. jurisdiction and a Bank Netting Member that is a U.S. branch or agency must (i) provide, noless than annually and upon request by the Corporation, an attestation for itself, its parent bankand its parent bank holding company (as applicable) detailing the minimum capital requirements(including, but not limited to, any capital conservation buffer, countercyclical buffer, and any DSIB or G-SIB buffer, if applicable) and capital ratios required by their home country regulator and(ii) promptly notify the Corporation: (a) within two Business Days of any of their capitalrequirements (including, but not limited to, any capital conservation buffer, countercyclical buffer,and any D-SIB or G-SIB buffer, if applicable) or capital ratios falling below any minimum requiredby their home country regulator; and (b) within 15 calendar days of any such minimum capitalrequirement or capital ratio changing.

88Moreover, Foreign Netting Members and Bank Netting Members that are U.S. branches oragencies of non-U.S. banks or trust companies must submit to the Corporation, concurrently with
their submission to the relevant regulator or similar authority, copies of any regulatory
notifications required to be made when an entity does not comply with the financial reporting andresponsibility standards set by their home country regulator. Foreign Netting Members and Bank
Netting Members that are U.S. branches or agencies of non-U.S. banks or trust companies mustalso notify the Corporation in writing within 2 Business Days of becoming subject to a disciplinary
action by their home country regulator.
If the Corporation determines that a legal opinion, or update thereto, submitted by aMember, indicates that the Corporation could be subject to Legal Risk (as defined in Section 2 ofRule 4) with respect to such Member, the Corporation shall have the right to take, and/or require
the Member to take, appropriate action(s) to mitigate such Legal Risk, including, but not limited
to, requiring the Member to post additional Clearing Fund as set forth in Section 2 of Rule 4.
In addition to all of the above, each Member shall complete and deliver to the Corporationa Cybersecurity Confirmation at least every two years, on a date that is set by the Corporation andfollowing notice that is provided no later than 180 calendar days prior to such due date.
In addition, each Member shall maintain or upgrade their network technology, orcommunications technology or protocols on the systems that connect to the Corporation to theversion being required and within the time periods as provided by Important Notice posted to the
Corporation’s website.
A Netting Member must have a current Legal Entity Identifier on file with the Corporation
at all times. The Netting Member shall indemnify the Corporation, and its employees, officers,
directors, shareholders, agents, and Members (collectively, the “LEI Indemnified Parties”), for any
and all losses, liabilities, expenses and Legal Actions suffered or incurred by the LEI Indemnified
Parties arising from a Netting Member’s failure to have its current Legal Entity Identifier on filewith the Corporation. “Legal Action” means and includes any claim, counterclaim, demand,action, suit, countersuit, arbitration, inquiry, proceeding or investigation before any federal, stateor foreign court or other tribunal, or any investigative or regulatory agency or self-regulatoryorganization.
Notwithstanding anything to the contrary in this Rule, if a Member qualifies for more than
one category of Netting System membership, the Corporation, in its sole discretion, may requirethat such member provide those reports and other financial or other information required to beprovided to the Corporation by Members of any of those membership categories for which such
Member qualifies.
All information provided to the Corporation pursuant to this Section shall be in English(and if translated into English, the translation must be a fair and accurate English translation).

89

A Member that fails to submit the above listed information within the timeframes requiredby guidelines issued by the Corporation from time to time and in the manner requested, shall:(i)be subject to a fine by the Corporation; and(ii)
until the required information is submitted to the Corporation, have a
Required Fund Deposit equal to the greater of either (x) the sum of the normal calculationof its Required Fund Deposit plus $1,000,000, or (y) 125 percent of the normal calculationof its Required Fund Deposit.
Section 3 – Financial Statements
For purposes of Rule 2A and this Rule, the term “Financial Statements” means, a balance
sheet, statement of income, statement of changes in financial position and statement of changes
in owner’s equity, in each case with accompanying notes.
Section 4 – Confidentiality
Any non-public information furnished to the Corporation pursuant to this Rule shall beheld in confidence as may be required under the laws, rules and regulations applicable to the
Corporation that relate to the confidentiality of records. Each applicant and Member shall maintain
DTCC Confidential Information in confidence to the same extent and using the same means it uses
to protect its own confidential information, but no less than a reasonable standard of care and shallnot use DTCC Confidential Information or disclose DTCC Confidential Information to any third
party except as necessary to perform such applicant’s or Member’s obligations under these Rules
or as otherwise required by applicable law. Each applicant and Member acknowledges that abreach of its confidentiality obligations under these Rules may result in serious and irreparable
harm to the Corporation and/or DTCC for which there is no adequate remedy at law. In the eventof such a breach by the applicant or Member, the Corporation and/or DTCC shall be entitled toseek any temporary or permanent injunctive or other equitable relief in addition to any monetarydamages hereunder.
Section 5 – Application of Membership Standards
Notwithstanding the provisions of this Rule, the Board may determine, after considering
the facts and circumstances pertaining to a Member, not to apply one or more of the qualifications
or standards set forth in these Rules. If the Board determines that such qualification or standard
shall not apply, the Committee shall determine what, if any, limitation or restriction shall be placedon such Member. Limitations and restrictions shall bear a reasonable relationship to thequalification or standard not applied to such Member and may include, but are not limited to, an
increased Clearing Fund requirement or a limitation on the Member’s activities processed throughthe Corporation. Such determination shall only be made if the Board concludes that not applying
such qualification or standard, and imposing such limitation or restriction, would not be against
the best interests of the Corporation and its Members. In making such a determination, the Board
may require the Member to provide additional information or assurances. If the Board imposes alimitation or restriction pursuant to this provision, the Corporation shall promptly notify the SEC.

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Section 6 – Operational Testing Requirements(a)
The Corporation may, from time to time, require Members to fulfill, within the timeframes established by the Corporation, certain operational testing requirements (the scope of suchtesting to be determined by the Corporation in its sole discretion) and related reporting
requirements (such as reporting the test results to the Corporation in a manner specified by the
Corporation) that may be imposed by the Corporation to ensure the continuing operational
capability of the Member. The Corporation will assess a fine or terminate the membership of any
Member that does not fulfill any such operational testing and related reporting requirements within
the time frames established by the Corporation.
(b)
The Corporation has established standards for designating those Members who
shall be required to participate in annual business continuity and disaster recovery testing that the
Corporation reasonably determines are, taken as a whole, the minimum necessary for the
maintenance of fair and orderly markets in the event that business continuity and disaster recovery
plans are required to be activated. The standards shall take into account factors such as:(1) activity-based thresholds; (2) significant operational issues of the Member during the twelve
months prior to the designation; and (3) past performance of the Member with respect tooperational testing. The specific standards adopted by the Corporation and any updates ormodifications thereto shall be published to Members and applied on a prospective basis.
Upon notification that the Member has been designated to participate in the annual business
continuity and disaster recovery testing, as described above, Members shall be required to fulfill,
within the timeframes established by the Corporation, certain testing requirements (the scope ofsuch testing to be determined by the Corporation in its sole discretion) and related reporting
requirements (such as reporting the test results to the Corporation in a manner specified by the
Corporation) that may be imposed by the Corporation.
Section 7 – General Continuance Standards
A Member shall promptly inform the Corporation, both orally and in writing, if it no longer
is in compliance with any of the relevant qualifications and standards for admission to membershipset forth in Rule 2 and in this Rule, including whether it is subject to any of the criteria set forth insubsection (d) of Section 2 of Rule 2A. Notification must take place within two Business Days
from the date on which the Member first learns of its non-compliance. The Corporation shallassess a fine against any Member who fails to so notify the Corporation. In addition, a Member
shall notify the Corporation within two Business Days of learning that an investigation orproceeding to which it is or is becoming the subject of would cause the Member to fall out ofcompliance with any of the relevant qualifications and standards for membership set forth in Rules
2, 2A and 3. Notwithstanding the previous sentence, the Member shall not be required to notify
the Corporation if doing so would cause the Member to violate an applicable law, rule orregulation. If, with respect to any type of Member: (a) it fails to maintain the relevant standards
and qualifications for admission to membership, including but not limited to minimum capital
standards and operational testing and related reporting requirements imposed by the Corporationfrom time to time; (b) it violates any Rule of the Corporation or other agreement with the
Corporation; (c) it fails to satisfy in a timely manner any obligation to the Corporation; (d) there
is a Reportable Event relating to such Member; or (e) the Corporation otherwise deems it necessary91

or advisable, in order to protect the Corporation, its other Members, or its creditors or investors,
to safeguard securities and funds in the custody or control of the Corporation or for which the
Corporation is responsible, or to promote the prompt and accurate processing, clearance orsettlement of securities transactions, the Corporation will undertake appropriate action todetermine the status of the Member and its continued eligibility. In addition, the Corporation may
review the financial responsibility and operational capability of the Member to the extent provided
in these Rules and otherwise require from the Member additional reporting of its financial or
operational condition at such intervals and in such detail as the Corporation shall determine,
including, but not limited to, such information as the Corporation may request regarding thebusinesses and operations of the Member and its risk management practices with respect toservices of the Corporation utilized by the Member for another Person or Persons, and shall makea determination as to whether such Member should be placed on the Watch List by the Corporationconsistent with the provisions of Section 12 of this Rule.
Furthermore, a Netting Member must submit to the Corporation written notice of any
Reportable Event at least 90 calendar days prior to the effective date of such Reportable Event
unless the Member demonstrates that it could not have reasonably done so, and provided notice,both orally and in writing, to FICC as soon as possible.
Beginning on the FATCA Compliance Date, each FFI Member shall inform the
Corporation, both orally and in writing, if it (i) undergoes a change in circumstance that would
affect its FATCA Certification or (ii) otherwise has reason to know that it is not, or will not be,
FATCA Compliant, in each case, within two days of knowledge thereof.
The Corporation shall assess a fine against any Netting Member who fails to so notify the
Corporation.
In addition, if the Corporation has reason to believe that a Member may fail to comply withany of these Rules, it may require the Member to provide it, within such timeframe, in such detail,and pursuant to such manner as the Corporation shall determine, with assurances in writing of acredible nature that the Member shall not, in fact, violate any of these Rules. Notwithstanding theprevious sentence, each Member, or any applicant to become such, shall furnish to the Corporationsuch adequate assurances of its financial responsibility and operational capability as the
Corporation may at any time or from time to time deem necessary or advisable in order to protect
the Corporation and its members, to safeguard securities and funds in the custody or control of the
Corporation and for which the Corporation is responsible, or to promote the prompt and accurate
clearance, settlement and processing of securities transactions. Upon the request of a participant
or applicant, or otherwise, the Corporation may choose to confer with the participant or applicant
before or after requiring it to furnish adequate assurances pursuant to this Rule.
Adequate assurances of financial responsibility or operational capability of a Member orapplicant to become such, as may be required by the Corporation pursuant to these Rules, may
include, but shall not be limited to, as appropriate under the context of the Member’s use of the
Corporation’s services:

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(i)
restrictions or modifications on the Member’s use of any or all of the
Corporation’s services (whether generally, or with respect to certain transactions);(ii)
additional reporting by the Member of its financial or operational conditionat such intervals and in such detail as the Corporation shall determine;(iii) increased Clearing Fund deposits and/or a requirement to post its Required
Fund Deposit in proportions of cash, Eligible Netting Securities and Eligible Letters of
Credit different from those permitted under Rule 4; or(iv)
prohibitions on the Member from withdrawing Clearing Fund on deposit inexcess of its Required Fund Deposit.
In the event that a Member fails to maintain the relevant requirements of any of these Rules,
the Corporation shall, pursuant to these Rules, either cease to act for the Member or terminate its
membership in the Comparison System or in both the Comparison System and the Netting System,
unless the Member requests that such action not be taken and the Corporation determines that,
depending upon the specific circumstances and the record of the Member, it is appropriate insteadto establish for such Member a time period (hereinafter, the “Noncompliance Time Period”), whichshall be determined by the Corporation and which shall be no longer than 30 calendar days unlessotherwise determined by the Corporation, during which the Member must resume compliance withsuch requirements. In the event that the Member is unable to satisfy such requirements within the
Noncompliance Time Period, the Corporation shall, pursuant to these Rules, either cease to act for
the Member or terminate its membership in the Comparison System or in both the Comparison
System and the Netting System. If the Corporation takes any action pursuant to this paragraph, it
shall promptly file with its records and with the SEC a full report of such actions, and the reasons
thereof.
Notwithstanding anything to the contrary in this Section, if the Corporation, in its sole
discretion, determines that a Netting Member’s financial condition has significantly deteriorated
during a Noncompliance Time Period, the Corporation immediately may, pursuant to these Rules,
either cease to act for the Member or terminate its membership in the Comparison System or inboth the Comparison System and the Netting System.
Section 8 – Specific Continuance Standards
In addition to the requirements set forth in Section 6 above of this Rule, the following
requirements shall apply to Members that fall out of compliance with an applicable membershipstandard:(a)
If a Bank Netting Member falls below the applicable minimum financial
requirements as specified in Rule 2A or this Rule 3, it shall, for a period beginning on the day on
which it fell below such level and continuing until the later of the 90th calendar day after the dateon which (i) it returned to compliance with such standard, or (ii) the Corporation received noticeof the applicable violation, have a Required Fund Deposit equal to the greater of either: (x) thesum of the normal calculation of its Required Fund Deposit plus $1,000,000, or (y) 125 percent of
the normal calculation of its Required Fund Deposit;
93

(b)If a Dealer Netting Member falls below either the minimum Net Worth levelapplicable to Dealer Netting Members pursuant to this Rule or the applicable minimum regulatory
capital level, as applicable, as specified in this Rule, it shall, for a period beginning on the date on
which it fell below such level and continuing until the later of the 90th calendar day after the dateon which (i) it returned to compliance with such standard, or (ii) the Corporation received noticeof the applicable violation, have a Required Fund Deposit equal to the greater of either: (x) thesum of its Required Fund Deposit plus $1,000,000, or (y) 125 percent of its Required Fund
Deposit;(c)
If a Futures Commission Merchant Netting Member falls below either theminimum Net Worth level applicable to Futures Commission Merchant Netting Members pursuant
to this Rule or the applicable minimum regulatory capital level specified in this Rule, it shall, fora period beginning on the date on which it fell below such level and continuing until the later of
the 90th calendar day after the date on which (i) it returned to compliance with such standard, or(ii) the Corporation received notice of the applicable violation, have a Required Fund Deposit
equal to the greater of either: (x) the sum of its Required Fund Deposit plus $1,000,000, or (y) 125
percent of its Required Fund Deposit;(d)
If an Inter-Dealer Broker Netting Member falls below either the applicableminimum Net Worth level or the applicable minimum regulatory capital level specified in thisRule, it shall have, for a period beginning on the date on which it fell from compliance with either
standard and continuing until the later of the 90th calendar day after the date on which (i) it returned
to compliance with such standard, or (ii) the Corporation received notice of the applicableviolation, a Required Fund Deposit equal to the greater of either: (x) the sum of the normal
calculation of its Required Fund Deposit plus $1,000,000, or (y) 125 percent of the normal
calculation of its Required Fund Deposit;(e)
An Inter-Dealer Broker Netting Member shall: (A) limit its business to acting
exclusively as a Broker; (B) conduct all of its business in Repo Transactions with Netting
Members; and (C) conduct at least 90 percent of its business in transactions that are not Repo
Transactions, measured based on its overall dollar volume of submitted sides over the prior month,with Netting Members. If an Inter-Dealer Broker Netting Member fails to comply with this scopeof-business standard, then, for a period beginning on the date on which it fell out of compliancewith this standard and continuing until the date on which it returned to compliance with suchstandard, such Member shall be considered by the Corporation for purposes of these Rules to be a
Dealer Netting Member. Notwithstanding anything to the contrary above, if such Inter-Dealer
Broker Netting Member continues to act exclusively as a Broker, it shall continue to be subject tothe provisions of Section 7 of Rule 4 as if it were an Inter-Dealer Broker Netting Member, until
and unless the Corporation determines, in its sole discretion, that such Member should be treatedfor purposes of that Section as if it were a Dealer Netting Member and so informs such Member.
Moreover, notwithstanding anything to the contrary above, if such Inter-Dealer Broker Netting
Member does not return to compliance with its applicable scope-of-business standard within 90
calendar days from the date on which it fell below such standard, such Member shall permanently
become a Dealer Netting Member for purposes of these Rules, until and unless it applies to the
Corporation to return to its Inter-Dealer Broker Netting Member status and such application isapproved by the Board; and

94

(f)
If a Government Securities Issuer Netting Member, Insurance Company Netting
Member, Registered Clearing Agency Netting Member, or Registered Investment Company
Netting Member falls out of compliance with any minimum admission or continuance standard
that may be set for it by the Corporation pursuant to these Rules, it shall, for a period beginningon the date on which it fell below such standard and continuing until the later of the 90th calendar
day after the date on which (i) it returned to compliance with such standard, or (ii) the Corporation
received notice of the applicable violation, have a Required Fund Deposit equal to the greater of
either: (x) the sum of the normal calculation of its Required Fund Deposit plus $1,000,000, or(y) 125 percent of the normal calculation of its Required Fund Deposit.
(g)
If a Foreign Netting Member falls out of compliance with the minimum financial
requirements that the Corporation has determined are applicable to it pursuant to these Rules, theconsequences under this Section of such noncompliance shall be determined by the Corporationin its sole discretion.
For purposes of applying a premium to the Required Fund Deposit of a Member that falls
below its minimum financial requirements as set forth in this Section, the Corporation shall begin
to assess such a premium on the date on which the Corporation becomes aware of the applicableviolation.
If the Corporation takes any action pursuant to this Section, it shall promptly report suchaction, and the reasons thereof, to the Board, at its next regularly scheduled meeting, or sooner if
deemed appropriate by the Corporation.
Section 9 – Compliance with Laws
(i)

General

In connection with their use of the Corporation’s services, Members must comply with allapplicable laws, including applicable laws relating to securities, taxation, and money laundering,as well as sanctions administered and enforced by the Office of Foreign Assets Control (“OFAC”).
(ii)

OFAC

As part of their compliance with OFAC sanctions regulations, all Members agree not to
conduct any transaction or activity through GSD which it knows to violate sanctions administeredand enforced by OFAC.
Members subject to the jurisdiction of the U.S., with the exception of Comparison-Only
Members, are required to periodically confirm that the Member has implemented a risk-based
program reasonably designed to comply with applicable OFAC sanctions regulations. Failure to
do so in the manner and timeframes set forth by the Corporation from time to time will result in a
fine.
(iii)

FATCA

Beginning on the FATCA Compliance Date, each FFI Member must agree not to conduct
any transaction or activity through the Corporation if such FFI Member is not FATCA Compliant,95

unless such requirement has been explicitly waived in writing by the Corporation with respect tothe specific FFI Member, provided, however, that no such waiver will be issued if it shall cause
the Corporation to be obligated to withhold under FATCA on gross proceeds from the sale or otherdisposition of any property.
All FFI Members are required, as applicable under FATCA, to certify and periodicallyrecertify to the Corporation that they are FATCA Compliant by providing to the Corporation a
FATCA Certification. Failure to do so in the manner and timeframes set forth by the Corporationfrom time to time will result in a fine, unless such requirement has been explicitly waived in writingby the Corporation with respect to the specific FFI Member, provided, however, that no such
waiver will be issued if it shall cause the Corporation to be obligated to withhold under FATCA
on gross proceeds from the sale or other disposition of any property.
An FFI Member agrees to indemnify the Corporation, its affiliates, and each of theirrespective shareholders, directors, officers, employees, agents and advisors (each, an “Indemnified
Person”) for any loss, liability or expense sustained by the Indemnified Person as a result of such
FFI Member failing to be FATCA Compliant.
Section 10 – Books and Records
The books and records of a Member and, in the case of a Registered Investment Company
Netting Member, its Controlling Management, insofar as they relate to transactions processed
through the Corporation, shall be open to the inspection of the duly authorized representatives of
the Corporation upon reasonable prior notice and during the Member’s or its ControllingManagement’s normal business hours, as applicable. The Corporation shall be furnished with all
such information about the business and transactions of the Member and, in the case of a
Registered Investment Company Netting Member, its Controlling Management, as it may require;provided that (i) any non-public information furnished to the Corporation pursuant to this Rule
shall be held in confidence as may be required under the laws, rules and regulations applicable to
the Corporation that relate to the confidentiality of records, and (ii) if the Member ceases
membership, the Corporation shall have no right to inspect the Member’s or its ControllingManagement’s books and records, as applicable, or to require information relating to transactions
wholly subsequent to the time when the Member ceases membership.
Section 11 – Additional Accounts Requested by Members(a)
The Corporation may permit a Member to maintain one or more additional
Accounts at the request of a Member if the Corporation determines that doing so will not subject
the Corporation to material legal, financial or operational risk.
(b)
The Corporation may permit a Netting Member to open additional Netting Member
Accounts for the Netting Member itself or for wholly-owned subsidiaries of the Netting Member.
(c)
The Corporation may permit a Netting Member to open an additional Account for
its Market Professional customers. Such Account must be in furtherance of a Cross-Margining
Arrangement and must meet the requirements of the applicable Cross-Margining Agreement and96

Rule 43. Such Account must meet all obligations under these Rules unless otherwise specified
herein.
(d)
All other additional Netting Member Accounts requested by Netting Members for
Non-Members not otherwise permitted under these Rules shall require the approval of the Board.
Netting Members shall not be permitted to maintain additional accounts for comparison-only
activities unless they can demonstrate that doing so will not violate Section 3 of Rule 11.
(e)Additional Accounts that are opened for a Member pursuant to this Section 11 ofRule 3 shall be opened solely for the administrative convenience of the Member or in furtheranceof the Cross-Margining Arrangements between the Corporation and an FCO, and no other personor entity shall have any rights, obligations or liabilities with respect to any of the Member’s
Accounts with the Corporation. Only Members shall be entitled to process transactions throughthe Corporation and to participate in the services offered by the Corporation for which they havebeen approved. A Member that processes through the Corporation any contract or other transaction
for an entity that is a Non-Member shall, so far as the rights of the Corporation and of otherMembers are concerned, be liable as principal on such transaction. A Non-Member who processes
transactions through a Member shall not possess any of the rights or benefits of a Member.
(f)
The Corporation may, in its sole discretion, at any time and without prior notice(but being obligated to give notice as soon as possible thereafter) and whether or not the Member
is in default of its obligations to the Corporation, apply Required Fund Deposits made by a Member
pursuant to its obligations under one of its Accounts, as necessary, to ensure that the Member
meets all of its obligations to the Corporation under its other Account(s), and otherwise exercise
all rights to offset and net any obligations among any or all of the Accounts, whether or not a nonMember is deemed to have any interest in the Member’s Account(s), notwithstanding the terms ofthis Rule.
(g)
This section shall not apply to Repo Brokers who are required to maintain
Segregated Repo Accounts pursuant to Section 2 of Rule 19.
Section 12 – Ongoing Monitoring(a)
All Netting Members, Sponsoring Members and Funds-Only Settling Bank
Members will be monitored and reviewed by the Corporation on an ongoing and periodic basis,
which may include monitoring of news and market developments and review of financial reports
and other public information.
(b)(i)
A Member that is (A) a Bank Netting Member that files the Call Report,(B) a Dealer Netting Member or Inter-Dealer Broker Netting Member that files the FOCUS
Report or the equivalent with its regulator, or (C) a Foreign Netting Member that is a bankor trust company and that has audited financial data that is publicly available will beassigned a credit rating by the Corporation in accordance with the Credit Risk Rating
Matrix. Such Member’s credit rating will be reassessed each time the Member provides
the Corporation with requested information pursuant to Section 7 of Rule 3, or as may beotherwise required under the Rules (including this Section 12 of Rule 3).

97

(ii)
Because the factors used as part of the Credit Risk Rating Matrix may not
identify all risks that a Member specified in paragraph (b)(i) of this Section 12 may present
to the Corporation, the Corporation may, in its discretion, override such Member’s credit
rating derived from the Credit Risk Rating Matrix to downgrade the Member. This
downgrading may result in the Member being placed on the Watch List based on relevant
factors, including those set forth in paragraph (d) below. The Corporation may also takesuch additional actions with regard to the Member as are permitted by the Rules.
(c)
Sponsoring Members, Funds-Only Settling Bank Members and Netting Membersother than those specified in paragraph (b)(i) of this Section 12 will not be assigned a credit ratingby the Credit Risk Rating Matrix but may be placed on the Watch List based on relevant factors,
including those set forth in paragraph (d) below, as the Corporation deems necessary to protect the
Corporation and its Members.
(d)
The factors to be considered by the Corporation under paragraphs (b)(ii) and (c) of
this Section 12 include, but are not limited to, (i) news reports and/or regulatory observations thatraise reasonable concerns relating to the Member, (ii) reasonable concerns around the Member’sliquidity arrangements, (iii) material changes to the Member’s organizational structure,(iv) reasonable concerns of the Corporation about the Member’s financial stability due to particular
facts and circumstances, such as material litigation or other legal and/or regulatory risks, (v) failureof the Member to demonstrate satisfactory financial condition or operational capability or areasonable concern of the Corporation regarding the Member’s ability to maintain applicable
membership standards, and (vi) failure of the Member to provide information required by the
Corporation to assess risk exposure posed by the Member’s activity (including information
requested by the Corporation pursuant to Section 7 of this Rule 3).
(e)
The Corporation may require a Netting Member that has been placed on the Watch
List to make and maintain a deposit to the Clearing Fund over and above the amount determinedin accordance with the provisions of Rule 4 (which additional deposit shall constitute a portion of
the Netting Member’s Required Fund Deposit), or such higher amount as the Board may deem
necessary for the protection of the Corporation or other Members, which higher amount may
include, but is not limited to, additional payments or deposits in any form to offset potential risk
to the Corporation and its Members arising from activity submitted by such Member. The
Corporation may also retain any Excess Clearing Fund Deposits of a Netting Member that has
been placed on the Watch List as provided in Section 10 of Rule 4. Moreover, as regards a Netting
Member that has been placed on the Watch List by the Corporation, the Corporation may suspend,during all or a portion of the time period that such Member is on the Watch List, its right underthese Rules to collect a Credit Forward Mark Adjustment Payment. Moreover, if a Netting
Member on the Watch List has a Collateral Allocation Entitlement as the result of its GCF Repo
Transaction activity, the Corporation may, in its sole discretion, maintain possession of the
securities and/or cash that comprise such Collateral Allocation Entitlement.
(f)
A Member being placed on the Watch List shall result in a more thoroughmonitoring of the Member’s financial condition and/or operational capability, which could
include, for example, on-site visits or additional due diligence information requests from the
Corporation. In addition, the Corporation may require a Member placed on the Watch List to makemore frequent financial disclosures, including, without limitation, interim and/or pro forma98reports. Members that are subject to placement on the Watch List are also reported to the
Corporation’s management committees and regularly reviewed by a cross-functional teamcomprised of senior management of the Corporation. The Corporation may also take such
additional actions with regard to any Member (including a Member placed on the Watch List) as
are permitted by the Rules.
Section 13 – Voluntary Termination
A Member that is a Comparison-Only Member may elect to terminate such membership,
and a Netting Member may elect to terminate its membership in either the Corporation or in justthe Netting System (and to become a Comparison-Only Member), by providing the Corporation
with a written notice of such termination (hereinafter, the “Voluntary Termination Notice”). The
Member shall specify in the Voluntary Termination Notice a desired date for its withdrawal frommembership; provided, however, if the Member is terminating its membership in the Corporation,such date shall not be prior to the scheduled final settlement date of any remaining obligation owed
by the Member to the Corporation as of the time such Voluntary Termination Notice is submitted
to the Corporation, unless otherwise approved by the Corporation.
Such termination will not be effective until accepted by the Corporation, which shall be nolater than 10 Business Days after the receipt of the Voluntary Termination Notice from such
Member. The Corporation’s acceptance shall be evidenced by a notice to Members announcing
the Member’s termination and the effective date of the termination of the Member (hereinafter the“Termination Date”). As of the Termination Date, a Netting Member that terminates its
membership in the Netting System, or a Comparison-Only Member or Netting Member thatterminates its membership in the Corporation, shall no longer be eligible or required to submit to
the Corporation data on trades and shall no longer be eligible to have its trade data submitted byan authorized submitter, notwithstanding any provision of Rule 5, Rules 6A through 6C, or Rule
11 to the contrary, unless the Board determines otherwise in order to ensure an orderly liquidationof the Member’s Net Settlement Positions. If any trade is submitted to the Corporation either bysuch Member or its authorized submitter that is scheduled to settle on or after the Termination
Date, such Member’s Voluntary Termination Notice will be deemed void, and the Member willremain subject to these Rules as if it had not given such Voluntary Termination Notice.
A Member’s voluntary termination of membership shall not affect its obligations to the
Corporation, or the rights of the Corporation, with respect to transactions submitted to the
Corporation before the Termination Date. The return of the Member’s Clearing Fund deposit shallbe governed by Section 8 of Rule 4. If a Member is a Tier One Netting Member and an Event
Period were to occur after such Member has submitted its Voluntary Termination Notice but prior
to the Termination Date, in order for such Member to benefit from its Loss Allocation Cap pursuant
to Section 7 of Rule 4, the Member will need to comply with the provisions of Section 7b of Rule
4 and submit a Loss Allocation Withdrawal Notice, which notice, upon submission, shallsupersede and void any pending Voluntary Termination Notice previously submitted by theMember.

99

Section 14 – Excess Capital Premium
If a Netting Member maintains an Excess Capital Ratio greater than 1.0, then the
Corporation may require the Netting Member to make and maintain an additional deposit to theClearing Fund in an amount equal to the product of its Excess Capital Differential multiplied by
its Excess Capital Ratio. Any such additional deposit required by the Corporation shall beconsidered included as part of the Netting Member’s Required Fund Deposit.
The Corporation also will reserve the right to: (i) collect an amount less than the Excess
Capital Premium (including no premium) based on specific circumstances (such as a Netting
Member being subject to an unexpected haircut or capital charge that does not fundamentallychange its risk profile), and (ii) return all or a portion of the Excess Capital Premium (or suchlesser amount) if it believes that the Netting Member’s risk profile does not require themaintenance of that amount. ‡‡FICC has identified the following guidelines, which are intended to be illustrative, but not limited, where thepremium will not be imposed: management will look to see whether the premium results from unusual or nonrecurring circumstances where management believes it would not be appropriate to assess the premium.
Examples of such circumstances are a member’s late submission of trade data for comparison that would
otherwise reduce the margined position if timely submitted or an unexpected haircut or capital charge that does
not fundamentally change its risk profile.

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RULE 3A – SPONSORING MEMBERS AND SPONSORED MEMBERS
Section 1 – General
The Corporation may permit the establishment of a sponsored membership relationshipbetween a Netting Member that is approved as a Sponsoring Member and one or more Persons
that are accepted by the Corporation as Sponsored Members of that particular Sponsoring Member.
The rights, liabilities and obligations of Sponsoring Members and Sponsored Members
shall be governed by this Rule 3A. References to a “Member” in other Rules shall not apply toSponsoring Members nor Sponsored Members, in their respective capacities as such, unlessspecifically noted as such in this Rule 3A or in such other Rules.
A Sponsoring Member shall continue to have all of the rights, liabilities and obligations set
forth in these Rules and in any agreement between it and the Corporation pertaining to its status
as a Netting Member, and such rights, liabilities and obligations shall be separate from its rights,
liabilities and obligations as a Sponsoring Member except as contemplated under Sections 10, 11
and 12 of this Rule 3A and under the Sponsoring Member Guaranty.
Section 2 – Qualifications of Sponsoring Members, the Application Process and ContinuanceStandards(a)
A Netting Member shall be eligible to apply to become a Category 1 Sponsoring
Member if it: (i) is a Bank Netting Member, (ii) has a level of equity capital of at least $5 billion,(iii) is Well Capitalized, and (iv) has a bank holding company that is registered under the Bank
Holding Company Act of 1956, as amended, such bank holding company is also Well Capitalized.
A Netting Member that is a Tier One Netting Member, other than an Inter-Dealer Broker Netting
Member, or a Non-IDB Repo Broker with respect to activity in its Segregated Repo Account, shallbe eligible to apply to become a Category 2 Sponsoring Member. The Corporation may requirethat a Person be a Netting Member for a time period deemed necessary by the Corporation before
that Person may be considered to become a Sponsoring Member.
(b)(i)
Each Netting Member applicant to become a Sponsoring Member shallcomplete and deliver to the Corporation an application in such form as may be prescribedby the Corporation from time to time and any other information requested by the
Corporation. An application to become a Sponsoring Member shall first be reviewed by
the Corporation. The Corporation shall recommend approval or disapproval of theapplication to the Board.
(ii)
The Corporation may impose financial requirements on a Netting Member
applying to become a Category 2 Sponsoring Member that are greater than financial
requirements applicable to the applicant in its capacity as a Netting Member under Section
4(b) of Rule 2A, based upon the level of the anticipated positions and obligations of suchapplicant, the anticipated risk associated with the volume and types of transactions suchapplicant proposes to process through the Corporation as a Category 2 Sponsoring
Member, and the overall financial condition of such applicant. The Board shall approve
any increased financial requirements imposed by the Corporation in connection with the101approval of an application of a Netting Member to become a Category 2 Sponsoring
Member, and the Corporation shall thereafter regularly review such Category 2 Sponsoring
Member regarding its compliance with such increased financial requirements.
(iii) If the Board denies the application of a Netting Member to become aSponsoring Member, such denial shall be handled in the same way as set forth in Section
6 of Rule 2A with respect to membership applications.
(iv)
Each Sponsoring Member, or any Netting Member applicant to become
such, shall also furnish to the Corporation such adequate assurances of its financial
responsibility and operational capability within the meaning of Section 7 of Rule 3 as the
Corporation may at any time or from time to time deem necessary or advisable in order toprotect the Corporation and its members, to safeguard securities and funds in the custodyor control of the Corporation and for which the Corporation is responsible, or to promote
the prompt and accurate clearance and settlement of securities transactions. The Board
shall approve any adequate assurances imposed by the Corporation in connection with theapproval of an application of a Netting Member to become a Sponsoring Member, and the
Corporation shall thereafter regularly review such Sponsoring Member regarding its
compliance with such adequate assurances, as appropriate. Any adequate assurances
imposed on a Sponsoring Member by the Corporation after its approval shall be
communicated in writing to the Sponsoring Member, and the Corporation shall thereafter
regularly review such Sponsoring Member regarding its compliance with such adequate
assurances, as appropriate.
(v)
Each Sponsoring Member or Netting Member applicant must also have thesuccessful completion of network and connectivity testing at the current FICC standards(the scope of such testing to be determined by the Corporation in its sole discretion).
(c)Each Netting Member whose application is approved to become a Sponsoring
Member shall sign and deliver to the Corporation a Sponsoring Member Agreement whereby the
Netting Member shall agree to any terms and conditions deemed by the Corporation to benecessary in order to protect itself and its Members. Each Netting Member to become aSponsoring Member shall also sign and deliver to the Corporation a Sponsoring Member Guaranty
and a related legal opinion in a form satisfactory to the Corporation.
Nothing in these Rules shall prohibit a Sponsoring Member from seeking reimbursementfrom a Sponsored Member for payments made by the Sponsoring Member (whether pursuant to
the Sponsoring Member Guaranty, out of Clearing Fund deposits or otherwise) with respect toobligations as to which the Sponsored Member is a principal obligor under these Rules, or asotherwise may be agreed by the Sponsored Member and Sponsoring Member.
(d)Each Sponsoring Member shall submit to the Corporation, within the timeframes
and in the formats required by the Corporation, the reports and information that all Netting
Members are required to submit regardless of type of Netting Member and the reports andinformation required to be submitted for its respective type of Netting Member, all pursuant to
Section 2 of Rule 3. Each Sponsoring Member shall submit the Legal Entity Identifier for each of
its Sponsored Member applicants as part of the application of such Sponsored Member applicant.

102Each Sponsoring Member shall provide the Corporation with a Legal Entity Identifier for each of
its Sponsored Members such that the Corporation shall have a current Legal Entity Identifier foreach Sponsored Member at all times. The Sponsoring Member shall indemnify the Corporation,and its employees, officers, directors, shareholders, agents, and Members (collectively, the “LEI
Indemnified Parties”), for any and all losses, liabilities, expenses and Legal Actions suffered or
incurred by the LEI Indemnified Parties arising from a Sponsoring Member’s failure to have thecurrent Legal Entity Identifiers of its Sponsored Members on file with the Corporation. “Legal
Action” means and includes any claim, counterclaim, demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation before any federal, state or foreign court or other tribunal, or
any investigative or regulatory agency or self-regulatory organization.
(e)Each Member shall maintain or upgrade their network technology, orcommunications technology or protocols on the systems that connect to the Corporation to theversion being required and within the time periods as provided by Important Notice posted to the
Corporation’s website.
(f)
A Sponsoring Member’s books and records, insofar as they relate to the SponsoredMember Trades submitted to the Corporation, shall be open to the inspection of the duly authorized
representatives of the Corporation to the same extent provided in Section 10 of Rule 3 for otherMembers.
(g)
A Sponsoring Member shall promptly inform the Corporation, in writing, if it is nolonger in compliance with the relevant standards and qualifications for applying to become aSponsoring Member set forth in this Rule 3A. Notification must take place immediately and in no
event later than 2 business days from the date on which the Sponsoring Member first learns of its
non-compliance. If the Sponsoring Member fails to maintain a standard, the Corporation will, if
necessary, undertake appropriate action to determine the status of the Sponsoring Member and its
continued eligibility as such. In addition, the Corporation may review the financial responsibility
and operational capability of the Sponsoring Member, and otherwise require from the Sponsoring
Member additional reports of its financial or operational condition at such intervals and in suchdetail as the Corporation shall determine. In addition, if the Corporation has reason to believe thata Sponsoring Member may fail to comply with any of the Rules applicable to Sponsoring
Members, it may require the Sponsoring Member to provide it, within such timeframe, and in suchdetail, and pursuant to such manner as the Corporation shall determine, with assurances in writingof a credible nature that the Sponsoring Member shall not, in fact, violate any of these Rules.
With respect to any of its Sponsored Members, a Sponsoring Member shall also submit to
the Corporation written notice (i) within 1 business day of becoming aware that a SponsoredMember is no longer in compliance with the requirements of subsection (a) of Section 3 of thisRule 3A, and (ii) at least 90 calendar days prior to the effective date of any Reportable Event
applicable to a Sponsored Member, unless the Sponsoring Member demonstrates that it could nothave reasonably done so, in which case such notice shall be provided as soon as possible.
The Corporation shall assess a fine pursuant to the applicable Fine Schedule in these Rules
against any Sponsoring Member who fails to notify the Corporation as required by this subsection(g) of Section 2 of this Rule 3A.

103

In the event that a Sponsoring Member fails to maintain the relevant requirements of theRules, the Sponsoring Member Agreement, or the Sponsoring Member Guaranty, the Corporation
shall have the right to cease to act for the Sponsoring Member in its capacity as a Sponsoring
Member pursuant to Section 14 of this Rule 3A, unless the Sponsoring Member requests that suchaction not be taken and the Corporation determines that, depending upon the specificcircumstances and the record of the Sponsoring Member, it is appropriate instead to establish forsuch Sponsoring Member a time period, which shall be determined by the Corporation and whichshall be no longer than 30 calendar days unless otherwise determined by the Corporation, during
which the Sponsoring Member must resume compliance with such requirements. In the event that
the Sponsoring Member is unable to satisfy such requirements within the time period specified by
the Corporation, the Corporation shall, pursuant to these Rules, cease to act for the Sponsoring
Member in its capacity as a Sponsoring Member pursuant to Section 14 of this Rule 3A.
(h)
If a Category 1 Sponsoring Member falls below one or more of the required
minimum financial standards for being a Sponsoring Member set forth in subsection (a) above, it
shall, for the period beginning on the day on which it fell below such level and continuing until
the later of the 90th calendar day after the date on which (i) it returned to compliance with suchstandard, or (ii) the Corporation received notice of the applicable violation, have a Sponsoring
Member Omnibus Account Required Fund Deposit equal to the greater of either: (x) the sum of
the normal calculation of its Sponsoring Member Omnibus Account Required Fund Deposit plus
$1,000,000, or (y) 125 percent of the normal calculation of its Sponsoring Member Omnibus
Account Required Fund Deposit. If, in the case of a Category 2 Sponsoring Member, the sum of
the VaR Charges of its Sponsoring Member Omnibus Account(s) and its Netting Member
Accounts exceeds its Netting Member Capital, the Category 2 Sponsoring Member shall not be
permitted to submit activity into its Sponsoring Member Omnibus Account(s), unless otherwise
determined by the Corporation in order to promote orderly settlement.
(i)
A Sponsoring Member may voluntarily elect to terminate its status as a Sponsoring
Member, with respect to all Sponsored Members or with respect to one or more SponsoredMembers from time to time, by providing the Corporation with a written notice of suchtermination (hereinafter, “Sponsoring Member Voluntary Termination Notice”). The Sponsoring
Member shall specify in the Sponsoring Member Voluntary Termination Notice a desired date forthe termination of the Sponsoring Member’s status as such with respect to the SponsoredMember(s) as to which the Sponsoring Member has terminated such status (hereinafter, the“Former Sponsored Members”), which date shall not be prior to the scheduled final settlement
date of any remaining obligation owed by the Sponsoring Member with respect to the Former
Sponsored Members to the Corporation as of the time such Sponsoring Member Voluntary
Termination Notice is submitted to the Corporation, unless otherwise approved by the Corporation.
No later than 10 Business Days after the receipt of the Sponsoring Member Voluntary Termination
Notice from such Sponsoring Member, the Corporation shall notify the Sponsoring Member thatsuch notice has been accepted and the date the termination shall be effective (hereinafter, the“Sponsoring Member Termination Date”).
If a Sponsoring Member has terminated its status as a Sponsoring Member with respect toall Sponsored Members, the Corporation shall post an Important Notice to all Members
announcing the termination of the Sponsoring Member’s status as a Sponsoring Member and theSponsoring Member Termination Date.
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As of the Sponsoring Member Termination Date, the Sponsoring Member shall no longer
be eligible to submit trades on behalf of its Former Sponsored Members and each of its Former
Sponsored Members shall cease to be a Sponsored Member unless it is the Sponsored Member ofanother Sponsoring Member. If any trade is submitted to the Corporation by the Sponsoring
Member on behalf of its Former Sponsored Members that is scheduled to settle on or after theSponsoring Member Termination Date, such Sponsoring Member’s Sponsoring Member
Voluntary Termination Notice will be deemed void, and the Sponsoring Member will remainsubject to this Rule as if it had not given such Sponsoring Member Voluntary Termination Notice.
A Sponsoring Member’s voluntary termination of its status as such, in whole or in part,shall not affect its obligations to the Corporation, or the rights of the Corporation, including under
the Sponsoring Member Guaranty, with respect to Sponsored Member Trades submitted to the
Corporation before the applicable Sponsoring Member Termination Date. Any SponsoredMember Trades which have been Novated by the Corporation shall continue to be processed by
the Corporation.
(j)
Any non-public information furnished to the Corporation pursuant to this Rule shallbe held in confidence as may be required under the laws, rules and regulations applicable to the
Corporation that relate to the confidentiality of records. Each Sponsoring Member shall maintain
DTCC Confidential Information in confidence to the same extent and using the same means it uses
to protect its own confidential information, but no less than a reasonable standard of care and shallnot use DTCC Confidential Information or disclose DTCC Confidential Information to any third
party except as necessary to perform such Sponsoring Member’s obligations under these Rules oras otherwise required by applicable law. Each Sponsoring Member acknowledges that a breachof its confidentiality obligations under these Rules may result in serious and irreparable harm to
the Corporation and/or DTCC for which there is no adequate remedy at law. In the event of sucha breach by the Sponsoring Member, the Corporation and/or DTCC shall be entitled to seek any
temporary or permanent injunctive or other equitable relief in addition to any monetary damages
hereunder.
Section 3 – Qualifications of Sponsored Members, Approval Process and Continuance Standard(a)
A Person shall be eligible to become a Sponsored Member if: (i) it is sponsored
into membership by a Sponsoring Member, and (ii) it (A) is a “qualified institutional buyer” asdefined by Rule 144A under the Securities Act of 1933, as amended, or (B) is a legal entity that,
although not organized as an entity specifically listed in paragraph (a)(1)(i)(H) of Rule 144A under
the Securities Act of 1933, as amended, satisfies the financial requirements necessary to be a“qualified institutional buyer” as specified in that paragraph. The Corporation shall have the rightto rely on the representation provided by the Sponsoring Member regarding satisfaction of (ii).
(b)
Each time that a Sponsoring Member wishes to sponsor a Person into membership,
it shall provide the Corporation with the Legal Entity Identifier of the Person and the representationreferred to in subsection (a)(ii) immediately above, as well as any additional information in suchform as may be prescribed by the Corporation. The Corporation shall approve or disapprove
Persons as Sponsored Members. If the Corporation denies the request of a Sponsoring Member to
add a Person as a Sponsored Member, such denial shall be handled in the same manner as set forthin Section 6 of Rule 2A with respect to membership applications except that the written statement105referred to therein shall be provided to both the Sponsoring Member and the Person seeking tobecome a Sponsored Member.
(c)
Each Person to become a Sponsored Member shall sign and deliver to the
Corporation a Sponsored Member Agreement whereby the Person shall agree to any terms andconditions deemed by the Corporation to be necessary in order to protect itself and its Members.
Each Person to become a Sponsored Member that shall be an FFI Member must be FATCA
Compliant and is subject to the requirements of Section 9(iii) of Rule 3.
(d)
The Corporation may, pursuant to Section 13 of this Rule 3A, cease to act for aSponsored Member that is no longer in compliance with the requirements of subsection (a) of thisSection 3.
(e)
A Sponsored Member may voluntarily elect to terminate its membership byproviding the Corporation with a written notice of such termination (hereinafter, the “SponsoredMember Voluntary Termination Notice”). The Sponsored Member shall specify in the SponsoredMember Voluntary Termination Notice a desired date for the termination, which date shall not beprior to the scheduled final settlement date of any remaining obligation owed by the SponsoredMember to the Corporation as of the time such Sponsored Member Voluntary Termination Notice
is submitted to the Corporation, unless otherwise approved by the Corporation. No later than 10
Business Days after the receipt of the Sponsored Member Voluntary Termination Notice fromsuch Sponsored Member, the Corporation shall notify the Sponsored Member and all Sponsoring
Members for that Sponsored Member that such notice has been accepted and the date thetermination shall be effective (hereinafter the “Sponsoring Member Termination Date”).
The Corporation’s shall post an Important Notice to all Members announcing thetermination of the Sponsored Member’s membership with the Corporation and the effective dateof such termination (hereinafter the “Sponsored Member Termination Date”). As of the SponsoredMember Termination Date, the relevant Sponsoring Member shall no longer be eligible to submit
trades on behalf of the Sponsored Member. If any trade is submitted to the Corporation by therelevant Sponsoring Member on behalf of the Sponsored Member that is scheduled to settle on orafter the Sponsored Member Termination Date, such Sponsored Member’s Sponsored Member
Voluntary Termination Notice will be deemed void, and the Sponsored Member will remainsubject to this Rule as if it had not given such Sponsored Member Voluntary Termination Notice.
A Sponsored Member’s voluntary termination shall not affect its obligations to the
Corporation, or the rights of the Corporation, including under the Sponsoring Member Guaranty,
with respect to Sponsored Member Trades submitted to the Corporation before the SponsoredMember Termination Date, and the Sponsoring Member Guaranty shall remain in effect to cover
all outstanding obligations of the Sponsored Member to the Corporation that are within the scopeof such Sponsoring Member Guaranty.

106Section 4 – Compliance with Laws
Each of the Sponsoring Members and Sponsored Members shall comply in all material
respects with all applicable laws, including applicable laws relating to securities, taxation andmoney laundering, as well as global sanctions laws, in connection with the use of the Corporation’s
services.
Section 5 – Sponsored Member Trades
Sponsored Member Trades (other than Sponsored GC Trades) may be any type oftransaction eligible for submission to the Corporation for netting with the exception of NettingEligible Auction Purchases, Brokered Transactions, and GCF Repo Transactions.
Rule 14 (Forward Trades) shall apply to Sponsored Member Trades (other than SponsoredGC Trades) that are Forward Trades in the same manner in which it applies to Netting Memberswith the exception that the Report on Forward Net Settlement Positions shall be issued to theSponsoring Member as processing agent for its Sponsored Members. The Corporation’s provisionof such Report to the Sponsoring Member shall constitute satisfaction of the Corporation’s
obligations to provide such Report to the affected Sponsored Members.
Rule 18 (Special Provisions for Repo Transactions) shall apply to Sponsored Member
Trades (other than Sponsored GC Trades) that are Repo Transactions in the same manner in which
it applies to Netting Members.
Section 6 – Trade Submission and the Comparison System(a)
The Corporation’s Schedule of Timeframes shall be applicable to SponsoredMember Trades, other than Sponsored GC Trades to which the Corporation’s Schedule ofSponsored GC Trade Timeframes shall be applicable.
(b)
The Corporation has established standards for designating those Members who
shall be required to participate in annual business continuity and disaster recovery testing that the
Corporation reasonably determines are, taken as a whole, the minimum necessary for the
maintenance of fair and orderly markets in the event that business continuity and disaster recovery
plans are required to be activated. The standards shall take into account factors such as: (1)activity-based thresholds; (2) significant operational issues of the Member during the twelve
months prior to the designation; and (3) past performance of the Member with respect tooperational testing. The specific standards adopted by the Corporation and any updates ormodifications thereto shall be published to Members and applied on a prospective basis.
Upon notification that the Member has been designated to participate in the annual business
continuity and disaster recovery testing, as described above, Members shall be required to fulfill,
within the timeframes established by the Corporation, certain testing requirements (the scope ofsuch testing to be determined by the Corporation in its sole discretion) and related reporting
requirements (such as reporting the test results to the Corporation in a manner specified by the
Corporation) that may be imposed by the Corporation.

107

The comparison of Sponsored Member Trades shall be governed by Rule 5 and either:(i) Rule 6A, (ii) Rule 6B or (iii) Sections 1, 2, 4, 6 through 10 and 13 of Rule 6C depending upon
the type of comparison for which the Sponsored Member Trades are submitted. The Sponsoring
Member shall act as processing agent for performing all functions and receiving Reports andinformation set forth in these trade submission and comparison Rules on behalf of its SponsoredMembers. The Corporation’s provision of such Reports and information to the Sponsoring
Member shall constitute satisfaction of the Corporation’s obligations to provide such Reports andinformation to the affected Sponsored Members.
(c)
The enhanced comparison processes regarding the presumed match of data set forthin Rule 10 shall apply to Sponsored Member Trades. A special enhanced comparison process shallbe applicable to Sponsored Member Trades that are submitted for Bilateral Comparison as follows:
If all other required fields are valid and match but the executing firm field on the side representing
the Netting Member Account of the Sponsoring Member has been omitted and the executing firm
field on the side representing the Sponsoring Member Omnibus Account is valid, then the
Corporation shall compare the Sponsored Member Trade based on the valid executing firm field.
Section 7 – The Netting System and Novation(a)
GC Trades:

The following provisions apply to Sponsored Member Trades other than Sponsored(i)
The Sponsored Member Trades of each Sponsored Member shall be
Novated and netted in the same manner as set forth in Section 8 of Rule 5 and Sections 1,
4 and 6 of Rule 11 for Netting Member trades as long as such Sponsored Member Trades
meet the requirements of Section 2 of Rule 11. Net Settlement Positions per CUSIP shallbe calculated for each Sponsored Member in the same manner set forth in Rule 11 for
Netting Members. The Sponsoring Member shall act as processing agent for performing
all functions and receiving Reports and information set forth in Rule 11 on behalf of its
Sponsored Members. The Corporation’s provision of such Reports and information to theSponsoring Member shall constitute satisfaction of the Corporation’s obligations toprovide such Reports and information to the affected Sponsored Members.
(ii)
Net Settlement Positions of Sponsored Members that are comprised inwhole or in part of Sponsored Member Trades that are Locked-In Trades shall be treatedby the Corporation in the same manner as all other Net Settlement Positions.
(iii) Fail Deliver Obligations and Fail Receive Obligations per CUSIP shall becalculated at the level of the Sponsoring Member Omnibus Account in the same way as
they are calculated for Netting Members pursuant to Rule 11. At the request of the
Corporation, the Sponsoring Member shall inform the Corporation as to the manner inwhich the Sponsoring Member allocates a Fail Deliver Obligation or Fail Receive
Obligation among its Sponsored Members. Fail charges shall be applied at the level of theSponsoring Member Omnibus Account in the same way as they are applied to Netting
Members pursuant to Rule 11.

108

(iv)
Sponsored Member Trades shall be Novated in the same manner in which
trades of Netting Members are Novated pursuant to Section 8 of Rule 5.
(b)

The following provisions apply only to Sponsored GC Trades:(i)
Only the End Leg of a Sponsored GC Trade may be Novated to the
Corporation. A Sponsored GC Trade may, but need not, have an Initial Haircut.
(ii)
The End Leg of each Sponsored GC Trade shall be Novated in the samemanner as set forth in Section 8 of Rule 5 as of the time that the following requirements
have been satisfied on a given Business Day;(A)

Trade data on the Sponsored GC Trade has been submitted to the
Corporation by the Sponsoring Member pursuant to Rule 6A by thedeadline set forth in the Corporation’s Schedule of Sponsored GC
Trade Timeframes;(B)

The data on the Sponsored GC Trade has been compared in the
Comparison System pursuant to the Rule 6A;(C)

The Start Leg of such Sponsored GC Trade has fully settled at aSponsored GC Clearing Agent Bank by the deadline set forth in the
Corporation’s Schedule of Sponsored GC Trade Timeframes;(D)

Such Sponsored GC Clearing Agent Bank has, pursuant tocommunications links, formats, timeframes, and deadlines
established by the Corporation for such purpose, provided to the
Corporation a report containing such data as the Corporation may
require from time to time, including information regarding theparticular GC Repo Securities that were delivered in settlement of
the Start Leg of the Sponsored GC Trade; and(E)

The Corporation determines that the data contained in such reportmatches the data on the Sponsored GC Trade submitted by therelevant Sponsoring Member pursuant to Rule 6A.

(iii) On each Business Day, the Corporation will provide each Sponsoring
Member with one or more Reports setting forth (A) each Sponsored GC Trade, the data on
which has been compared in the Comparison System and (B) each Sponsored GC Trade,the End Leg of which has been Novated to the Corporation.
(iv)
Each Sponsoring Member and Sponsored Member acknowledges andagrees that it has authorized each relevant Sponsored GC Clearing Agent Bank to provide
the Corporation with all information and data as the Corporation may require or requestfrom time to time in order to novate and process Sponsored GC Trades.

109Section 8 – Securities Settlement(a)
GC Trades:

The following provisions apply to Sponsored Member Trades other than Sponsored(i)
A Sponsored Member shall appoint its Sponsoring Member to act asprocessing agent with respect to the Sponsored Member’s satisfaction of its securities
settlement obligations and for performing all functions and receiving Reports andinformation set forth in the Sections of the Rules cited in Section 8(a)(iii) below. The
Corporation’s provision of such Reports and information to the Sponsoring Member shallconstitute satisfaction of the Corporation’s obligations to provide such Reports andinformation to the affected Sponsored Members.
(ii)
Netting at the Sponsored Member level shall occur as stated in Section 7(a)of this Rule 3A. The Corporation shall then, for operational purposes, calculate a single
Net Settlement Position in each CUSIP for the Sponsoring Member Omnibus Account andassociated Deliver Obligations and Receive Obligations.
(iii) Each Sponsored Member shall be responsible for satisfying its allocableportion (calculated for such Sponsored Member as stated in Section 7(a) of this Rule 3Aof the Deliver Obligations and Receive Obligations established for the Sponsoring Member
Omnibus Account, using its Sponsoring Member as a processing agent, in the same manner
set forth in Sections 9 through 12 of Rule 11 and Sections 1 through 5, 7, 9, 10, and 11 ofRule 12 for Netting Members. With respect to Section 1 of Rule 12, the optional Pair-Off
Service shall be available to Sponsored Member Trades within the meaning of section (a)of that definition. With respect to Section 5 of Rule 12, the Sponsoring Member shallinform the Corporation as to the manner in which a partial delivery, if any, was allocatedamong the Sponsored Members. Notwithstanding anything to the contrary in these Rules
or any Sponsoring Member Guaranty, a Sponsoring Member’s satisfaction of the net
Deliver Obligations and Receive Obligations to the Corporation with respect to theSponsoring Member Omnibus Account of such Sponsoring Member prior to suchSponsoring Member’s receipt of any Sponsored Member’s payment or delivery of its
allocable portion of such Deliver Obligations or Receive Obligations shall constituteperformance by the Sponsoring Member under its Sponsoring Member Guaranty withrespect to such Sponsored Member’s allocable portion of the Sponsoring Member Omnibus
Account Deliver Obligations and Receive Obligations, regardless of the manner or capacityin which the Sponsoring Member satisfies such net Deliver Obligations and Receive
Obligations.
(iv)
On each Business Day, each Deliver Obligation and Receive Obligation of
the Sponsoring Member Omnibus Account shall be settled at Settlement Value reported onsuch Business Day for such Obligations. The Corporation’s satisfaction of its securities
settlement obligations with the Sponsoring Member Omnibus Account shall constitutesatisfaction of the Corporation’s obligation to settle with an individual Sponsored Member
whose securities settlement obligations constitute an allocable portion of the Deliver
Obligation or Receive Obligation of the Sponsoring Member Omnibus Account.

110

(v)
Any financing costs incurred as described in Section 6 of Rule 12 due toSponsored Member activity shall be the responsibility of the applicable Sponsoring
Member. Section 8 of Rule 12 shall apply to Sponsoring Members and Sponsored Membersin the same manner in which it applies to Netting Members.
(vi)
The Corporation’s buy-in provisions set forth in Section 13 of Rule 11 shallapply, the same manner in which they apply to Netting Member positions, to the Receive
Obligations and Deliver Obligations established at the level of the Sponsoring Member
Omnibus Account pursuant to subsection (a)(ii) of this Section 8.
(vii) As security for any and all obligations and liabilities of a SponsoredMember to the Corporation under the Rules, including, without limitation, all of the
securities and funds-only settlement obligations of such Sponsored Member under theRules, each such Sponsored Member grants to the Corporation a first priority perfected
security interest in all assets and property placed by a Sponsored Member in the possessionof the Corporation (or its agents acting on its behalf), including all securities and cash on
deposit with the Corporation or its agents.
(b)

The following provisions apply only to Sponsored GC Trades:(i)
GC Collateral Return Obligations and cash payment obligations associatedwith GC Collateral Return Entitlements must be satisfied by a GC Funds Lender and GC
Funds Borrower, respectively, within the timeframes established for such by the
Corporation in the Schedule of Sponsored GC Trade Timeframes. In addition, any failure
by the GC Funds Borrower to satisfy its cash payment obligations associated with GC
Collateral Return Entitlements within the timeframe established for such by the
Corporation in the Schedule of Sponsored GC Trade Timeframes shall subject it to a late
fee as if such GC Funds Borrower were a Net Funds Payor within the meaning of Section
IX of the Fee Structure (Late Fee Related to GCF Repo Transactions).
(ii)
If on any Business Day, the market value of a GC Funds Borrower’s GC
Collateral Return Entitlement from the previous Business Day (or the current BusinessDay) is less than the GC Start Leg Market Value, then such GC Funds Borrower shalldeliver to the Corporation (and the Corporation shall deliver to the relevant GC Funds
Lender) additional GC Comparable Securities and/or cash, such that the market value of
the GC Funds Borrower’s GC Collateral Return Entitlement (and the market value of therelevant GC Funds Lender’s GC Collateral Return Obligation) is at least equal to the GC
Start Leg Market Value. Such additional securities and/or cash must be delivered by the
GC Funds Borrower within the timeframe set forth in the Schedule of Sponsored GC Trade
Timeframes.
(iii) If on any Business Day, the market value of a GC Funds Lender’s GC
Collateral Return Obligation from the previous Business Day (or the current Business Day)is greater than the GC Start Leg Market Value, then such GC Funds Lender shall deliverto the Corporation (and the Corporation shall deliver to the relevant GC Funds Borrower)some of the Purchased GC Repo Securities, such that the market value of the GC Funds
Lender’s GC Collateral Return Obligation (and the market value of the relevant GC Funds

111

Borrower’s Collateral Return Entitlement) is at least equal to the GC Start Leg Market
Value. Such Purchased GC Repo Securities must be delivered within the timeframe set
forth in the Schedule of Sponsored GC Trade Timeframes.
(iv)
Each GC Funds Borrower (or if the repo rate for the relevant Sponsored GC
Trade is negative, the GC Funds Lender) shall, within the timeframe set forth in the
Schedule of Sponsored GC Trade Timeframes, pay the daily accrued GC Daily Repo
Interest to the Corporation (and the Corporation shall pay such GC Daily Repo Interest to
the GC Funds Lender or GC Funds Borrower, as applicable).
(v)
A GC Funds Borrower may substitute cash and/or GC Comparable
Securities for any Purchased GC Repo Securities in accordance with the timeframe set
forth in the Schedule of Sponsored GC Trade Timeframes.
(vi)
The Corporation hereby directs each Sponsored Member and Sponsoring
Member to satisfy any payment or delivery obligation due to the Corporation, except for
any obligation to pay a Funds-Only Settlement Amount, by making the relevant payment
or delivery to an account at the relevant Sponsored GC Clearing Agent Bank specified by
the pre-Novation counterparty to the Sponsored Member or Sponsoring Member, as
applicable, in accordance with such procedures as the Sponsored GC Clearing Agent Bank
may specify from time to time. Each Sponsored Member and Sponsoring Member that is
owed any such payment or delivery from the Corporation acknowledges and agrees that, if
the pre-Novation counterparty to such Sponsored GC Trade makes the relevant payment
or delivery as described in the prior sentence, the Corporation’s obligation to make suchpayment or delivery shall be discharged and satisfied in full.
(vii) The market value of all GC Repo Securities shall be determined by therelevant Sponsored GC Clearing Agent Bank each Business Day.
(c)
Notwithstanding the foregoing and any other activities the Sponsoring Member
may perform in its capacity as agent for Sponsored Members, each Sponsored Member shall be
principally obligated to the Corporation with respect to all securities settlement obligations under
the Rules, and the Sponsoring Member shall not be a principal under the Rules with respect tosettlement obligations of its Sponsored Members.
(d)
The Corporation, when calculating Individual Total Amounts for a Sponsoring
Member, may net any offsetting settlement obligations across the Sponsoring Member’s
proprietary positions and the positions of its Sponsored Members in its Sponsoring Member
Omnibus Account(s).
Section 9 – Funds-Only Settlement(a)
The following provisions apply to Sponsored Member Trades other than SponsoredGC Trades: A Sponsored Member shall have the same Funds-Only Settlement Amount obligations
as a Netting Member pursuant to Rule 13. However, if the parties to a Sponsored Member Tradeagree for such Sponsored Member Trade to have an Initial Haircut, any Funds-Only Settlement
Amount that is applicable to such Sponsored Member Trade and that includes a Collateral Markshall, in lieu of such Collateral Mark, include any Haircut Deficit or Haircut Surplus. Any Haircut
112

Deficit shall be a negative amount for the Member with a Net Long Position, and a positive amountfor the Member with a Net Short Position. Any Haircut Surplus shall be a negative amount for theMember with a Net Short Position, and a positive amount for the Member with a Net Long
Position. The Corporation shall not be under any obligation to verify the parties’ agreement inrespect of an Initial Haircut, and its calculation of any Initial Haircut shall be conclusive andbinding on the parties. A Sponsored Member shall appoint its Sponsoring Member to act asprocessing agent for performing all functions and receiving Reports and information set forth inRule 13. The Corporation’s provision of such Reports and information to the Sponsoring Member
shall constitute satisfaction of the Corporation’s obligations to provide such Reports andinformation to the affected Sponsored Members. Notwithstanding the foregoing and any otheractivities the Sponsoring Member may perform in its capacity as agent for Sponsored Members,
each Sponsored Member shall be principally obligated to the Corporation with respect to all fundsonly settlement obligations under the Rules, and the Sponsoring Member shall not be a principal
under the Rules with respect to settlement obligations of its Sponsored Members.
(b)
The following provision shall apply only to Sponsored GC Trades: EachSponsoring Member and Sponsored Member shall be obligated to pay to the Corporation, and/or
shall be entitled to receive from the Corporation, the following amounts: Forward Mark
Adjustment Payment and Interest Adjustment Payment. Such amounts shall be payable andreceivable as though they were amounts described in Rule 13.
(c)

The following provisions shall apply to all Sponsored Member Trades:(i)
The Corporation shall, for operational purposes, calculate a single FundsOnly Settlement Amount obligation for the Sponsoring Member Omnibus Account.
Notwithstanding anything to the contrary in these Rules or any Sponsoring Member
Guaranty, a Sponsoring Member’s satisfaction of the net Funds-Only Settlement Amountobligation to the Corporation with respect to the Sponsoring Member Omnibus Account ofsuch Sponsoring Member prior to such Sponsoring Member’s receipt of any SponsoredMember’s payment of its allocable portion of such Funds-Only Settlement Amountobligation shall constitute performance by the Sponsoring Member under its Sponsoring
Member Guaranty with respect to such Sponsored Member’s allocable portion of theSponsoring Member Omnibus Account Funds-Only Settlement Amount obligation,
regardless of the manner or capacity in which the Sponsoring Member satisfies such net
Funds-Only Settlement Amount obligation.
(ii)
Each Sponsored Member shall be responsible for satisfying its allocableportion of the Funds-Only Settlement Amount calculated for the Sponsoring Member
Omnibus Account, using its Sponsoring Member as a processing agent, in the same manner
set forth in Rule 13 for Netting Members. The Corporation’s satisfaction of its funds-only
settlement obligations with the Sponsoring Member Omnibus Account shall constitutesatisfaction of the Corporation’s obligation to settle with an individual Sponsored Member
whose Funds-Only Settlement obligations constitute an allocable portion of the FundsOnly Settlement Amount of the Sponsoring Member Omnibus Account.
(iii) A Sponsoring Member shall be subject to a fine pursuant to the Fine
Schedule for Late Payment of Funds Settlement Debit in these Rules for any late payment113

of a Funds-Only Settlement Amount that is a debit obligation of any of its SponsoredMembers.
(iv)
Section 7 of Rule 13 shall apply to the Sponsored Member activity in thesame manner in which it applies to Netting Member activity, except that the Sponsoring
Member shall have all obligations arising thereunder even if caused by its SponsoredMembers.
Section 10 – Clearing Fund Obligations(a)Each Sponsoring Member shall make and maintain so long as such Member is aSponsoring Member a deposit to the Clearing Fund as a Required Fund Deposit to support theactivity in the Sponsoring Member Omnibus Account (the “Sponsoring Member Omnibus
Account Required Fund Deposit”). Deposits to the Clearing Fund shall be held by the Corporation
or its designated agents, to be applied as provided in the Rules.
(b)
For purposes of satisfying the Sponsoring Member’s Clearing Fund requirements
under the Rules for both its Netting Member activity and its Sponsoring Member activity, theSponsoring Member’s Netting Member Accounts and its Sponsoring Member Omnibus Accountshall be treated separately, as if they were accounts of separate entities. Notwithstanding theprevious sentence, however, the Corporation shall have the right to apply a Sponsoring Member’s
Clearing Fund deposits to any obligations of that Sponsoring Member as otherwise permitted
pursuant to Rule 4.
(c)
The amount of the Sponsoring Member Omnibus Account Required Fund Deposit
to be made and maintained by each Sponsoring Member on each Business Day shall be determined
as follows: A Required Fund Deposit calculation shall be performed for each Sponsored Member
whose activity is represented in the Sponsoring Member Omnibus Account pursuant to Rule 4,
subject to the provisions of this Section 10 of this Rule 3A. The Sponsoring Member Omnibus
Account Required Fund Deposit shall be equal to the greater of: (i) $1 million or (ii) the sum of
the following: (1) the sum of the VaR Charges for all of the Sponsored Members whose activity
is represented in the Sponsoring Member Omnibus Account as derived pursuant to Section 1b(a)(i)of Rule 4, and (2) all amounts derived pursuant to the provisions of Rule 4 other than pursuant to
Section 1b(a)(i) of Rule 4 computed at the level of the Sponsoring Member Omnibus Account.
For purposes of calculating the Unadjusted GSD Margin Portfolio Amount applicable to aSponsoring Member Omnibus Account, the Corporation shall apply the higher of the Required
Fund Deposit calculation as of the beginning of the current Business Day and intraday on thecurrent Business Day.
(d)
The lesser of $5,000,000 or 10 percent of the total amount arrived at in subsection(c) of this Section 10, with a minimum of $1 million must be made and maintained in cash, withthe remaining portion to be made and maintained in the form specified in, and subject to therequirements of, Section 3 of Rule 4, and subject to subsection (e) of Section 2 of Rule 4.
(e)
The Corporation shall have the right to increase the Sponsoring Member Omnibus
Account Required Fund Deposit in the same way and for the same reasons as set forth in subsection(d) of Section 2 of Rule 4.

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(f)
Sections 2a, 3, 3a, 3b, 4, 5, 8, 9, 10 and 11 of Rule 4 shall apply to the Sponsoring
Member Omnibus Account Required Fund Deposit with respect to obligations of a Sponsoring
Member under the Rules, including its obligations arising under the Sponsoring Member Omnibus
Account, and the obligations of a Sponsoring Member under its Sponsoring Member Guaranty to
the same extent as such Sections apply to any Required Fund Deposit and any other obligations of
a Member. For purposes of Section 4 of Rule 4, obligations and liabilities of a Netting Member
to the Corporation that shall be secured shall include, without limitation, a Netting Member’s
obligations as a Sponsoring Member under the Rules, including, without limitation, any obligationof any such Sponsoring Member to provide the Sponsoring Member Omnibus Account Required
Fund Deposit, such Sponsoring Member’s obligations arising under the Sponsoring Member
Omnibus Account of such Sponsoring Member and such Sponsoring Member’s obligations under
its Sponsoring Member Guaranty.
(g)
A Sponsoring Member shall be subject to a fine pursuant to the applicable Fine
Schedule in these Rules for any late satisfaction of a Clearing Fund deficiency call.
(h)Sponsoring Members, with respect to their Sponsoring Member Omnibus
Accounts, shall not be eligible to participate in any Cross-Margining Arrangements.
(i)
For purposes of the application of Rule 4 to a Sponsoring Member Omnibus
Account, each Sponsored GC Trade shall be treated as a GCF Repo Transaction, each GC Funds
Lender and GC Funds Borrower shall be treated as a GCF Counterparty, and each Sponsored GC
Clearing Agent Bank shall be treated as a GCF Clearing Agent Bank.
Section 11 – Right of Offset
In the ordinary course, with respect to satisfaction of any Sponsored Member’s obligations
under the Rules, the Sponsoring Member’s Netting Member Accounts and its Sponsoring Member
Omnibus Account shall be treated separately, as if they were Accounts of separate entities.
Notwithstanding the previous sentence, however, the Corporation may, in its sole discretion, at
any time any obligation of the Sponsoring Member arises under the Sponsoring Member Guaranty
to pay or perform thereunder with respect to any Sponsored Member, exercise a right of offset andnet any such obligation of the Sponsoring Member under its Sponsoring Member Guaranty against
any obligations of the Corporation to the Sponsoring Member in respect of such Sponsoring
Member’s Netting Member Accounts.
Section 12 – Loss Allocation Obligations(a)Sponsored Members shall not be obligated for allocations, pursuant to Rule 4, ofloss or liability incurred by the Corporation. To the extent that a loss or liability is determined by
the Corporation to arise in connection with Sponsored Member Trades (i.e., in connection with theinsolvency or default of a Sponsoring Member), the Sponsored Members shall not be responsible
for or considered in the loss allocation calculation, but rather such loss shall be allocated to Tier
One Netting Members in accordance with the principles set forth in Section 7 of Rule 4. Except
as expressly set forth in this Section 12, if a loss or liability of the Corporation is determined toarise in connection with the close-out or liquidation of a Sponsored Member Trade of a SponsoredMember that is an Off-the-Market Transaction because the Sponsored Member has provided an

115

Initial Haircut, the Corporation shall allocate such loss or liability attributable to the Initial Haircut
to such Sponsored Member in accordance with the provisions of Section 7 of Rule 4.
(b)
To the extent the Corporation incurs a loss or liability from a Defaulting Member
Event or a Declared Non-Default Loss Event and a loss allocation obligation arises that would be
the responsibility of the Sponsoring Member Omnibus Account if the Sponsoring Member
Omnibus Account were a Netting Member, the Corporation shall calculate such loss allocation
obligation as if the affected Sponsored Members were subject to such allocations pursuant to
Section 7 of Rule 4, but the Sponsoring Member shall be responsible for satisfying suchobligations.
(c)With respect to an obligation to make payment due to any loss allocation amounts
assessed to a Sponsoring Member pursuant to subsection (b) above, the Sponsoring Member may
instead elect to terminate its membership in the Corporation pursuant to Section 7b of Rule 4 andthereby benefit from its Loss Allocation Cap pursuant to Section 7 of Rule 4; however, for the
purpose of determining the Loss Allocation Cap for such Sponsoring Member, its Required Fund
Deposit shall be the sum of its Required Fund Deposit and its Sponsoring Member’s Omnibus
Account Required Fund Deposit.
Section 13 – Restrictions on Access to Services by a Sponsored Member(a)Based upon the judgment of the Corporation that adequate cause exists to do so,
the Corporation may at any time upon providing notice to the Sponsored Member and its
Sponsoring Member, suspend a Sponsored Member from any service provided by the Corporation
either with respect to a particular transaction or transactions or with respect to transactions
generally, or prohibit or limit such Sponsored Member with respect to access to services offeredby the Corporation in the event that one or more of the factors set forth in Section 1(a) through (g)of Rule 21, with the Corporation making the determinations set forth therein, is present withrespect to the Sponsored Member, and the Corporation, in its sole discretion, has reasonablegrounds to believe that such action is appropriate either for the protection of the Corporation orother Members or to facilitate the orderly and continuous performance of the Corporation’s
services.
(b)Sections 1 through 6 of Rule 21 shall apply with respect to a Sponsored Member inthe same way as they apply to Netting Members, including the Corporation’s right to summarilysuspend a Sponsored Member and to cease to act for such Sponsored Member pursuant to Section
22A, except that the Corporation shall make the determination referred to in Section 3 of Rule 21.
(c)
If the Corporation determines to cease to act for the Sponsored Member, theprovisions of Rule 22A shall apply in the same way as they would apply to a Netting Member.
Section 14 – Restrictions on Access to Services by a Sponsoring Member(a)Based upon the judgment of the Corporation that adequate cause exists to do so,
the Corporation may at any time upon providing notice to the Sponsoring Member, suspend a
Sponsoring Member in its capacity as a Sponsoring Member from any service provided by the
Corporation either with respect to a particular transaction or transactions or with respect totransactions generally or prohibit or limit such Sponsoring Member with respect to access to116

services offered by the Corporation in the event that if one or more of the factors set forth in
Section 1(a) through (g) of Rule 21, with the Corporation making the determinations set forth
therein, is present with respect to the Sponsoring Member, and the Corporation, in its sole
discretion, has reasonable grounds to believe that such action is appropriate either for theprotection of the Corporation or other Members or to facilitate the orderly and continuous
performance of the Corporation’s services.
(b)
Sections 1 through 6 of Rule 21 shall apply with respect to a Sponsoring Memberin the same way as they apply to Netting Members, including the Corporation’s right to summarilysuspend the Sponsoring Member and to cease to act for such Sponsoring Member, except that the
Corporation shall make the determination referred to in Section 3 of Rule 21.
(c)
If the Corporation ceases to act for a Sponsoring Member in its capacity as aSponsoring Member, Rule 22A shall apply and the Corporation shall decline to accept or processdata from the Sponsoring Member on Sponsored Member Trades and the Corporation shall ceaseto act for all of the Sponsored Members of the affected Sponsoring Member. If the Corporationsuspends the Sponsoring Member or ceases to act for the Sponsoring Member, the Corporation
shall decline to accept or process data from the Sponsoring Member on Sponsored Member Trades
and shall suspend the Sponsored Members of the affected Sponsoring Member for so long as andto the extent that the Corporation is ceasing to act for the Sponsoring Member. Any SponsoredMember Trades which have been Novated by the Corporation shall continue to be processed by
the Corporation. The Corporation, in its sole discretion, shall determine whether to close-out theaffected Sponsored Member Trades and/or permit the Sponsored Members to complete theirsettlement.
Section 15 – Insolvency of a Sponsored Member(a)
A Sponsored Member and its Sponsoring Member (to the extent it has knowledge
thereof) shall be obligated to inform the Corporation that the Sponsored Member is insolvent orthat the Sponsored Member will be unable to perform any of its material contracts, obligations oragreements in the same manner as required by Section 1 of Rule 22 for other Members. For
purposes of this section, a Sponsoring Member shall be deemed to have knowledge that aSponsored Member is insolvent or will be unable to perform on any of its material contracts,
obligations or agreements if one or more duly authorized representatives of the Sponsoring
Member, in its capacity as such, has knowledge of such matters. A Sponsored Member shall betreated by the Corporation in all respects as insolvent under the same circumstances set forth in
Section 2 of Rule 22 for other Members. Section 3 of Rule 22 shall apply, in the same manner inwhich such Section applies to other Members, in the case where the Corporation treats a SponsoredMember as insolvent.
(b)
In the event that the Corporation determines to treat a Sponsored Member as
insolvent, the Corporation shall cease to act for the insolvent Sponsored Member and Rule 22A
shall apply with respect to the close-out of the insolvent’s Sponsored Member Trades.

117Section 16 – Insolvency of a Sponsoring Member(a)
A Sponsoring Member shall be obligated to inform the Corporation that it isinsolvent or that it will be unable to perform any of its material contracts, obligations or agreementsin the same manner as required by Section 1 of Rule 22 for other Members. A Sponsoring Member
shall be treated by the Corporation in all respects as insolvent under the same circumstances set
forth in Section 2 of Rule 22 for other Members. Section 3 of Rule 22 shall apply, in the samemanner in which such Section applies to other Members, in the case where the Corporation treatsa Sponsoring Member as insolvent.
(b)
In the event that the Corporation determines to treat a Sponsoring Member as
insolvent, the Corporation shall cease to act for the insolvent Sponsoring Member and decline toaccept or process data from the Sponsoring Member, including Sponsored Member Trades, andthe Corporation shall terminate the membership of all of the insolvent’s Sponsored Members
unless they are the Sponsored Members of another Sponsoring Member. Any Sponsored Member
Trades which have been Novated by the Corporation shall continue to be processed by the
Corporation. The Corporation, in its sole discretion, shall determine whether to close-out theaffected Sponsored Member Trades and/or permit the Sponsored Members to complete theirsettlement.
Section 17 – Other Applicable Rules, Schedules, Interpretations and Statements
For purposes of the Rules, Schedules, Interpretations and Statements of Policy referenced
in this section, Sponsoring Members and/or Sponsored Members, in their respective capacities assuch, shall be “Members.”(a)Rule 22B (Corporation Default) shall apply to Sponsored Members.

For the avoidance of doubt, the Corporation shall be responsible for satisfying any
undisputed payment or delivery obligation required to be made by it to a Sponsored Member underthese Rules, including, but not limited to, any undisputed interest payment obligation that accrues
in favor of a Sponsored Member on a Sponsored Member Trade that has been subject to Novation
pursuant to these Rules but has not yet settled and for which the Corporation has received noticefrom such Sponsored Member of the Corporation’s failure to make, when due, such undisputed
interest payment to such Sponsored Member within the meaning of Section (b)(i) of Rule 22B.
(b)
Rule 22D (Wind-down of the Corporation), Rule 27 (Admission to Premises of the
Corporation, Powers of Attorney, Etc.), Rule 28 (Forms), Rule 29 (Release of Clearing Data), Rule
30 (Lists to be Maintained), Rule 31 (Distribution Facilities), 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 (Limitations of Liability),
Section 3 of Rule 40 (General Provisions), Rule 41 (Cross-Guaranty Agreements), Rule 42(Suspension of Rules), Rule 44 (Action by the Corporation), Rule 45 (Notices), Rule 46(Interpretation of Terms), Rule 47 (Interpretation of Rules), Rule 48 (Disciplinary Proceedings),
Rule 50 (Market Disruption and Force Majeure) and Rule 50A (Systems Disconnect: Threat of
Significant Impact to the Corporation’s Systems) shall apply to, or with respect to, SponsoredMembers and Sponsoring Members.

118

(c)
All Schedules that are cited in, or pertain to, the Rules cited in this Rule 3A asapplying to Sponsoring Members and/or Sponsored Members shall apply to Sponsored Members
and Sponsoring Members.
(d)
Any Statements of Policy or Interpretations contained in these Rules shall apply toSponsoring Members and Sponsored Members unless expressly stated otherwise.
Section 18 – Liquidation of Sponsored Member and Related Sponsoring Member Positions(a)
The provisions of this Section 18, which shall supersede any conflicting provisionsof this Rule 3A and Rule 22A, shall only apply (i) with respect to the liquidation of positions
resulting from Sponsored Member Trades within the meaning of subsections (a)(i) and (b) of theSponsored Member Trade definition, (ii) in the event a Sponsoring Member is not a Defaulting
Member and the Corporation has not ceased to act for the Sponsoring Member and (iii) if a
Corporation Default has not occurred. In addition, the Corporation may only cause the termination
described in subsection (b) below if it has ceased to act for the Sponsored Member at issue and theSponsoring Member has not performed the obligations of the Sponsored Member in respect of all
positions guaranteed by such Sponsoring Member.
(b)
Subject to the provisions of subsection (a) of this Section 18, on any Business Day,
the Sponsoring Member or the Corporation may by written notice to the other cause the immediate
termination of all, but not fewer than all, of the long and short Net Settlement Positions andForward Net Settlement Positions of the Sponsored Member established in the Sponsoring
Member’s Sponsoring Member Omnibus Account. Any such notice shall also cause the immediate
termination of all of the corresponding, offsetting long and short Net Settlement Positions andForward Net Settlement Positions of the Sponsoring Member established in the Sponsoring
Member’s Netting Member Account(s). Each such termination shall be effected by the Sponsoring
Member’s establishment of a final Net Settlement Position for each Eligible Netting Security witha distinct CUSIP number that shall equal the net of all outstanding deliver obligations and receive
obligations of the parties thereto in each such Eligible Netting Security including those that arise
from Forward Net Settlement Positions (hereinafter, the “Final Net Settlement Position”).
(c)
To liquidate the Final Net Settlement Positions of any Sponsored Member and thecorresponding, offsetting Final Net Settlement Positions of the Sponsoring Member establishedpursuant to subsection (b) of this Section 18, a Sponsoring Member shall calculate a liquidation
amount, which may be equal to zero and shall be deemed a Funds-Only Settlement Amount. The
liquidation amount in respect of the Final Net Settlement Positions of a Sponsored Member (the“Sponsored Member Liquidation Amount”) shall be due to or from the Corporation from or to theSponsored Member. The liquidation amount in respect of the corresponding, offsetting Final Net
Settlement Positions of the Sponsoring Member (the “Sponsoring Member Liquidation Amount”)
shall be due to or from the Corporation from or to the Sponsoring Member. If the SponsoredMember Liquidation Amount in respect of the Final Net Settlement Positions of a SponsoredMember is due to the Corporation, the Sponsoring Member Liquidation Amount in respect of thecorresponding Final Net Settlement Positions of the Sponsoring Member shall be due to theSponsoring Member. If the Sponsored Member Liquidation Amount in respect of the Final Net
Settlement Positions of a Sponsored Member is due to the Sponsored Member, the Sponsoring

119Member Liquidation Amount in respect of the Final Net Settlement Positions of the Sponsoring
Member shall be due to the Corporation.
Any Sponsoring Member Liquidation Amount calculated by a Sponsoring Member
pursuant to this subsection (c) may be based on prices obtained from a generally recognized sourceor the most recent closing bid or offer quotation from such a source and may include the losses(including costs such as fees, expenses and commissions) and/or gains realized by the Sponsoring
Member in entering into replacement transactions and/or entering into or terminating hedgetransactions in connection with or as a result of, and any other loss, damage, cost or expense
directly arising or resulting from, the liquidation of the Sponsoring Member’s Final Net Settlement
Positions. The Sponsored Member Liquidation Amount in respect of Final Net Settlement
Positions of a Sponsored Member shall equal the Sponsoring Member Liquidation Amount inrespect of the corresponding Final Net Settlement Positions of the Sponsoring Member. The
Sponsoring Member’s calculation of any Sponsored Member Liquidation Amount or Sponsoring
Member Liquidation Amount shall be conclusive and binding on all relevant parties, absent
manifest error and subject to any right of the Corporation to indemnification under the Rules.
If a Sponsored Member Liquidation Amount is due to the Corporation from the SponsoredMember, the Sponsoring Member shall be obligated to pay such Sponsored Member Liquidation
Amount under its Sponsoring Member Guaranty, which obligation shall, notwithstanding anything
to the contrary in the Sponsoring Member Guaranty, be payable without demand and(automatically and without further action by any Person) be set off against the obligation of the
Corporation to pay the corresponding Sponsoring Member Liquidation Amount to the Sponsoring
Member.
If a Sponsored Member Liquidation Amount is due to the Sponsored Member from the
Corporation, the Corporation’s sole obligation in respect of any such Sponsored Member
Liquidation Amount shall be to transfer such amount to the applicable account of the Sponsoring
Member at the Funds-Only Settling Bank Member acting on behalf of a Sponsoring Member (the“Funds-Only Omnibus Account”). The Corporation hereby instructs the Sponsoring Member todischarge its obligation to pay the Corporation any Sponsoring Member Liquidation Amount bytransferring such amount to the Sponsoring Member’s Funds-Only Omnibus Account for
application to the Corporation’s obligation to pay the corresponding Sponsored Member
Liquidation Amount to the Sponsored Member. To the extent that the Sponsoring Member
transfers such funds to the Fund-Only Omnibus Account as provided in this paragraph, (i) the
obligations of the Corporation in respect of the Sponsored Member Liquidation Amount shall bedischarged and (ii) the obligations of the Sponsoring Member in respect of the corresponding
Sponsoring Member Liquidation Amount shall be discharged. The Sponsored Member agrees to
accept the transfer of such funds to the Funds-Only Omnibus Account in full satisfaction of theobligation of the Corporation to pay the Sponsored Member Liquidation Amount to the SponsoredMember.
(d)
The Sponsoring Member shall indemnify the Corporation, and its employees,
officers, directors, shareholders, agents, and Members (collectively, the “SMP Indemnified
Parties”), for any and all losses, liability, or expenses of an SMP Indemnified Party arising fromany claim by an affected Sponsored Member disputing the Sponsoring Member’s calculation of120

any Sponsored Member Liquidation Amount or Sponsoring Member Liquidation Amountpursuant to this Section 18.
(e)
The Corporation hereby acknowledges that a Sponsoring Member may take asecurity interest in the deliver, receive, and related payment obligations owed by the Corporation
to a Sponsored Member in respect of its transactions that have been Novated to the Corporation
by such Sponsoring Member and established in its Sponsoring Member Omnibus Account,
including, but not limited to, such Sponsored Member’s rights to receive payment of any
Sponsored Member Liquidation Amount pursuant to this Section 18 (the “Sponsored Member
Rights”), and agrees that, if the provisions of this Section 18 apply, the Corporation’s security
interest in all assets and property placed by a Sponsored Member in the possession of the
Corporation (or its agents acting on its behalf), including all securities and cash on deposit with
the Corporation or its agents, granted in Section 8(g) of this Rule 3A, shall be subordinated to thesecurity interest of the Sponsoring Member in the Sponsored Member Rights.

121

RULE 3B – CENTRALLY CLEAREDINSTITUTIONAL TRIPARTY SERVICE
Section 1 – General
The rights, liabilities and obligations of CCIT Members shall be governed by this Rule 3B.
References to a “Member” in other Rules shall not apply to CCIT Members, unless specifically
noted as such in this Rule 3B or in such other Rules.
In order for a Netting Member to participate in the CCIT Service as a trading counterparty
to CCIT Members in CCIT Transactions, the Netting Member must be a participant in the GCF
Repo Service. In addition to the Rules governing Netting Members, Netting Members who submit
CCIT Transactions shall be subject to the provisions of this Rule 3B and to such other Rules
applicable to CCIT Transactions.
Section 2 – Eligibility, Qualifications and Standards for Membership: CCIT Member(a)
The Corporation may approve an application to become a CCIT Member upon adetermination that the applicant meets the following requirements:(i)
Financial Responsibility – The applicant has sufficient financial ability tomeet all of its obligations to the Corporation in a timely manner.
(ii)
Minimum Financial Requirements – The applicant has minimum Net Assets
of $100 million. The Corporation, based upon the level of the anticipated positions andobligations of the applicant, the anticipated risk associated with the volume and types oftransactions the applicant proposes to process through the Corporation and the overall
financial condition of the applicant, may impose greater standards.
(iii) Operational Capability – The applicant or its Joint Account Submitter, as
applicable, must be able to satisfactorily communicate with the Corporation, fulfill
anticipated commitments to and meet the operational requirements of the Corporation withnecessary promptness and accuracy, and conform to any operational condition andrequirement that the Corporation reasonably deems necessary for its protection or that ofits Members (including CCIT Members).
(iv)
Fees – The applicant agrees to make, and has sufficient financial ability tomake, all anticipated fee payments required to be made to the Corporation that may be set
forth in these Rules.
(v)
Disqualification Criteria – The Corporation must have received no
substantial information that would reasonably and adversely reflect on the applicant, or its
Controlling Management, if applicable, to such an extent that the applicant should bedenied membership in the Corporation. The Corporation, in its sole discretion, shalldetermine whether any of the following criteria should be the basis for denial of themembership application:

122

(A)

the applicant is subject to Statutory Disqualification (as defined in
Section 3(a)(39) of the Exchange Act), or an order of similar effectissued by a Federal or State banking authority, or other examining
authority or regulator, including a non-U.S. examining authority or
regulator;(B)the applicant or its Controlling Management has been responsiblefor (I) making a misstatement of a material fact or omitting to statea material fact to the Corporation, in connection with its application
to become a Member or thereafter or (II) fraudulent acts or violationof the Securities Act of 1933, the Exchange Act, the Investment
Company Act, the Investment Advisers Act or the Government
Securities Act of 1986, or any rule or regulation promulgatedthereunder;(C)the applicant or its Controlling Management has been convictedwithin the ten years preceding the filing of the application or at any
time thereafter of (I) any criminal offense involving the purchase,sale or delivery of any security, bribery, perjury, burglary orconspiracy to commit any offense referred to in this subparagraph,(II) the larceny, theft, robbery, embezzlement, extortion, fraudulent
conversion, fraudulent concealment, forgery or misappropriation offunds, securities or other property, (III) any violation ofSections 1341, 1342 or 1343 of Title 18, United States Code or (IV)any other criminal offense involving breach of fiduciary obligation,or arising out of the conduct of business as a broker, dealer,investment company, adviser or underwriter, bank, trust company,
fiduciary, insurance company or other financial institution;(D)the applicant or its Controlling Management has been permanently
or temporarily enjoined or prohibited by order, judgment or decreeof any court or other governmental authority of competentjurisdiction from acting as a broker, dealer, investment company,
adviser or underwriter, bank, trust company, fiduciary, insurancecompany or other financial institution, or from engaging in orcontinuing any conduct or practice in connection with any suchactivity, or in connection with the purchase, sale or delivery of any
security, and the enforcement of such injunction or prohibition has
not been stayed; or(E)

the applicant has been expelled or suspended from or had its
participation terminated by a national securities association or
exchange registered under the Exchange Act, a Self-Regulatory
Organization or an entity that engages in clearance and settlement
activities or a securities depository, or has been barred or suspended
from being associated with any member of such an exchange,
association, organization, entity or securities depository.
123

(vi)
Enforceability Opinion – The applicant provides the Corporation with an
opinion of counsel acceptable to the Corporation in its sole discretion that the Corporation’s
Rules will be enforceable against such applicant if it becomes a CCIT Member.
(vii) Insolvency Opinion – The Corporation has (or is able to obtain from theapplicant or otherwise) an opinion of counsel acceptable to the Corporation in its sole
discretion that, in the event the Corporation ceases to act for the applicant after suchapplicant becomes a CCIT Member, the Corporation will be able to exercise the remedies
described in these Rules, including those specified in Section 11(e) of this Rule 3B. The
Corporation may determine in its discretion that the opinion described in this Section
2(a)(vii) is not required in respect of an applicant.
(b)
Two or more CCIT Members may be represented by a Joint Account Submitter thathas been approved by the Corporation subject to such CCIT Member signing and delivering a Joint
Account Submitter Agreement to the Corporation in such form as may be prescribed by the
Corporation. If the Corporation terminates the Joint Account Submitter Agreement, the Joint
Account Submitter will no longer be permitted to represent the CCIT Members in the Joint
Account. Each such CCIT Member will be required to assume the duties of the Joint Account
Submitter or appoint a new Joint Account Submitter subject to the requirements of these Rules.
(c)
In addition to the criteria set forth in subsection (a) above, the Corporation shallretain the right to deny membership to an applicant if the Corporation becomes aware of any factor
or circumstance about the applicant or its Controlling Management which may impact thesuitability of that particular applicant as a Member of the Corporation. Further, applicants are
required to inform the Corporation as to any member of their Controlling Management that is or
becomes subject to Statutory Disqualification (as defined in Section 3(a)(39) of the Exchange Act).
Section 3 – Membership Application Process to Become a CCIT Member(a)Each applicant to become a CCIT Member shall, as required by the Corporationfrom time to time, complete and deliver to the Corporation an Applicant Questionnaire in suchform as may be prescribed by the Corporation and shall also deliver to the Corporation the financial
reports, other reports, opinions and other information as the Corporation determines appropriate.
(b)
Each applicant to become a CCIT Member or its Joint Account Submitter, as
applicable, must also fulfill, within the timeframes established by the Corporation, any operational
testing requirements (the scope of such testing to be determined by the Corporation in its sole
discretion) and related reporting requirements (such as reporting the test results to the Corporation
in a manner specified by the Corporation) that may be imposed by the Corporation to ensure theoperational capability of the applicant.
(c)Each applicant shall complete and deliver to the Corporation:(i)a FATCA Certification as part of its membership application. Without
limiting the generality of the foregoing, if an applicant is a FFI Member, the Corporation
shall require such applicant to certify and periodically to recertify to the Corporation that
it is FATCA Compliant under such procedures as are set forth under FATCA, unless suchrequirements have been explicitly waived in writing by the Corporation; provided,124however, that no such waiver will be issued if it shall cause the Corporation to be obligatedto withhold under FATCA on gross proceeds from the sale or other disposition of any
property. In addition, as part of its membership application, such applicant agrees toindemnify each Indemnified Person for any loss, liability or expense sustained by theIndemnified Person as a result of such applicant failing to be FATCA Compliant;(ii)
Each CCIT Member applicant must have the successful completion of
network and connectivity testing at the current FICC standards (the scope of such testing
to be determined by the Corporation in its sole discretion); and(iii)

a Cybersecurity Confirmation.

(d)Each applicant to become a CCIT Member shall obtain and provide to the
Corporation a Legal Entity Identifier.
(e)
Any non-public information furnished to the Corporation pursuant to this Rule shallbe held in confidence as may be required under the laws, rules and regulations applicable to the
Corporation that relate to the confidentiality of records. Each applicant and Member shall maintain
DTCC Confidential Information in confidence to the same extent and using the same means it uses
to protect its own confidential information, but no less than a reasonable standard of care and shallnot use DTCC Confidential Information or disclose DTCC Confidential Information to any third
party except as necessary to perform such applicant’s or Member’s obligations under these Rules
or as otherwise required by applicable law. Each applicant and Member acknowledges that abreach of its confidentiality obligations under these Rules may result in serious and irreparable
harm to the Corporation and/or DTCC for which there is no adequate remedy at law. In the eventof such a breach by the applicant or Member, the Corporation and/or DTCC shall be entitled toseek any temporary or permanent injunctive or other equitable relief in addition to any monetarydamages hereunder.
(f)

In evaluating a membership application, the Corporation may:(i)
if applicable, contact the applicant’s primary regulatory authority, otherexamining authority or regulator or any self-regulatory organization of which the applicant
is a member and request from such authority or organization any records, reports, or otherinformation that, in their judgment, may be relevant to the application;(ii)
examine the books, records and operational procedures of, and inspect thepremises of, the applicant or its Controlling Management as they may be related to thebusiness to be conducted through the Corporation; and(iii) take such other evidence or make such other inquiries as is necessary,
including sworn or unsworn testimony, to ascertain relevant facts bearing upon theapplicant’s qualifications.
The Corporation shall approve an application to become a CCIT Member only upon adetermination that the applicant meets the standards set forth in this Rule. In addition, with regard
to any applicant that is an FFI Member, such applicant must be FATCA Compliant.

125Notwithstanding that an application to become a CCIT Member shall have been approvedby the Corporation, if a material change in the condition of the applicant or its ControllingManagement occurs, which in the judgment of the Corporation could bring into question theapplicant’s ability to perform as a CCIT Member, and such material change becomes known to the
Corporation prior to the applicant’s commencing use of the Corporation’s services, theCorporation shall have the right to stay commencement by the applicant of use of the Corporation’s
services until a reconsideration by the Corporation of the applicant’s financial responsibility andoperational capability can be completed. As a result of such reconsideration, the Corporation may
determine to withdraw approval of an application to become a CCIT Member or condition theapproval upon the furnishing of additional information or assurances.
The Corporation may deny an application to become a CCIT Member upon the
Corporation’s determination that the Corporation does not have adequate personnel, space, dataprocessing capacity or other operational capability at that time to perform its services for theapplicant without impairing the ability of the Corporation to provide services for its existing
Members (including CCIT Members), to assure the prompt, accurate and orderly processing andsettlement of securities transactions or to otherwise carry out its functions; provided, however, thatany such applications which are denied pursuant to this paragraph shall be approved as promptly
as the capabilities of the Corporation permit.
Upon the Corporation’s denial of an application to become a CCIT Member pursuant tothis Rule, the Corporation shall furnish the applicant with a concise written statement setting forth
the specific grounds under consideration upon which any such denial may be based and shall notify
the applicant of its right to request a hearing before the Board, such request to be filed by theapplicant with the Corporation pursuant to Rule 37 (Hearing Procedures).
Section 4 – Membership Agreement
Each CCIT Member agrees:(a)to abide by these Rules and to be bound by all the provisions thereof;(b)
to pay to the Corporation in a timely manner the compensation provided for bythese Rules for services rendered and such costs and fines as may be imposed in accordance withthese Rules for the failure to comply therewith;(c)
to be bound by any amendment to these Rules with respect to any transaction
occurring subsequent to the time such amendment takes effect as fully as though such amendment
were now a part of these Rules;(d)to continue to be bound by these Rules, notwithstanding that it may have terminatedits membership, as to all matters and transactions occurring while it was a CCIT Member;(e)
to fulfill its settlement obligations to the Corporation in accordance with theseRules and pay or deliver to the Corporation in a timely manner all amounts due and any loss or
liability allocated to it pursuant to these Rules;

126

(f)
that the determination of the Board as to any questions arising with regard to any
payment, charge, fee, deposit, or fine to which it may be subject shall be final and conclusive,
except as may be otherwise provided in these Rules;(g)
if the CCIT Member is represented at any time by a Joint Account Submitter and isparticipating through a Joint Account, (i) to cause the Joint Account Submitter to fulfill all
obligations of a Joint Account Submitter under these Rules, (ii) that the failure of the Joint Account
Submitter to fulfill the requirements of the CCIT Member and/or the Joint Account under theseRules shall not excuse such CCIT Member’s obligations to the Corporation pursuant to the Rulesand (iii) that the Joint Account may be liable for the failure of the Joint Account Submitter to fulfill
the obligations of a Joint Account Submitter under these Rules;(h)if the CCIT Member is represented at any time by a Joint Account Submitter and isparticipating through a Joint Account, (i) to specify its Joint Account Submitter in advance of such
Joint Account Submitter submitting its first trade on behalf of the CCIT Member, (ii) to provide
the Corporation with advance notice in writing of a change in its Joint Account Submitter and (iii)
to not revoke the authority of its Joint Account Submitter without providing the Corporation withadvance written notice; and(i)to any other terms and conditions deemed by the Corporation to be necessary inorder to protect itself and its Members (including CCIT Members), including all agreements,
opinions of counsel and other legal documentation required by the Corporation.
Each CCIT Member that plans to participate through a Joint Account must enter into a
Joint Account Submitter Agreement with the Corporation.
Each CCIT Member that is represented by a Joint Account Submitter shall only be entitledto and liable for rights and obligations arising under or in connection with CCIT Transactions
allocated to such CCIT Member. To the extent a Joint Account or Joint Account Submitter incurs
obligations to the Corporation that are unallocated, each CCIT Member represented by such Joint
Account Submitter shall only be liable for its pro rata share of such obligations.
The Corporation may terminate a Joint Account Submitter Agreement if: (i) the relevant
Joint Account or any CCIT Member that participates in the Joint Account fails to satisfy therequirements applicable to it under these Rules; (ii) the Joint Account Submitter fails to satisfy therequirements of these Rules relating to such Joint Account Submitter; or (iii) the Corporation
determines, in its sole discretion, that such action is necessary for the protection of the Corporation
or its Members (including CCIT Members).
Section 5 – On-going Membership Requirements(a)
The eligibility, qualifications and standards set forth above in this Rule in respectof an applicant shall continue to be met upon an applicant’s admission as a CCIT Member and at
all times while a CCIT Member. In addition, each CCIT Member shall comply with the ongoing
requirements set forth below in this Section.

127

(b)

Each CCIT Member shall submit to the Corporation the following:(i)Each Member shall maintain or upgrade their network technology, orcommunications technology or protocols on the systems that connect to the Corporation to
the version being required and within the time periods as provided by Important Noticeposted to the Corporation’s website;(ii)
disclosure on at least an annual basis regarding such CCIT Member’s Net
Assets, any financial statements the CCIT Member makes publicly available and such otherreports, financial and other information as the Corporation from time to time may
reasonably require. The time periods prescribed by the Corporation for such disclosure areset forth in the form of notices posted at the Corporation’s website and/or distributed by
the Corporation from time to time. It shall be the CCIT Member’s responsibility to retrieve
all notices daily from the Corporation’s website; and(iii) a completed Cybersecurity Confirmation at least every two years, on a datethat is set by the Corporation and following notice that is provided no later than 180
calendar days prior to such due date.
(c)Each CCIT Member shall submit to the Corporation written notice of any CCIT
Reportable Event. A CCIT Reportable Event means:(i)an event that would, after giving effect thereto, cause a material change inthe control, ownership or management of the CCIT Member, or that could have a material
impact on such CCIT Member’s business and/or financial condition;(ii)material changes in the CCIT Member’s business lines, including new
business lines undertaken; or(iii) any litigation which could reasonably be anticipated to have a material
negative effect on the CCIT Member’s financial condition or ability to conduct business.
A CCIT Member must submit to the Corporation written notice of any CCIT Reportable
Event at least 90 calendar days prior to the effective date of such CCIT Reportable Event, unlessthe CCIT Member demonstrates that it could not have reasonably done so, and provides notice,both orally and in writing, to the Corporation as soon as possible.
Each CCIT Member that is an FFI Member shall inform the Corporation, both orally andin writing, if it (i) undergoes a change in circumstance that would affect its FATCA Certificationor (ii) otherwise has reason to know that it is not, or will not be, FATCA Compliant, in each case,within two days of knowledge thereof.
A CCIT Member must have a current Legal Entity Identifier on file with the Corporation
at all times. The CCIT Member shall indemnify the Corporation, and its employees, officers,
directors, shareholders, agents, and Members (collectively, the “LEI Indemnified Parties”), for any
and all losses, liabilities, expenses and Legal Actions suffered or incurred by the LEI Indemnified
Parties arising from a CCIT Member’s failure to have its current Legal Entity Identifier on filewith the Corporation. “Legal Action” means and includes any claim, counterclaim, demand,128

action, suit, countersuit, arbitration, inquiry, proceeding or investigation before any federal, stateor foreign court or other tribunal, or any investigative or regulatory agency or self-regulatoryorganization.
(d)
A CCIT Member that fails to submit the above listed information within thetimeframes required by guidelines issued by the Corporation from time to time and in the mannerrequested shall be subject to the fine(s) noted under “Failure to Timely Provide Financial and
Related Information” and “Reportable Events—Fine for Failure of Timely Notification”, asapplicable, in the Fine Schedules in these Rules.
(e)

Operational Testing Requirements(i)
The Corporation may, from time to time, require CCIT Members or their
Joint Account Submitters, as applicable, to fulfill, within the timeframes established by the
Corporation, certain operational testing requirements (the scope of such testing to be
determined by the Corporation in its sole discretion) and related reporting requirements(such as reporting the test results to the Corporation in a manner specified by the
Corporation) that may be imposed by the Corporation to ensure the continuing operational
capability of such CCIT Members. The Corporation will assess a fine or terminate themembership of any CCIT Member that does not fulfill any such operational testing andrelated reporting requirements within the timeframes established by the Corporation. If a
Joint Account Submitter does not fulfill any such operational testing and related reporting
requirements within the timeframes established by the Corporation, the Corporation may
terminate all Joint Account Submitter Agreements for any or all CCIT Members that such
Joint Account Submitter represents.
(ii)
The Corporation has established standards for designating those CCIT
Members or Joint Account Submitters, as applicable, who shall be required to participate
in annual business continuity and disaster recovery testing that the Corporation reasonably
determines are, taken as a whole, the minimum necessary for the maintenance of fair andorderly markets in the event that business continuity and disaster recovery plans are
required to be activated. The standards shall take into account factors such as: (A) activitybased thresholds; (B) significant operational issues of the CCIT Member during the twelve
months prior to the designation; and (C) past performance of the CCIT Member or its Joint
Account Submitter, as applicable, with respect to operational testing. The specificstandards adopted by the Corporation and any updates or modifications thereto shall be
published to CCIT Members and applied on a prospective basis.
Upon notification that the CCIT Member or its Joint Account Submitter, as
applicable, has been designated to participate in the annual business continuity and disasterrecovery testing, as described above, the CCIT Member or its Joint Account Submitter, as
applicable, shall be required to fulfill, within the timeframes established by the
Corporation, certain testing requirements (the scope of such testing to be determined by
the Corporation in its sole discretion) and related reporting requirements (such as reporting
the test results to the Corporation in a manner determined by the Corporation).

129

(f)
A CCIT Member shall promptly inform the Corporation, both orally and in writing,
if it no longer is in compliance with any of the relevant qualifications and standards for admission
to membership set forth in this Rule, including the criteria set forth in Section 2(a) of this Rule.
Notification must take place within two Business Days from the date on which the CCIT Member
first learns of its non-compliance. The Corporation shall assess a fine pursuant to the applicable
Fine Schedule in these Rules against any CCIT Member which fails to so notify the Corporation.
In addition, a CCIT Member shall notify the Corporation within two Business Days of learningthat an investigation or proceeding to which it is or is becoming the subject of would cause the
CCIT Member to fall out of compliance with any of the relevant qualifications and standards formembership set forth in this Rule. Notwithstanding the previous sentence, the CCIT Member shallnot be required to notify the Corporation if doing so would cause the CCIT Member to violate anapplicable law, rule or regulation. If, with respect to a CCIT Member: (i) it fails to maintain therelevant standards and qualifications for admission to membership, including but not limited tominimum capital standards and operational testing and related reporting requirements imposed by
the Corporation from time to time; (ii) it violates any Rule of the Corporation or other agreementwith the Corporation; (iii) it fails to satisfy in a timely manner any obligation to the Corporation;(iv) there is any CCIT Reportable Event relating to such Member; or (v) the Corporation otherwise
deems it necessary or advisable, in order to protect the Corporation, its other Members (including
CCIT Members), or its creditors or investors, to safeguard securities and funds in the custody orcontrol of the Corporation or for which the Corporation is responsible, or to promote the prompt
and accurate processing, clearance or settlement of securities transactions, the Corporation will
undertake appropriate action to determine the status of the CCIT Member and its continued
eligibility. In addition, the Corporation may review the financial responsibility and operational
capability of the CCIT Member and/or its Controlling Management to the extent provided in theseRules and otherwise require from the CCIT Member additional reporting of its financial or
operational condition at such intervals and in such detail as the Corporation shall determine, andshall make a determination as to whether such CCIT Member should be placed on the Watch Listby the Corporation consistent with the provisions of Section 5(l) of this Rule.
(g)
In addition, if the Corporation has reason to believe that a CCIT Member may fail
to comply with any of the Rules, it may require the CCIT Member to provide it, within such
timeframe, in such detail, and pursuant to such manner as the Corporation shall determine, withassurances in writing of a credible nature that the CCIT Member shall not, in fact, violate any ofthese Rules. Notwithstanding the previous sentence, each CCIT Member, or any applicant tobecome such, shall furnish to the Corporation such adequate assurances of its financial
responsibility and operational capability as the Corporation may at any time or from time to time
deem necessary or advisable in order to protect the Corporation and its Members (including CCIT
Members), or its creditors or investors, to safeguard securities and funds in the custody or controlof the Corporation or for which the Corporation is responsible, or to promote the prompt andaccurate processing, clearance or settlement of securities transactions. Upon the request of a CCIT
Member or applicant to become such, the Corporation may choose to confer with the CCIT
Member or applicant before or after requiring it to furnish adequate assurances pursuant to thisRule.
Adequate assurances of financial responsibility or operational capability of a CCIT
Member or applicant to become such, as may be required by the Corporation pursuant to these130

Rules, may include, but shall not be limited to, as appropriate in the context of the CCIT Member’s
use of the Corporation’s services:(i)
imposing restrictions or modifications on the CCIT Member’s use of the
Corporation’s services (whether generally or with respect to certain transactions); or(ii)
requiring additional reporting by the CCIT Member of its financial or
operational condition at such intervals and in such detail as the Corporation shalldetermine.
(h)
In the event that a CCIT Member fails to maintain the relevant requirements of anyof these Rules, the Corporation shall, pursuant to these Rules, cease to act for the CCIT Member,unless the CCIT Member requests that such action not be taken and the Corporation determines
that, depending upon the specific circumstances and the record of the CCIT Member, it isappropriate instead to establish for such CCIT Member a time period (hereinafter, the“Noncompliance Time Period”), which shall be determined by the Corporation and which shall be
no longer than 30 calendar days unless otherwise determined by the Corporation, during which the
CCIT Member must resume compliance with such requirements. In the event that the CCIT
Member is unable to satisfy such requirements within the Noncompliance Time Period, theCorporation shall, pursuant to these Rules, cease to act for the CCIT Member. If the Corporation
takes any cease to act action pursuant to this paragraph, it shall promptly file with its records andwith the SEC a full report of such actions, and the reasons thereof.
(i)
Notwithstanding anything to the contrary in this Section, if the Corporation, in its
sole discretion, determines that a CCIT Member’s financial condition has significantly deteriorated
during a Noncompliance Time Period, the Corporation immediately may, pursuant to these Rules,
cease to act for the CCIT Member.
(j)Compliance with Laws
(i)

General

In connection with their use of the Corporation’s services, CCIT Members and their
Joint Account Submitters, as applicable, must comply with all applicable laws, including
applicable laws relating to securities, taxation, and money laundering, as well as global
sanctions laws.
(ii)

Global Sanctions

As part of their compliance with global sanctions regulations, CCIT Members andtheir Joint Account Submitters, as applicable, must not conduct any transaction or activity
through the Corporation which they know to violate global sanctions regulations.
CCIT Members subject to the jurisdiction of the U.S. are required to periodicallyconfirm that they and their Joint Account Submitters, as applicable, have implemented arisk-based program reasonably designed to comply with applicable OFAC sanctions
regulations. Failure to do so in the manner and timeframes set forth by the Corporationfrom time to time will result in a $5,000.00 fine.
131

(iii)

FATCA

Each CCIT Member that is an FFI Member must agree not to conduct any CCIT
Transaction or activity through the Corporation if such CCIT Member is not FATCA
Compliant, unless such requirement has been explicitly waived in writing by the
Corporation with respect to the specific CCIT Member; provided, however, that no such
waiver will be issued if it shall cause the Corporation to be obligated to withhold under
FATCA on gross proceeds from the sale or other disposition of any property.
All such CCIT Members that are FFI Members are required, as applicable under
FATCA, to certify and periodically recertify to the Corporation that they are FATCA
Compliant by providing to the Corporation a FATCA Certification. Failure to do so in themanner and timeframes set forth by the Corporation from time to time will result in a fine,unless such requirement has been explicitly waived in writing by the Corporation withrespect to the specific CCIT Member; provided, however, that no such waiver will be
issued if it shall cause the Corporation to be obligated to withhold under FATCA on grossproceeds from the sale or other disposition of any property.
A CCIT Member that is an FFI Member shall indemnify each Indemnified Person
for any loss, liability or expense sustained by the Indemnified Person as a result of such
CCIT Member failing to be FATCA Compliant.
(k)
A CCIT Member’s and its Controlling Management’s books and records, insofar
as they relate to such CCIT Member’s transactions processed through the Corporation, shall be
open to the inspection of the duly authorized representatives of the Corporation upon reasonableprior notice and during the CCIT Member’s or its Controlling Management’s normal businesshours. The Corporation shall be furnished with all such information about the CCIT Member’sand its Controlling Management’s business and transactions as it may require; provided that (i) any
non-public information furnished to the Corporation pursuant to this Rule shall be held in
confidence as may be required under the laws, rules and regulations applicable to the Corporationthat relate to the confidentiality of records and (ii) if the CCIT Member ceases membership, theCorporation shall have no right to inspect the CCIT Member’s or its Controlling Management’s
books and records or to require information relating to transactions wholly subsequent to the time
when the CCIT Member ceases membership.
(l)
CCIT Members may be monitored for financial and/or operational factors as the
Corporation deems necessary to protect the Corporation and its Members from undue risk. CCIT
Members will not be assigned a rating from the Credit Risk Rating Matrix; however, they may be
included on the Watch List at the Corporation’s discretion. Placement on the Watch List shallresult in a more thorough monitoring of the CCIT Member’s financial and/or operational
condition, as applicable, and activities by the Corporation. The Corporation may require CCIT
Members placed on the Watch List to make more frequent financial disclosures, possibly includinginterim and/or pro forma reports. A CCIT Member shall be placed on the Watch List if the
Corporation takes any action against such CCIT Member pursuant to Section 5(f) of this Rule 3B.
A CCIT Member shall continue to be included on the Watch List until the condition(s) that resulted
in its placement on the Watch List have improved to the point where the condition(s) are no longer
present or a determination is made by the Corporation that close monitoring is no longer warranted.
132Section 6 – Voluntary Termination
A CCIT Member may voluntarily elect to terminate its membership in the Corporation by
providing the Corporation with a written notice of such termination (hereinafter, the “CCIT
Member Voluntary Termination Notice”). The CCIT Member shall specify in the CCIT Member
Voluntary Termination Notice a desired date for the termination, which date shall not be prior to
the scheduled final settlement date of any remaining obligation owed by the CCIT Member to the
Corporation as of the time such CCIT Member Voluntary Termination Notice is submitted to the
Corporation, unless otherwise approved by the Corporation.
Such termination will not be effective until accepted by the Corporation, which shall be nolater than 10 Business Days after the receipt of the CCIT Member Voluntary Termination Noticefrom such CCIT Member. The Corporation’s acceptance shall be evidenced by an Important
Notice to Members (including CCIT Members) announcing the CCIT Member’s termination andthe effective date of the termination of the CCIT Member (hereinafter the “CCIT Member
Termination Date”). As of the CCIT Member Termination Date, a CCIT Member that terminates
its membership in the Corporation shall no longer be eligible or required to submit to the
Corporation data on trades and shall no longer be eligible to have its trade data submitted by a
Joint Account Submitter, unless the Board determines otherwise in order to ensure an orderly
liquidation of the CCIT Member’s positions. If any trade is submitted to the Corporation either
by such CCIT Member or a Joint Account Submitter that is scheduled to settle on or after the CCIT
Member Termination Date, such CCIT Member’s CCIT Member Voluntary Termination Notice
will be deemed void, and the CCIT Member will remain subject to this Rule as if it had not givensuch CCIT Member Voluntary Termination Notice.
A CCIT Member’s voluntary termination of membership shall not affect its obligations to
the Corporation, or the rights of the Corporation, with respect to transactions submitted to the
Corporation before the CCIT Member Termination Date.
Section 7 – Loss Allocation Obligations of CCIT Members
Section 7 (Loss Allocation Waterfall) of Rule 4 (Clearing Fund and Loss Allocation) shallapply to CCIT Members as Tier Two Members. CCIT Members shall be responsible for the total
amount of loss allocated to them. With respect to CCIT Members with a Joint Account Submitter,loss allocation will be calculated at the Joint Account level and then applied pro rata to each CCIT
Member in the Joint Account based on the trade settlement allocation instructions. If, at the time
the Corporation calculates loss allocation, the trade settlement allocation instructions to theindividual CCIT Member level have not yet been received by the Corporation, the CCIT Membersin the Joint Account shall be required to provide the allocation to the Corporation within thetimeframes set by the Corporation in its discretion.
Section 8 – Obligations Under Rule 4 Regarding Netting Members That Participate in the CCIT
Service
The provisions of Rule 4 (Clearing Fund and Loss Allocation) shall apply to the CCIT
Service activity of Netting Members in the same way in which such provisions apply to Netting
Members’ GCF Repo Transaction activity.

133Section 9 – Trade Submission and the Comparison System(a)
CCIT Members (whether submitting individually or through a Joint Account) shallbe permitted to submit only CCIT Transactions to the Corporation. CCIT Transactions must be in
Generic CUSIP Numbers approved by the Corporation for GCF Repo Transactions.
(b)
Each CCIT Member shall be required to maintain two accounts at the GCF Clearing
Agent Bank(s) at which the Netting Members with whom the CCIT Member enters into CCIT
Transactions maintain accounts. One account at such GCF Clearing Agent Bank shall be
designated for the CCIT Member’s activity in respect of CCIT Transactions (hereinafter, the“CCIT Account”) and the second account shall be designated for Transactions (as defined in
Section 14(a) of this Rule 3B) initiated by the Corporation pursuant to Section 14(a) of this Rule3B (hereinafter, the “CCIT MRA Account”). In each case, such accounts shall be as designatedby the Corporation for these purposes from time to time. If acting through a Joint Account, a CCIT
Member shall cause its Joint Account Submitter to maintain both a CCIT Account and a CCIT
MRA Account for the Joint Account at the GCF Clearing Agent Bank(s) at which the Netting
Members with whom the CCIT Member enters into CCIT Transactions maintain accounts.
(c)
The provisions of Rule 5 (Comparison System) shall apply to CCIT Transactions
subject to the following:(i)“Member”, when used in Rule 5, shall include a CCIT Member or a Joint
Account Submitter acting on behalf of a CCIT Member, as applicable.
(ii)
With respect to Section 3 (Trade Submission Communication Methods) of
Rule 5, CCIT Transactions may only be submitted using the Interactive Submission
Method or the Corporation’s web interface.
(iii) With respect to Section 4 (Submission Size Alternatives) of Rule 5, CCIT
Transactions must be submitted exactly as executed.
CCIT Transactions may be submitted for Bilateral Comparison or Locked-In Comparison.
(d)Rule 6A (Bilateral Comparison) shall govern the comparison of CCIT Transactions
that are submitted for Bilateral Comparison subject to the following:(i)“Member”, when used in Rule 6A, shall include a CCIT Member or a Joint
Account Submitter acting on behalf of a CCIT Member, as applicable.
(ii)
With respect to Section 1 (General) of Rule 6A, the Schedule of Required
and Other Data Submission Items for GCF Repo Transactions shall apply to CCIT
Transactions. The Schedule of Required Match Data and the Schedule of Money
Tolerances shall not apply to CCIT Transactions. With respect to the Schedule of Required
and Other Data Submission Items for GCF Repo Transactions, the fields requiring Broker
information shall not apply.

134

(iii) With respect to Section 2 (Submission Method Requirements) of Rule 6A,
CCIT Transactions may only be submitted using the Interactive Submission Method or the
Corporation’s web interface.
(e)
The following provisions of Rule 6C (Locked-In Comparison) shall govern thecomparison of CCIT Transactions that are submitted on a Locked-In Trade basis: Sections 1(General), 2 (Authorizations of Transmission to and Receipt by the Corporation of Data on
Locked-In Trades), the first sentence in Section 4 (Submission Requirements), 5 (GCF Repo
Transactions), 7 (Reporting of Locked-In Trades), 8 (Discretion to not Accept Data), 9 (Binding
Nature of Comparison System Output on Locked-In Trades), 12 (Affirmation, Cancellation and
Modification Requirements for Data on GCF Repo Transactions) and 13 (Timing of Comparison).
For purposes of the application of these provisions to CCIT Transactions, CCIT Transactions shallbe treated as GCF Repo Transactions. “Member”, when used in applicable parts of Rule 6C, shall
include a CCIT Member or, as applicable, a Joint Account Submitter acting on behalf of a CCIT
Member.
(f)
The Schedule of GCF Repo Timeframes shall apply to CCIT Transactions (whether
submitted for Bilateral Comparison or Locked-In Comparison) and CCIT Members shall be
subject to any applicable late fees (applied at the Joint Account level if applicable) noted in the
Corporation’s Fee Structure for failure to meet applicable deadlines. CCIT Members shall be
subject to all consequences for not meeting the deadlines in the Schedules noted in Rule 20 (Special
Provisions for GCF Repo Transactions) in the same way as such consequences apply to Netting
Members.
Section 10 – Forward Trades
The provisions of Rule 14 (Forward Trades) shall apply to CCIT Transactions in the same
way such provisions apply to GCF Repo Transactions.
Section 11 – Netting System and Settlement of CCIT Transactions(a)Rule 20 (Special Provisions for GCF Repo Transactions) shall apply to the netting
and settlement obligations of the Corporation and each party to a CCIT Transaction in the sameway in which such provisions apply to GCF Repo Transactions subject to the following:(i)when used, “Netting Member” or “Affected Netting/CCIT Member” shall
include a CCIT Member or, as applicable, a Joint Account;(ii)
CCIT Members (whether acting individually or through a Joint Account)shall always be GCF Net Funds Lenders;(iii) CCIT Members shall not be initiators of requests for collateral substitutions
but shall be the recipients of such collateral substitutions; and(iv)
The CCIT Transaction activity of Netting Members shall be netted withsuch Netting Members’ GCF Repo Service activity for one net obligation per Generic
CUSIP Number approved for the GCF Repo Service.

135

(b)
On each Business Day, CCIT Members submitting CCIT Transactions through a
Joint Account shall cause their Joint Account Submitter to submit the trade settlement allocation
with respect to trades settled by the Joint Account during that Business Day.
(c)Each CCIT Member hereby grants to the Corporation a security interest in all its
right, title and interest, at any time acquired, in and to the securities and other property delivered
to it by the Corporation pursuant to a CCIT Transaction from time to time credited to an accountmaintained by the CCIT Member or the Joint Account Submitter on its behalf pursuant to Section
9(b) of this Rule 3B as security for the prompt and complete payment and performance when due(whether at stated maturity or by acceleration or otherwise) of all obligations of the CCIT Member
to the Corporation under each CCIT Transaction.
(d)
Although the Corporation and each CCIT Member intends that each CCIT
Transaction be a sale and purchase and not a loan, in the event any such CCIT Transaction isdeemed to be a loan, the Corporation shall be deemed to have pledged to the relevant CCIT
Member as security for the performance by the Corporation of its obligations under such CCIT
Transaction, and shall be deemed to have granted to such CCIT Member a security interest in, thesecurities and other property delivered to it by the Corporation pursuant to such CCIT Transaction
from time to time credited to the account maintained by the CCIT Member or the Joint Account
Submitter on its behalf pursuant to Section 9(b) of this Rule 3B.
(e)
In addition to and not by way of limitation of any provisions of these Rules, if the
Corporation ceases to act for a CCIT Member, the Corporation may (i) exercise all rights andremedies available to a secured party under the Uniform Commercial Code, whether or not in
effect in the applicable jurisdiction and (ii) instruct the relevant GCF Clearing Agent Bank todeliver to the Corporation the Eligible Securities that the CCIT Member is obligated to return to
the Corporation against payment by the Corporation of the Contract Value.
Section 12 – [Reserved]
Section 13 – Funds-Only Settlement(a)
A CCIT Member, or Joint Account (as applicable), shall have the same Funds-OnlySettlement Amount obligations as a Netting Member pursuant to Rule 13 (Funds-Only Settlement),
and Rule 13 shall apply in its entirety to CCIT Members in the same way as it applies to Netting
Members except that only the following components of Section 1 of Rule 13 shall apply to CCIT
Members with respect to their CCIT Transactions:(i)

Invoice Amount; and(ii)

Miscellaneous Adjustment Amount.

136

(b)
The following payments and marks of Section 1 of Rule 13 shall apply to Netting
Members with respect to their CCIT Transactions (such payments and marksc shall apply as they
apply to GCF Repo Transactions except as noted below):(i)

GCF Transaction Adjustment Payment;(ii)
GCF Interest Rate Mark, provided that Netting Members shall be obligatedto pay debits but shall not be entitled to collect credits for GCF Interest Rate Mark withrespect to their CCIT Transactions;(iii) GCF Forward Starting Interest Rate Mark, provided that Netting Members
shall be obligated to pay debits but shall not be entitled to collect credits for GCF Forward
Starting Interest Rate Mark with respect to their CCIT Transactions;(iv)

GCF Interest Adjustment Payment, as it relates to (ii) and (iii) above;(v)

Invoice Amount as it relates to CCIT Transactions; and(vi)

Miscellaneous Adjustment Amount as it relates to CCIT Transactions.

(c)
CCIT Daily Repo Interest shall also apply to CCIT Members (or Joint Accounts asapplicable) and Netting Members with respect to their CCIT Transactions.
(d)Notwithstanding the above, a CCIT Member may elect to pay its Funds-OnlySettlement Amount debits directly to the Corporation using the invoicing process applicable toComparison-Only Members under Rule 25 (Bills Rendered) in lieu of the process described in
Section 5 of Rule 13. If the CCIT Member elects the invoicing process, the CCIT Member’s
Funds-Only Settling Bank shall no longer be responsible for processing Funds-Only Settlement
Amounts that are debits for such CCIT Member.
Section 14 – Liquidity Requirements of CCIT Members(a)In order to finance the Corporation’s obligations in respect of certain Deliver
Obligations in connection with CCIT Transactions in accordance with subsection (b) of thisSection 14, the SIFMA MRA (without the referenced annexes) is hereby incorporated by referencein the Rules as a master repurchase agreement between the Corporation, as Seller, and each CCIT
Member, as Buyer (hereinafter, the “CCIT MRA”); provided that, notwithstanding anything else
set forth in the CCIT MRA:(i)
Transactions (for purposes of this Section 14(a), as defined in the CCIT
MRA) shall only be initiated by the Corporation in accordance with this Rule 3B,(ii)
all Transactions shall be terminable only by demand of the Corporation andin accordance with this Rule 3B except as specified in subsection (c) below,(iii) all Securities (for purposes of this Section 14(a), as defined in the CCIT
MRA) shall be transferred by the Corporation in its sole discretion,

137

(iv)
any and all notices, statements, demands or other communications under the
CCIT MRA shall be given by a party to the other in accordance with the notice provisions
set forth in the Rules,(v)
so long as the CCIT Member is a Member of the Corporation, the CCIT
MRA may only be terminated by the Corporation except as specified in subsection (c)below,(vi)
there shall be no Events of Default (for purposes of this Section 14(a), as
defined in the CCIT MRA) with respect to Seller other than as specified in this Section 14,(vii) on any Business Day prior to the CCIT MRA Termination Date as definedin subsection (c) below, the Corporation may, by notice to Buyer, terminate any
Transaction, in whole or in part, by specifying such Business Day as the Repurchase Date(for purposes of this Section 14(a), as defined in the CCIT MRA) for some or all of thePurchased Securities (for purposes of this Section 14(a), as defined in the CCIT MRA),(viii) if the Corporation terminates a portion of a Transaction pursuant toclause (vii) of this paragraph:(A)

the Repurchase Price (for purposes of this Section 14(a), as definedin the CCIT MRA) for the Purchased Securities to be repurchasedon such date (hereinafter, the “Relevant Securities”) shall be an
amount equal to the sum of the Purchase Price (for purposes of thisSection 14(a), as defined in the CCIT MRA) for the Relevant
Securities and the unpaid Price Differential (for purposes of thisSection 14(a), as defined in the CCIT MRA) accrued on thePurchase Price for the Relevant Securities through such Business
Day;

(B)

upon transfer of the Repurchase Price for the Relevant Securities,
the Relevant Securities shall no longer constitute Purchased
Securities; and(C)upon transfer of the Repurchase Price for the Relevant Securities,
the Purchase Price for the Transaction shall be reduced by the
Purchase Price for the Relevant Securities,(ix)
Section 19(a) of the CCIT MRA shall be amended by adding at the end
thereof before the period “, and this Agreement and each Transaction is of a type set forthin Section 5390(c)(8)(D) of Title 12 of the United States Code, as amended”,(x)Section 19(b) of the CCIT MRA shall be amended by adding at the end
thereof before the period “, and a right to terminate, liquidate or accelerate as described in
Section 5390(c)(8)(A) and (C) of Title 12 of the United States Code, as amended”,(xi)
Buyer’s Margin Percentage (for purposes of this Section 14(a), as definedin the CCIT MRA) shall be 102% for all Transactions, and138

(xii) the Pricing Rate (as defined in the CCIT MRA) in respect of eachTransaction shall be the rate that the Corporation reasonably determines approximates theaverage daily interest rate paid by a seller of the Purchased Securities under a cleared
repurchase transaction.
(b)
Once the Corporation has ceased to act for a Netting Member with whom a CCIT
Member traded pursuant to these Rules, if any portions of such trades, as Novated pursuant tothese Rules, remain outstanding, then, if the Corporation determines, in its sole discretion, that theprocedures below are necessary to address certain of the Corporation’s liquidity needs, theCorporation may initiate transactions under the CCIT MRA as provided below.
(i)
The Corporation shall determine which CCIT Members had open CCIT
Transactions originally with the Defaulting Member (each such CCIT Member hereinafter,an “Affected CCIT Member”),(ii)
The Corporation shall notify all Affected CCIT Members informing themthat the Corporation will initiate repurchase agreements under the CCIT MRA,(iii) The Corporation shall determine each Affected CCIT Member’s pro rata
share of the total principal dollar amount of such CCIT Transactions originally with theDefaulting Member in respect of which the Corporation needs financing, with such pro rata
share being determined by reference to the total dollar amount of such Affected CCIT
Member’s trades with the Defaulting Member that remain unsettled (hereinafter, such
Affected CCIT Member’s “Financing Amount”),(iv)
The Corporation shall initiate repurchase transactions under the terms andconditions of the CCIT MRA with each Affected CCIT Member having a Purchase Priceequal to such Affected CCIT Member’s Financing Amount (each such repurchasetransaction, hereinafter, a “CCIT MRA Transaction”, shall be a “Transaction” under the
CCIT MRA),(v)
The payment of the Purchase Price and the delivery of any Purchased
Securities under each CCIT MRA Transaction shall be netted against the delivery
obligations and related payment obligations under the original CCIT Transaction to whichsuch CCIT MRA Transaction relates, and(vi)
Upon the initiation of a CCIT MRA Transaction, the Corporation shallcause the relevant GCF Clearing Agent Bank to transfer the Purchased Securities from an
Affected CCIT Member’s CCIT Account to such Affected CCIT Member’s CCIT MRA
Account.
(c)
If (i) a Corporation Default has occurred during the term of a CCIT MRA
Transaction or (ii) the Corporation has not repurchased all Purchased Securities (for purposes ofthis Section 14(c), as defined in the CCIT MRA) under the applicable CCIT MRA Transaction by(A) the end of the 30th calendar day after the Purchase Date (for purposes of this Section 14(c), as
defined in the CCIT MRA) in the case of a CCIT MRA Transaction where the underlying security
is a U.S. government agency debenture or U.S. Treasury bill, note or bond or (B) the end of the60th calendar day after the Purchase Date in the case of a CCIT MRA Transaction where the139underlying security is a mortgage-backed security (each a “CCIT MRA Termination Date”), theAffected CCIT Member may exercise the rights of a “nondefaulting party” under Section 11 of
the CCIT MRA as if an “Event of Default” with respect to Seller had occurred and such Affected
CCIT Member had exercised the option referred to in Section 11(a) of the CCIT MRA.
(d)
It shall be an “Event of Default” with respect to Buyer under a CCIT MRA if the
Corporation ceases to act for the relevant Affected CCIT Member.
(e)
All delivery obligations and related payment obligations under an original CCIT
Transaction in respect of which the Corporation enters into a CCIT MRA Transaction inaccordance with Section 14(b) above shall be deemed satisfied by operation of this Section 14,
and settlement of any such original CCIT Transaction between the Corporation and any CCIT
Member shall be final notwithstanding that the Eligible Securities are not required to be delivered
to the Corporation in connection with such original CCIT Transaction by the CCIT Member who
was a buyer in the original CCIT Transaction (such delivery being netted against delivery to Buyer
under the CCIT MRA).
(f)
The Corporation and any CCIT Member may agree to enter into repurchasetransactions in addition to those initiated by the Corporation pursuant to Section 14(b) above. In
furtherance of the foregoing, the SIFMA MRA is hereby incorporated by reference in the Rules asa master repurchase agreement between the Corporation, as Seller, and each CCIT Member, as
Buyer (hereinafter, the “Uncommitted CCIT MRA”); provided that, notwithstanding anything else
set forth in the Uncommitted CCIT MRA:(i)
Transactions (for purposes of this Section 14(f), as defined in the
Uncommitted CCIT MRA) shall only be initiated by the Corporation in accordance withthis Rule 3B,(ii)
all Transactions shall be terminable only by demand of the Corporation andin accordance with this Rule 3B,(iii) all Securities (for purposes of this Section 14(f), as defined in the
Uncommitted CCIT MRA) shall be transferred by the Corporation in its sole discretion,(iv)
any and all notices, statements, demands or other communications under theUncommitted CCIT MRA shall be given by a party to the other in accordance with thenotice provisions set forth in the Rules,(v)
there shall be no Events of Default (for purposes of this Section 14(f), as
defined in the Uncommitted CCIT MRA) with respect to Seller other than a Corporation
Default,(vi)
Section 19(a) of the Uncommitted CCIT MRA shall be amended by adding
at the end thereof before the period “, and this Agreement and each Transaction is of a typeset forth in Section 5390(c)(8)(D) of Title 12 of the United States Code, as amended”, and(vii) Section 19(b) of the Uncommitted CCIT MRA shall be amended by adding
at the end thereof before the period “, and a right to terminate, liquidate or accelerate as
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described in Section 5390(c)(8)(A) and (C) of Title 12 of the United States Code, as
amended”.
Section 15 – Restrictions on Access to Services by a CCIT Member, Insolvency of a CCIT Member
and Wind-Down of a CCIT Member
The provisions of Rules 21 (Restrictions on Access to Services), 21A (Wind-Down of a
Netting Member) and 22 (Insolvency of a Member) shall apply to CCIT Members in the same way
as such provisions apply to Netting Members.
Section 16 – Procedures for When the Corporation Ceases to Act for a CCIT Member
Rule 22A (Procedures for When the Corporation Ceases to Act) shall apply when the
Corporation ceases to act for a CCIT Member in the same way as such Rule applies to Netting
Members, except that with respect to Section 2(b), the CCIT Member for whom the Corporation
has ceased to act shall be required to return each Eligible Security that the CCIT Member isobligated to return to the Corporation against payment by the Corporation of the Contract Value.
Section 17 – Other Applicable Rules, Schedules, Interpretations and Statements(a)Rule 1 (Definitions), Rule 22B (Corporation Default), Rule 22C (Interpretation in
Relation to the Federal Deposit Insurance Corporation Act of 1991), Rule 22D (Wind-down of the
Corporation), Rule 23 (Fine Payments), Rule 25 (Bills Rendered), Rule 27 (Admission to Premisesof the Corporation, Powers of Attorney, Etc.), Rule 28 (Forms), Rule 29 (Release of Clearing
Data), Rule 31 (Distribution Facilities), 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 (Limitations of Liability), Rule 40 (General
Provisions), Rule 41 (Cross Guaranty Agreements), Rule 42 (Suspension of Rules), Rule 44(Action by the Corporation), Rule 45 (Notices), Rule 46 (Interpretation of Terms), Rule 47(Interpretation of Rules), Rule 48 (Disciplinary Proceedings), Rule 50 (Market Disruption andForce Majeure) and Rule 50A (Systems Disconnect: Threat of Significant Impact to the
Corporation’s Systems) shall apply to CCIT Members with respect to CCIT Transactions in thesame way as these provisions apply to Netting Members.
(b)With respect to Rule 49 (DTCC Shareholders Agreement), CCIT Members shall be
Voluntary Purchaser Participants.
(c)
All Schedules that are cited in, or pertain to, the Rules cited in this Rule 3B asapplying to CCIT Members shall apply to CCIT Members.
(d)
Any Statements of Policy or Interpretations contained in the Rules applicable to
the CCIT Service shall apply to CCIT Members unless expressly stated otherwise.

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RULE 4 – CLEARING FUND AND LOSS ALLOCATION
Section 1 – Required Fund Deposits
Each Netting Member shall make and maintain on an ongoing basis a deposit to theClearing Fund. The amount of each Netting Member’s required deposit shall be determined by
the Corporation in accordance with this Rule and shall be referred to as the Required Fund Deposit.
The timing of payment of the Required Fund Deposit shall be determined in accordance with theprovisions of Section 9 of this Rule.
A Netting Member may in its discretion maintain additional deposits at the Corporation,subject to any requirements the Corporation may establish for such excess amounts pursuant to
Section 10 of this Rule. For purposes of these Rules, such additional deposits shall be deemed tobe part of the Clearing Fund and the Netting Member’s Actual Deposit but shall not be deemed tobe part of the Netting Member’s Required Fund Deposit. The Corporation shall not be required
to segregate each Netting Member’s Actual Deposit, but shall maintain books and records
concerning the assets that constitute each Netting Member’s Actual Deposit.
Section 1a – Margin Portfolio(a)
A Margin Portfolio shall consist of such Accounts of the Member and of Permitted
Margin Affiliates of the Member as the Member shall designate in accordance with the Rules andProcedures of the Corporation.
(b)
A Sponsoring Member Omnibus Account shall not be grouped in a Margin
Portfolio with any other Accounts. An Account of a Tier Two Member shall not be grouped in a
Margin Portfolio with any Accounts of a Tier One Netting Member. A Bank Netting Member
shall not be permitted to group any of its Accounts in a Margin Portfolio with Accounts of a
Permitted Margin Affiliate unless it can demonstrate to the satisfaction of the Corporation that, indoing so, it is in compliance with regulatory requirements applicable to it.
(c)

A Broker Account shall not be grouped in a Margin Portfolio with Dealer Accounts.

(d)
The Corporation shall calculate a Member’s Required Fund Deposit with reference
to the Margin Portfolios of the Member as set forth in this Rule 4.
Section 1b – Unadjusted GSD Margin Portfolio Amount(a)
Each Business Day, the Corporation shall determine, with respect to each Margin
Portfolio, an Unadjusted GSD Margin Portfolio Amount as the sum of the following:(i)the VaR Charge,

minus
(ii)
in the case of a Margin Portfolio of a Cross Margining Participant that is
subject to one or more Cross-Margining Arrangements, in the discretion of the
Corporation, an amount not to exceed the sum of any applicable Cross-Margining
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Reductions, calculated on the current Business Day for such Cross-Margining Participant
in accordance with the applicable Cross-Margining Agreements,
plus or minus(iii) in the case of a Margin Portfolio of a GCF Counterparty, the Blackout
Period Exposure Adjustment, if applicable, during the monthly Blackout Period or until
the applicable GCF Clearing Agent Bank updates the Pool Factors used for collateralvaluation,
plus
(iv)
in the case of a Netting Member with backtesting deficiencies, theBacktesting Charge, if applicable,
plus
(v)

the Holiday Charge, if applicable, on the Business Day prior to a Holiday,

plus
(vi)
applicable,a Margin Liquidity Adjustment Charge and an MLA Excess Amount, if

plus(vii) an additional payment (“special charge”) applicable to a Margin Portfolio
as determined by the Corporation from time to time in view of market conditions and otherfinancial and operational capabilities of the Member. The Corporation shall make any suchdetermination based on such factors as the Corporation determines to be appropriate fromtime to time,plus(viii) a Portfolio Differential Charge, if applicable.
The Corporation shall determine a separate Unadjusted GSD Margin Portfolio Amount fora Netting Member’s Market Professional Cross-Margining Account.
The Corporation shall have the discretion to not apply the VaR calculation(s) to Net
Unsettled Positions in classes of securities whose volatility is less amenable to statistical analysis,or to Term Repo Transactions and Forward-Starting Repo Transactions (including term andforward-starting GCF Repo Transactions) whose term repo rate volatility is less amenable tostatistical analysis. In lieu of such calculation, the component required with respect to suchtransactions shall instead be determined utilizing a haircut method based on a historic index
volatility model.

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The Corporation shall take into account the VaR confidence level applicable to the Member
in calculating the VaR Charge. In the case of a Margin Portfolio containing accounts of Permitted
Margin Affiliates, the Corporation shall apply the highest VaR confidence level applicable to theMember or its Permitted Margin Affiliates.
The Corporation shall calculate the Unadjusted GSD Margin Portfolio Amount applicable
to a Sponsoring Member Omnibus Account, and the Sponsoring Member Omnibus AccountRequired Fund Deposit, subject to the provisions set forth in Section 10 of Rule 3A.
Section 2 – Required Fund Deposit Requirements(a)Each Business Day, each Netting Member shall be required to make a Required
Fund Deposit to the Clearing Fund equal to the greater of: (i) the Minimum Charge or (ii) theamounts derived pursuant to the provisions of Sections 1, 1a and 1b of this Rule 4 (hereinafter, the“Total Amount”). A Netting Member that has a Margin Portfolio that consists of a Market
Professional Cross-Margining Account shall be required to make an additional Required Fund
Deposit to the Clearing Fund associated with the activity of such Margin Portfolio. Unlessotherwise expressly provided, references in these Rules that pertain to Required Fund Deposits
shall apply to the Required Fund Deposits associated with a Netting Member’s Market
Professional Cross-Margining Account.
The Minimum Charge applicable to each Netting Member, other than a Repo Broker, shallbe no less than $1 million. The Minimum Charge applicable to each Repo Broker shall be no lessthan $5 million for each Margin Portfolio with Broker Account(s) and no less than $1 million foreach Margin Portfolio with Dealer Account(s).
Once applicable Minimum Charges have been applied, the Corporation shall apply any
applicable additional payments, charges and premiums set forth in these Rules.
A Netting Member’s Required Fund Deposit shall be reported daily, and payment shall be
due by the time specified in the Corporation’s procedures; however, such payment shall not be dueon a given day if: (a) the difference between the amount of a Member’s Required Fund Deposit
as reported on that day, and the amount then on deposit towards satisfaction thereof is less thanboth (i) $250,000, and (ii) 25 percent of the amount then on deposit; and (b) the Member is not on
the Watch List.
(b)
The Corporation shall calculate the Sponsoring Member Omnibus AccountRequired Fund Deposit in the manner set forth in Section 10 of Rule 3A.
(c)
The initial Required Fund Deposit of each Netting Member, other than a Repo
Broker, shall be set by the Corporation based upon the expected nature and level of such Member’s
activity.
(d)
Notwithstanding anything to the contrary in this Rule, the Corporation may requirea Netting Member to make and maintain a higher Required Fund Deposit than the amount as noted
above, if the Corporation determines that such higher Required Fund Deposit is necessary toprotect the Corporation and its Members from the risk (hereinafter, the “Legal Risk”) that the
Corporation, as a result of a law, rule or regulation applicable to a Netting Member, including a
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Netting Member’s insolvency or bankruptcy, may be delayed or prohibited from: (i) accessing any
portion of the Netting Member’s Required Fund Deposit, (ii) netting, closing out or liquidatingtransactions, or setting off obligations, or taking any other action contemplated by Rule 4 (Clearing
Fund and Loss Allocation), Rule 21 (Restrictions on Access to Services), Rule 22 (insolvency ofa Member) or Rule 22A (Procedures for When the Corporation Ceases to Act), or (iii) otherwise
exercising its rights pursuant to these Rules.
(e)
Notwithstanding anything to the contrary in this Rule, the Corporation may requirea Netting Member’s Required Fund Deposit to be in proportions of cash, Eligible Clearing Fund
Securities and Eligible Letters of Credit that the Corporation determines to be necessary to protect
itself and its Members from Legal Risk.
(f)
Notwithstanding anything to the contrary above, the Corporation, in its sole
discretion, may secure a loan made to a Repo Broker for purposes of satisfying that Repo Broker’s
Funds-Only Settlement Amount obligation with that Repo Broker’s Clearing Fund deposit madeto the Corporation.
Section 2a – Intraday Calculation of VaR Amounts - Intraday Supplemental Fund Deposit
Pursuant to procedures established by the Corporation, the Corporation shall re-calculate
intraday, each Business Day, at the times established by the Corporation for this purpose, theamount of the intraday VaR Charge applicable to each Margin Portfolio of a Member, based upon
the open positions in such Margin Portfolio at a designated time intraday, for purposes of
establishing whether a Member shall be required to make payment of an additional amount(hereinafter, the Member’s “Intraday Supplemental Fund Deposit”) to its Required Fund Deposit.
Such additional amount shall be deemed part of the Member’s Required Fund Deposit for all
purposes under these Rules.
The Corporation shall establish procedures for collection of an amount calculated in
respect of a Member’s Intraday Supplemental Fund Deposit, including parameters regarding
threshold amounts that require payment, and the form and time by which payment is required tobe made to the Corporation. The Corporation reserves the right to require a Member or Members
generally to make additional Intraday Supplemental Fund Deposits if the Corporation determines
it to be necessary to protect itself and its Members in response to factors such as market conditions
or financial or operational capabilities affecting a Member or Members generally.
In addition to the above, Repo Parties will also be subject to the provisions of this Section
2a with respect to their pending (non-DK’ed) Demand Trades with Repo Brokers.
Section 3 – Form of Deposit
Subject to the provisions of Section 2 of this Rule governing the computation of a Netting
Member’s Required Fund Deposit, and the limitations of this Section 3, Section 3a and Section
3b, a Netting Member’s deposits to the Clearing Fund may be in the form of:(a) cash, or(b) an open account indebtedness fully secured by Eligible Clearing Fund Securities.
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A minimum of 40 percent of the Netting Member’s Required Fund Deposit shall be made in theform of cash and/or Eligible Clearing Fund Treasury Securities.
The lesser of $5,000,000 or 10 percent of the Required Fund Deposit, with a minimum of$1 million, must be made and maintained in cash, with the remaining portion of the Required Fund
Deposit to be made and maintained in the form specified in this Section 3. The previous sentence
shall also apply to a Sponsoring Member Omnibus Account, but shall not apply to the individual
Sponsored Members whose activity is presented by such Account.
Section 3a – Special Provisions Related to Deposits of Cash
Cash deposits to the Clearing Fund shall be made in immediately-available funds. The
Corporation may invest any cash in the Clearing Fund, including (i) cash deposited by a Netting
Member as part of its Actual Deposit, (ii) the proceeds of (x) any loans made to the Corporation
secured by the pledge by the Corporation of Eligible Clearing Fund Securities pledged to the
Corporation or (y) any sales of Eligible Clearing Fund Securities pledged to the Corporation,(iii) cash receipts from any investment of, repurchase or reverse repurchase agreements relating
to, or liquidation of, Clearing Fund assets, and (iv) cash payments on Eligible Letters of Credit(collectively, “Clearing Fund Cash”) in accordance with the Clearing Agency Investment Policy
adopted by the Corporation.
Each Netting Member shall be entitled to any interest earned or paid on Clearing Fund cash
deposits.
Section 3b – Special Provisions Related to Eligible Clearing Fund Securities
All Eligible Clearing Fund Securities pledged to secure Clearing Fund deposits shall, forcollateral valuation purposes, be subject to a haircut and may be subject to a concentration limit.
The Corporation shall determine the applicable haircuts and any concentration limits from time totime in accordance with its internal policy and governance process, based on factors determined
to be relevant by the Corporation, which may include, for example, backtesting results and the
Corporation’s assessment of market conditions, in order to set appropriately conservative haircuts
and/or concentration limits for the Eligible Clearing Fund Securities and minimize backtesting
deficiency occurrences. The haircuts and any concentration limits prescribed by the Corporation
shall be set forth in a haircut schedule that is published on the Corporation’s website. It shall be
the Member’s responsibility to retrieve the haircut schedule. The Corporation will provide
Members with at a minimum one Business Day’s advance notice of any change in the haircut
schedule.
Eligible Clearing Fund Securities that are used to secure an open account indebtedness
must be pledged to the Corporation on such terms and conditions as it may require, and bedelivered to the Corporation or to the Corporation’s account at a financial institution designatedby the Corporation. The valuation of such Eligible Clearing Fund Securities shall be at current
market value, which shall be determined by the Corporation not less frequently than on a daily
basis, less an applicable haircut. The Corporation has the right, in its discretion, to refuse to accept
a particular type of Eligible Clearing Fund Security as a permissible form of Clearing Fund deposit.

146

Upon appropriate notice to the Corporation, pursuant to procedures that the Corporation
establishes for such purpose, and subject to reasonable time constraints imposed by the
Corporation based on its operational and administrative capacities, a Netting Member may
substitute and/or withdraw Eligible Clearing Fund Securities from pledge and deposit, provided
that the Netting Member has, effective immediately prior to the withdrawal, taken appropriate
action to maintain its Required Fund Deposit. Notwithstanding the above sentence, theCorporation may decline to permit a substitution or withdrawal on a given Business Day later than
one hour prior to the close of the securities Fedwire on such day. Any interest on Eligible Clearing
Fund Securities deposited by a Netting Member to secure a Clearing Fund open accountindebtedness that is received by the Corporation shall be credited to the Netting Member’s cash
deposits to the Clearing Fund, except in the event of a default by such Netting Member on any
obligations to the Corporation under these Rules, in which case the Corporation may exercise its
rights under Section 6 of this Rule.
Section 4 – LienAs security for any and all obligations and liabilities of a Netting Member to the
Corporation, including, without limitation, the obligations of the Netting Member’s Permitted
Margin Affiliate to the Corporation, any obligation or liability of a Netting Member pursuant to a
Cross-Margining Agreement, any Reimbursement Obligation of a Cross-Margining Participant to
the Corporation pursuant to Section 3 of Rule 43, any obligation of a Cross-Margining Beneficiary
Participant to reimburse the Corporation pursuant to Section 7 of Rule 43, any obligation of a
Cross-Guaranty Defaulting Member to reimburse the Corporation pursuant to Section 2 of Rule
41 or any obligation of a Cross-Guaranty Beneficiary Member to reimburse the Corporation
pursuant to Section 5 of Rule 41, each such Netting Member grants to the Corporation a firstpriority perfected security interest in its right, title and interest in and to any Eligible Clearing Fund
Securities, funds and assets pledged to the Corporation to secure the Netting Member’s open
account indebtedness or placed by a Netting Member in the possession of the Corporation (or its
agents acting on its behalf), including all securities and cash on deposit with the Corporation or its
agents pursuant to this Rule and Rule 13 (collectively with any Eligible Letters of Credit issued
on behalf of a Netting Member in favor of the Corporation, the Netting Member’s “Actual
Deposit”). The Corporation shall be entitled to exercise the rights of a pledgee under common law
and a secured party under Articles 8 and 9 of the New York Uniform Commercial Code withrespect to such assets.
Section 5 – Use of Clearing Fund
The Clearing Fund shall only be used by the Corporation (i) to secure each Member’s
performance of obligations to the Corporation, including, without limitation, each Member’s
obligations with respect to any loss allocations as set forth in Section 7 of this Rule and any
obligations arising from a Cross-Guaranty Agreement pursuant to Rule 41 or a Cross-Margining
Agreement pursuant to Rule 43, (ii) to provide liquidity to the Corporation to meet its settlement
obligations, including, without limitation, through the direct use of cash in the Clearing Fund or
through the pledge or rehypothecation of pledged Eligible Clearing Fund Securities in order tosecure liquidity, and (iii) for investment as set forth in Section 3a of this Rule.

147

Each time the Corporation uses any part of the Clearing Fund pursuant to clause (ii) in thepreceding paragraph for more than 30 calendar days, the Corporation, at the Close of Business on
the 30th calendar day (or on the first Business Day thereafter) from the day of such use, shallconsider the amount used but not yet repaid as a loss to the Clearing Fund incurred as a result of a
Defaulting Member Event and immediately allocate such loss in accordance with Section 7 of thisRule.
Section 6 – Application of Clearing Fund Deposits and Other Amounts to Defaulting
Members’ Obligations
Any loss or liability incurred by the Corporation as the result of the failure of a Defaulting
Member to fulfill its obligations to the Corporation shall be satisfied as set forth in this Section 6.
The Corporation shall apply (a) any Clearing Fund deposits, Funds-Only Settlement
Amounts, and any other collateral or assets held by the Corporation securing such Defaulting
Member’s obligations to the Corporation, (b) any Clearing Fund deposits, Funds-Only Settlement
Amounts, and other collateral held by the Corporation with respect to a Permitted Margin Affiliateof the Defaulting Member, (c) any proceeds of any of the foregoing, and (d) the following
additional resources set forth in paragraphs (i) and (ii) below as are applicable to the Defaulting
Member:(i)

If the Defaulting Member is a Cross-Margining Participant, the Corporation shallapply any amounts available from an FCO under a Cross-Margining Guaranty
either upon receipt or at the time described in Section 5(b) of Rule 43.

(ii)

If the Defaulting Member is a Cross-Guaranty Defaulting Member, the Corporation
shall apply any amounts available under a Cross-Guaranty Agreement (subject toan applicable Cross-Margining Agreement) either upon receipt or at the time
described in Section 3(b) of Rule 41.

If the Corporation applies a Defaulting Member’s Clearing Fund deposits as permitted bythis Rule, the Corporation may take any and all actions with respect to the Defaulting Member’s
Actual Deposit, including the assignment, transfer, and sale of any Eligible Clearing Fund
Securities, that the Corporation determines is appropriate.
In the event that the Corporation makes a payment to an FCO under a Cross-Margining
Guaranty and the Cross-Margining Participant that incurs a Reimbursement Obligation
representing the amount of such payment fails to promptly satisfy the Reimbursement Obligation,
the Corporation may in its discretion, and without treating such Cross-Margining Participant as a
Defaulting Member, treat such payment as a loss to be allocated in accordance with this Sectionand Section 7 of this Rule.
Section 7 – Loss Allocation Waterfall, Off-the-Market Transactions
For the purposes of this Rule, the following terms shall have the following meanings:“Defaulting Member” shall mean a Member for which the Corporation has ceased to act
pursuant to Rule 21 or Rule 22.
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“Defaulting Member Event” shall mean the determination by the Corporation to cease toact for a Member pursuant to Rule 21 or Rule 22.
“Declared Non-Default Loss Event” shall mean the determination by the Board of
Directors that a loss or liability incident to the clearance and settlement business of the Corporation
may be a significant and substantial loss or liability that may materially impair the ability of the
Corporation to provide clearance and settlement services in an orderly manner and will potentiallygenerate losses to be mutualized among Members in order to ensure that the Corporation may
continue to offer clearance and settlement services in an orderly manner.
Each Member shall be obligated to the Corporation for the entire amount of any loss or
liability incurred by the Corporation arising out of or relating to any Defaulting Member Event
with respect to such Member. To the extent that such loss or liability is not satisfied pursuant to
Section 6 of this Rule 4, the Corporation shall apply a Corporate Contribution thereto and charge
the remaining amount of such loss or liability ratably to other Members, as further provided below.
If the Corporation incurs a loss or liability arising out of or relating to a Defaulting Member
Event or a Declared Non-Default Loss Event, the Corporation shall address the loss or liability as
follows:
The Corporation shall apply the Corporate Contribution to losses and liabilities that ariseout of or relate to one or more Defaulting Member Events and/or Declared Non-Default Loss
Events that occur within an Event Period. If losses and liabilities with respect to such Event Period
remain unsatisfied following application of the Corporate Contribution, the Corporation shallallocate such losses and liabilities to Members, subject to the requirements and limitations below.
If the loss or liability with respect to an Event Period results from one or more Defaulting
Member Events, the Corporation shall determine the amount of such loss or liability that is
attributable to Tier One Netting Members and the amount of such loss or liability that is attributableto Tier Two Members. If the loss or liability with respect to an Event Period results from one ormore Declared Non-Default Loss Events, the amount of such loss or liability shall be attributableto Tier One Netting Members. Tier Two Members shall not be subject to loss allocation withrespect to Declared Non-Default Loss Events.
To the extent that a loss or liability of the Corporation is determined by the Corporation toarise in connection with the close-out or liquidation of an Off-the-Market Transaction in theportfolio of a Defaulting Member, it shall be allocated directly and entirely to the Member thatwas the counterparty to such Off-the-Market Transaction.
No loss allocation under this Rule shall constitute a waiver of any claim the Corporation
may have against a Member for any losses or liabilities, including, without limitation, any loss or
liability to which the Member is subject under these Rules. If the Corporation allocates losses or
liabilities pursuant to this Rule and subsequently recovers amounts against such allocated losses
or liabilities, in whole or in part, the net amount of the recovery shall be credited to the Persons,
including the Corporation, against whom the losses were charged in proportion to the amounts
charged against them.

149Tier One Netting Members
Defaulting Member Events and/or Declared Non-Default Loss Events that occur within aperiod of ten (10) Business Days (hereinafter, an “Event Period”) shall be grouped together for
purposes of applying the limits on loss allocation set forth in this Rule.
In the case of a Defaulting Member Event, an Event Period begins on the day the
Corporation notifies Members that it has ceased to act for the Defaulting Member (or the next
Business Day, if such day is not a Business Day).
In the case of a Declared Non-Default Loss Event, an Event Period begins on the day that
the Corporation notifies Members of the Declared Non-Default Loss Event (or the next Business
Day, if such day is not a Business Day), which notification shall be issued promptly following any
such determination. If a subsequent Defaulting Member Event or Declared Non-Default Loss
Event occurs during an Event Period, any losses or liabilities arising out of or relating to any such
subsequent event shall be resolved as losses or liabilities that are part of the same Event Period,
without extending the duration of such Event Period.
Each Tier One Netting Member that is a Tier One Netting Member on the first day of an
Event Period shall be obligated to pay its pro rata share of losses and liabilities arising out of or
relating to each Defaulting Member Event (other than a Defaulting Member Event with respect towhich it is the Defaulting Member) and each Declared Non-Default Loss Event occurring during
the Event Period. Any Tier One Netting Member for which the Corporation ceases to act on a
non-Business Day, triggering an Event Period that commences on the next Business Day, shall bedeemed to be a Tier One Netting Member on the first day of that Event Period.
A loss allocation “round” means a series of loss allocations relating to an Event Period, theaggregate amount of which is limited by the sum of the Loss Allocation Caps of affected Tier One
Netting Members (a “round cap”). When the aggregate amount of losses allocated in a roundequals the round cap, any additional losses relating to the applicable Event Period would beallocated in one or more subsequent rounds, in each case subject to a round cap for that round.
The Corporation may continue the loss allocation process in successive rounds until all losses fromthe Event Period are allocated among Tier One Netting Members who have not submitted a Loss
Allocation Withdrawal Notice in accordance with Section 7b of this Rule.
Each loss allocation shall be communicated to Tier One Netting Members by the issuanceof a notice that advises the Tier One Netting Members of the amount being allocated to them(hereinafter, the “Loss Allocation Notice”). Each Tier One Netting Member’s pro rata share oflosses and liabilities to be allocated in any round shall be equal to (i) the average of its Required
Fund Deposit for the seventy (70) Business Days preceding the first day of the applicable Event
Period or such shorter period of time that the Tier One Netting Member has been a Tier One
Netting Member (each Tier One Netting Member’s “Average RFD”), divided by (ii) the sum of
Average RFD amounts of all Tier One Netting Members subject to loss allocation in such round.
Each Loss Allocation Notice shall specify the relevant Event Period and the round to which
it relates. The first Loss Allocation Notice in any first, second, or subsequent round shall expressly
state that such Loss Allocation Notice reflects the beginning of the first, second, or subsequent150

round, as the case may be, and that each Tier One Netting Member in that round has five (5)Business Days from the issuance of such first Loss Allocation Notice for the round to notify the
Corporation of its election to withdraw from membership pursuant to Section 7b of this Rule, andthereby benefit from its Loss Allocation Cap. The “Loss Allocation Cap” of a Tier One Netting
Member shall be equal to the greater of (x) its Required Fund Deposit on the first day of theapplicable Event Period and (y) its Average RFD.
After a first round of loss allocations with respect to an Event Period, only Tier One Netting
Members that have not submitted a Loss Allocation Withdrawal Notice in accordance with Section
7b of this Rule shall be subject to further loss allocation with respect to that Event Period.
Notwithstanding the foregoing, however, an Inter-Dealer Broker Netting Member, or a
Non-IDB Repo Broker with respect to activity in its Segregated Repo Account, shall not be subject
to an aggregate loss allocation in an amount greater than $5 million pursuant to this Section 7 forlosses and liabilities resulting from an Event Period.
For purposes of calculating the pro rata share of losses and liabilities and the Loss
Allocation Cap pursuant to the previous paragraph, the Corporation shall not count toward a Tier
One Netting Member’s Required Fund Deposit any increased Clearing Fund deposit that the Tier
One Netting Member may be subject to pursuant to Section 2(d) of this Rule.
Tier One Netting Members shall pay to the Corporation the amount specified in any firstround Loss Allocation Notice on the second Business Day after the Corporation issues any such
notice. Tier One Netting Members shall pay to the Corporation the amount specified in any
subsequent round Loss Allocation Notice on the second Business Day after the Corporation issues
such notice, unless the Tier One Netting Member has timely notified (or will timely notify) the
Corporation of its election to withdraw from membership with respect to a prior loss allocation
round, pursuant to Section 7b of this Rule.
To the extent that a Tier One Netting Member’s Loss Allocation Cap exceeds the Tier One
Netting Member’s Required Fund Deposit on the first day of the applicable Event Period, theCorporation may, in its discretion, retain any excess amounts on deposit from the Tier One Netting
Member, up to the Tier One Netting Member’s Loss Allocation Cap.
If a Tier One Netting Member fails to make payment to the Corporation in respect of a
Loss Allocation Notice by the time such payment is due, the Corporation shall have the right toproceed against such Tier One Netting Member as a Defaulting Member that has failed to satisfy
an obligation in accordance with Section 6 of this Rule.
If a Tier One Netting Member notifies the Corporation of its election to withdraw frommembership pursuant to Section 7b of this Rule, the Tier One Netting Member shall comply withthe provisions of Section 7b of this Rule. If, after notifying the Corporation of its election towithdraw from membership pursuant to Section 7b of this Rule, the Tier One Netting Member
fails to comply with the provisions of Section 7b of this Rule, its notice of withdrawal shall bedeemed void and any further losses resulting from the applicable Event Period may be allocatedagainst it as if it had not given such notice.

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A Tier One Netting Member that elects to withdraw pursuant to Section 7b of this Rule
shall not be eligible to re-apply to become a Comparison-Only Member or a Netting Member
unless, prior to submitting such application, it makes the payment(s) to the Corporation that would
have been due pursuant to Section 7 of this Rule as if the Tier One Netting Member had notwithdrawn, together with interest on that amount at the average of the Federal Funds Rate plus one
percent, calculated from the date on which the Event Period began.
Tier Two Members
To the extent there is a loss or liability payable by Tier Two Members, such loss or liability
shall be allocated to Tier Two Members.
If the Tier Two Members are not CCIT Members (hereinafter, the “Tier Two Non-CCIT
Members”), the allocation will be based upon their trading activity with the Defaulting Memberthat resulted in a loss or liability. The Corporation shall assess such loss or liability against theTier Two Non-CCIT Members ratably based upon their loss or liability as a percentage of theentire amount of the loss or liability attributable to such Tier Two Non-CCIT Members. Such Tier
Two Non-CCIT Members with a bilateral liquidation profit will not be allocated any portion of
the loss or liability otherwise attributable to Tier Two Members.
If the Tier Two Members are CCIT Members (hereinafter, the “Tier Two CCIT
Members”), the allocation will be based upon their open trading activity with the Defaulting
Member that resulted in a loss or liability. The Corporation shall assess such loss or liability
against the Tier Two CCIT Members ratably based upon a percentage of the loss or liability
attributable to each Tier Two CCIT Member’s specific Generic CUSIP that it had open with theDefaulting Member. Such Tier Two CCIT Members with a bilateral liquidation profit will not beallocated any portion of the loss or liability otherwise attributable to Tier Two Members.
If a Tier Two Member fails to make payment to the Corporation in respect of a Loss
Allocation Notice by the time such payment is due, the Corporation shall have the right to proceedagainst such Tier Two Member as a Defaulting Member that has failed to satisfy an obligation inaccordance with Section 6 of this Rule.
Section 7a – Corporate Contribution
For any loss allocation pursuant to Section 7 of this Rule, whether arising out of or relating
to a Defaulting Member Event or a Declared Non-Default Loss Event, the Corporation’s corporate
contribution to losses or liabilities that are incurred by the Corporation with respect to an Event
Period (hereinafter, the “Corporate Contribution”) shall be an amount that is equal to fifty (50)percent of the amount calculated by the Corporation in respect of its General Business Risk Capital
Requirement as of the end of the calendar quarter immediately preceding the Event Period. The
Corporation’s General Business Risk Capital Requirement, as defined in its Clearing Agency
Policy on Capital Requirements, is, at a minimum, equal to the regulatory capital that the
Corporation is required to maintain in compliance with Rule 17Ad-22(e)(15) under the ExchangeAct. If the Corporate Contribution is applied by the Corporation against a loss or liability relating
to an Event Period, whether arising out of or relating to a Defaulting Member Event or a Declared
Non-Default Loss Event, the Corporate Contribution for any subsequent Event Periods occurring

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during the two hundred fifty (250) Business Days thereafter shall be reduced to the remaining
unused portion of the Corporate Contribution amount that applied for the first Event Period. The
Corporation shall notify Members of any such reduction to the Corporate Contribution. The
Corporation shall maintain one Corporate Contribution, the amount of which is available to boththe Government Securities Division and the Mortgage-Backed Securities Division, and would beapplied against a loss or liability in either Division in the order in which such loss or liability
occurs. In the event of a loss or liability relating to an Event Period, whether arising out of or
relating to a Defaulting Member Event or a Declared Non-Default Loss Event, attributable to only
one Division, the Corporate Contribution shall be applied to that Division up to the amount thenavailable. If a loss or liability relating to an Event Period, whether arising out of or relating to a
Defaulting Member Event or a Declared Non-Default Loss Event, occurs simultaneously at both
Divisions, the Corporate Contribution shall be applied to the respective Division in the same
proportion that the aggregate Average RFDs of all members in that Division bears to the aggregate
Average RFDs of all members in both Divisions.
Nothing in these Rules shall prevent the Corporation from voluntarily applying amounts
greater than the Corporate Contribution against any loss or liability of the Corporation, whether
arising out of or relating to a Defaulting Member Event or a Declared Non-Default Loss Event, if
the Board of Directors, in its sole discretion, believes such to be appropriate under the factual
situation existing at the time.
Section 7b – Withdrawal Following Loss Allocation
If a Tier One Netting Member timely notifies the Corporation of its election to withdraw
from membership in respect of a loss allocation round as set forth in Section 7 of this Rule
(hereinafter, the “Loss Allocation Withdrawal Notice”), the Tier One Netting Member shall:(i)

specify in the Loss Allocation Withdrawal Notice an effective date for its
withdrawal from membership, which date shall not be prior to the scheduled final
settlement date of any remaining obligation owed by the Tier One Netting Member
to the Corporation, unless otherwise approved by the Corporation; and(ii)

as of the time of such Tier One Netting Member’s submission of the Loss
Allocation Withdrawal Notice to the Corporation, cease submitting transactions to
the Corporation for processing, clearance or settlement, unless otherwise approvedby the Corporation.

A Tier One Netting Member that withdraws in compliance with the requirements of thissection shall nevertheless remain obligated for its pro rata share of losses and liabilities with respect
to any Event Period for which it is otherwise obligated hereunder; however, its aggregate obligation
shall be limited to the amount of its Loss Allocation Cap (as fixed in the round for which it withdrew).
If the Tier One Netting Member fails to comply with the requirements in this section, its
Loss Allocation Withdrawal Notice will be deemed void, and the Tier One Netting Member willremain subject to further loss allocations pursuant to Section 7 of this Rule as if it had not givensuch Loss Allocation Withdrawal Notice.

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Section 8 – Return of Members’ Clearing Fund Deposits
If a Member gives notice to the Corporation of its election to withdraw from membership,
the Member’s Actual Deposit in the form of (i) cash or securities shall be returned to it within
thirty (30) calendar days and (ii) Eligible Letters of Credit shall be returned to it within ninety (90)calendar days, after all of its transactions have settled and all matured and contingent obligations
to the Corporation for which the Member was responsible while a Member have been satisfied.
Notwithstanding anything else contained in these Rules, the Corporation may retain an
amount equal to any Cross-Guaranty Repayment Deposit and/or Cross-Margining Repayment
Deposit of any Member until such time as the Corporation determines that such Member is nolonger liable to the Corporation under Rule 41 “Cross Guaranty Agreements” and/or Rule 43“Cross-Margining Arrangements”, to reimburse the Corporation for any Cross-Guaranty
Repayment or Cross-Margining Repayment, respectively, that the Corporation may be obligatedto make under any relevant Cross-Guaranty Agreement or Cross-Margining Agreement.
Section 9 – Initial Required Fund Deposit and Changes in Members’ Required Fund Deposits
The initial Required Fund Deposit of a Netting Member shall be required to be deposited
into the Clearing Fund prior to the Business Day on which such Person becomes a Netting Member
in accordance with the Corporation’s procedures.
A Netting Member must increase the amount of its deposit to the Clearing Fund (by thedeposit of cash, Eligible Netting Securities, and/or Eligible Letters of Credit subject to therequirements of this Rule) by the Required Fund Deposit Deadline on any Business Day that such
Netting Member’s Actual Deposit is less than its Required Fund Deposit as set forth in the Reportlisting such, subject to the conditions included in Section 2 of this Rule 4. If there is an increasein a Netting Member’s Required Fund Deposit, at the time the increase becomes effective, theNetting Member’s obligations to the Corporation shall be determined in accordance with theincreased Required Fund Deposit whether or not the Netting Member has satisfied such increased
amount.
If the Corporation applies a Netting Member’s Clearing Fund deposits as permitted
pursuant to this Rule, the Corporation may take any and all actions with respect to the Netting
Member’s Actual Deposit, including assignment, transfer, and sale of any Eligible Clearing Fund
Securities, that the Corporation determines is appropriate. If such application results in any
deficiency in the Netting Member’s Required Fund Deposit, the Netting Member shallimmediately replenish it. If the Netting Member fails to do so, the Corporation may takedisciplinary action against such Netting Member pursuant to Rule 21 or Rule 48. Any disciplinary
action that the Corporation takes pursuant to Rule 21 or Rule 48 or the voluntary or involuntary
cessation of membership shall not affect the Netting Member’s obligations to the Corporation or
any remedy to which the Corporation may be entitled under applicable law.
The Corporation retains discretion to extend the Required Fund Deposit Deadline on any
Business Day if there are operational or system difficulties that would reasonably prevent
Members from satisfying Required Fund Deposit deficits by the time specified in the Corporation’s
procedures.

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Notwithstanding the foregoing, the Corporation may require a Netting Member or Netting
Members generally to deposit additional amounts to their Clearing Fund deposit on an intraday
basis if the Corporation believes such action is necessary to protect itself and its Members.
Section 10 – Excess Clearing Fund Deposits
The Corporation shall determine with such frequency as it shall from time to time specify,
whether the amount deposited by a Member in the Clearing Fund is in excess of its Required Fund
Deposit (hereinafter, “Excess Clearing Fund Deposit”). On any day that the Corporation has
determined that an Excess Clearing Fund Deposit exists with respect to any Member, theCorporation will, in the form and manner required by the Corporation, notify each such Memberof such excess. Subject to the Corporation’s rights under these Rules to require additional amounts
to be deposited by a Member, upon a Member’s request, and in accordance with such proceduresas the Corporation may set forth from time to time, the Corporation shall return to the Member
such amount of its excess cash on deposit (subject to the minimum amount of cash required to be
maintained in the Clearing Fund) and/or pledged Eligible Clearing Fund Securities (valued at theircollateral value on the day of such withdrawal) as the Member requests. Notwithstanding theforegoing, at the discretion of the Corporation, some or all of the Excess Clearing Fund Deposit
may not be returned if the Member has an outstanding payment obligation to the Corporation, if
the Corporation determines that the Member’s anticipated Funds-Only Settlement Amounts or Net
Settlement Positions in the near future may reasonably be expected to be materially different thanthose of the recent past or if the Member is on the Watch List.
In addition, the return of an Excess Clearing Fund Deposit amount to any Member issubject to the following limitations: (1) such return of Excess Clearing Fund Deposit shall not bedone in a manner that would cause the Member to violate any other Section of these Rules;(2) Excess Clearing Fund Deposit shall not be returned to a Member to the extent that such returnwould reduce the amount of the Member’s Cross-Guaranty Repayment Deposit to the Clearing
Fund below the amount required to be maintained pursuant to Section 4 of Rule 41; and (3) Excess
Clearing Fund Deposit shall not be returned to a Member to the extent that such return would
reduce the amount of the Member’s Cross-Margining Repayment Deposit to the Clearing Fund
below the amount required to be maintained pursuant to Section 6 of Rule 43.
The provisions of this section shall not limit the rights or remedies of the Corporation asprovided in Section 7 of Rule 3.
Section 11 – Corporation’s Authority to Pledge and Assign
In furtherance of the rights of the Corporation pursuant to these Rules, the Corporation
shall have full power and authority to pledge, repledge, hypothecate, transfer, create a security
interest in, or assign any and all Actual Deposits and any proceeds thereof for the purpose of
securing loans made to the Corporation (the party making any such loan to the Corporation
hereinafter referred to as the “Lender”); provided that the proceeds of such loans are used for a
purpose permissible under Section 3 and Section 5 of this Rule. Such loans shall be on terms andconditions deemed necessary or advisable by the Corporation (including collateralization thereof)
in its sole discretion, and may be in amounts greater, and extend for periods of time longer, thanthe obligations, if any, of any Member to the Corporation for which such property and Eligible

155

Letters of Credit (if any) were pledged to or deposited with the Corporation. Notwithstanding theabove, the Corporation shall remain obligated to each such Member to return, and to allow
substitution for or withdrawal of, cash, and Eligible Clearing Fund Securities, and Eligible Lettersof Credit (if any) pledged or deposited by such Member as a Clearing Fund deposit, or otherwise
to collateralize such Member’s obligations to the Corporation, under the circumstances and within
the timeframes specified in these Rules. In the event of any conflict or inconsistency between thisRule 4 and any agreement between the Corporation and any Member, this Rule 4 shall govern andprevail.
Section 12 – Clearance and Settlement Business of the Corporation
For purposes of this Rule 4, references to the clearance and settlement business of the
Corporation shall include its business as a Securities Intermediary.

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RULE 5 – COMPARISON SYSTEM
Section 1 – General
Trade comparison, which consists of the reporting, validating, and, in some cases, matchingby the Corporation of the long and short sides of a securities trade, including a Repo Transaction,
to ensure that the details of such trade are in agreement between the parties, is the first step in theclearance and settlement process for securities transactions. A Member of the Comparison System
must submit to the Corporation for comparison trade data on all of its trades that are of the typeprocessed by the Corporation (including trades executed and settled on the same day), calling fordelivery of Eligible Securities, between it or an Executing Firm on whose behalf it is acting, andanother Member or an Executing Firm on whose behalf it or another Member is acting. If the
Corporation determines that a Comparison-Only Member has, without good cause, violated its
obligations pursuant to this section, such Comparison-Only Member may be reported to theappropriate regulatory body, placed on the Watch List and/or subject to an additional fee. In
addition, the Corporation may discipline a Comparison-Only Member for a violation of this sectionin accordance with Rule 48.
Trade data may be entered via any means permitted by the Corporation, and must include
such identifying detail as the Corporation may require. As trade data are submitted to the
Corporation, the Corporation shall generate output indicating that such trade data: (1) is compared,(2) is uncompared, (3) comparison is requested with regard to an advisory, and/or (4) has been
deleted from the Comparison System.
Section 2 – Three Types of Comparison
Trade data may be submitted to the Corporation for Bilateral Comparison (Rule 6A),
Demand Comparison (Rule 6B), or Locked-In Comparison (Rule 6C).
Section 3 – Trade Submission Communication Methods
Trade data may be submitted to the Corporation using the Interactive Submission Method,
the Multiple Batch Submission Method, or the Single Batch Submission Method. Members andother authorized submitters must use the trade submission method(s) required by the Corporation
with respect to each type of comparison.
Section 4 – Submission Size Alternatives
The following requirements shall apply to all trades that are submitted to the Corporation
by a Member, including all trades that are submitted on behalf of any Affiliate or Executing Firm.
A trade with a par value of $50 million or less must be submitted to the Corporation in thefull size and in the exact amount in which the trade was executed. Trades for over $50 million
must be submitted in an equivalent number of $50 million trades and a single tail for the remaining
amount.
Notwithstanding the above: (i) GCF Repo Transactions and Sponsored GC Trades mustbe submitted exactly as executed, and (ii) when the Corporation deems it appropriate and advises
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Members of such, Members using the Interactive Submission Method may submit Full-Sized
Trades exactly as executed, for amounts over $50 million.
The Corporation may discipline a Member for a violation of this section in accordance with
Rule 48.
Section 5 – General Responsibilities of Members in the Comparison System
Trade data submitted to the Corporation by a Member or on behalf of a Member by anauthorized submitter shall be submitted in the form and manner, and in accordance with thetimeframes, prescribed by, or pursuant to, these Rules or otherwise by the Corporation.
The name of a Member printed, stamped or written on any form, document or other item
issued by it pursuant to this Rule shall be deemed to have been adopted by it as its signature andshall be valid and binding upon it in all respects as though it had manually affixed its signature tosuch form, document or other item.
Each Member shall promptly review each Report it receives from the Corporation pursuant
to this Rule. Any errors, omissions, or similar problems noted by a Member with respect to aReport must be promptly reported to the Corporation.
Any trade the data on which are submitted to the Corporation by a Member pursuant tothese Rules which is not netted and settled through the Netting System pursuant to these Rules
shall be settled directly between the parties. Notwithstanding the previous sentence, settlement ofSame-Day Settling Trades shall be processed as per Section 11 of Rule 12.
Section 6 – Binding Nature of ComparisonsComparisons generated by the Corporation, whether for data submitted on a yield basis oron a price basis, shall constitute the sole comparison for all trades in Eligible Securities for which
Members have submitted data and which the Corporation has identified as Compared Trades. Eachcomparison generated by the Corporation as to any Compared Trade shall evidence a valid, binding
and enforceable contract in respect of such Compared Trade. Any confirmations, comparison orother documentary evidence of any such Compared Trade, other than the comparison generated
by the Corporation, shall not affect the existence or terms and conditions of such a valid, binding
and enforceable contract in respect of such Compared Trade. Notwithstanding the previous
sentence, the comparison by the Corporation of a trade involving unmatched commission amounts
pursuant to the Rules, while evidencing a valid, binding, and enforceable contract between theparties to the trade to the same degree as if the commission amounts matched, shall not constitutea final, binding determination by the Corporation as to the correct commission amount owing onsuch trade. The Broker that submitted data on such trade shall have an ongoing obligation to the
Dealer that submitted data on such trade to respond promptly to such Dealer’s commission
difference inquiries, and to act in good faith to promptly resolve any such alleged differences.
Section 7 – Deletion of Trade Data by the Corporation
Trade data submitted to the Corporation shall pend in the Comparison System until the data
either is compared or is deleted by the Corporation in accordance with a schedule for such deletion158

as is published by the Corporation from time to time, unless cancelled by Member or tradesubmitter action as provided for in these Rules.
Section 8 – Novation of Compared Trades(a)Each Compared Trade that meets the requirements of Section 2 of Rule 11 and wasentered into in good faith shall be Novated to the Corporation at the time at which comparison ofsuch Compared Trade occurs pursuant to Rules 6A, 6B or 6C. Such Novation shall consist of thetermination of the deliver, receive and related payment obligations between the Netting Members,
or between a CCIT Member (or Joint Account) and a Netting Member, with respect to theCompared Trade (including, if such Compared Trade is a Repo Transaction, any Right ofSubstitution established by the parties) and their replacement with identical obligations to and fromthe Corporation in accordance with these Rules.
(b)
Each Same-Day Settling Trade that becomes a Compared Trade and was enteredinto in good faith shall be Novated to the Corporation at the time at which the comparison of suchtrade occurs pursuant to Rules 6A or 6B, as applicable, provided the trade meets the requirementsof Section 11(ii) of Rule 12. Such Novation shall consist of the termination of the deliver, receiveand related payment obligations between the Netting Members and their replacement withidentical obligations to and from the Corporation in accordance with these Rules.
(c)
If a trade becomes uncompared or is cancelled pursuant to these Rules, the deliver,receive, and related payment obligations between the Corporation and the Netting Members and,as applicable, CCIT Member (or Joint Account), created by the Novation of such trade shall beterminated and cancelled, and no amounts shall be owing between the Corporation and the Netting
Members or CCIT Member (or Joint Account) on account of such trade. If a Compared Trade ismodified pursuant to these Rules after Novation and such modification does not cause such trade
to become uncompared, such modification shall cause a corresponding modification to the deliver,receive and related payment obligations of the relevant Netting Members and, as applicable, CCIT
Member (or Joint Account), to and from the Corporation.
(d)
At the time a Compared Trade is Novated to the Corporation, such Compared Tradeshall cease to be bound by any bilateral agreement between the parties to such Compared Tradewith respect to the delivery, receive and related payment obligations. If a Compared Trade
becomes uncompared or is cancelled pursuant to these Rules, such trade shall be governed by thesame bilateral agreement that governed the trade before it was Novated to the Corporation.
Section 9 – As-Of Trades
Data on As-Of Trades may be submitted for comparison at any time prior to the maturity
date for the Eligible Securities that underlie the trade.

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RULE 6A – BILATERAL COMPARISON
Section 1 – General
Bilateral Comparison requires the matching by the Corporation of data submitted by two
Members (or by an authorized submitter of one or both Members). A Member of the Comparison
System may submit to the Corporation for Bilateral Comparison trade data on any Transaction,prior to its maturity date, calling for delivery of Eligible Securities, between a Member of theComparison System or an Executing Firm on whose behalf it is acting, and another Member of theComparison System or an Executing Firm on whose behalf it is acting. The Corporation will, in
accordance with these Rules, handle the comparison of Transactions reflected in the trade data so
submitted to it.
In order for the Corporation to process a trade for Bilateral Comparison, the Corporationmust receive data from the long and short sides of the trade (or, if one or both of the counterparties
are not Members or are Sponsoring Members, the Corporation must receive the data from the
Submitting Member(s) or authorized submitters acting on its or their behalf). For a BilateralComparison to be generated by the Corporation, except as otherwise provided in Rule 10, Rule
22A, the Schedule of Required Match Data, or the Schedule of Money Tolerances, there must be
an exact match of all Required Match Data submitted on the trade, except for contra-participant
identifying information if the Corporation, acting upon the request of, and with instructions
deemed appropriate by the Corporation from, a Member translates an internal contra-party
identifying number submitted by such Member to a standard Member identification number
established by the Corporation. Except as otherwise provided in Rule 10, if there is a money
difference in a Required Match Data item within the tolerance specifications set by the Corporationin the Schedule of Money Tolerances that are relevant to the trade, the Corporation shall accept
the delivering party’s amount. Notwithstanding anything to the contrary in the previous sentence,
the Corporation, in its sole discretion, may establish minimum amounts, maximum amounts, andother parameters for the acceptance of data submitted to the Corporation.
Items identified as uncompared by the Corporation reflect trades submitted by a Member
for which the counterparty Member either did not submit data or did not submit data whichmatched in all respects, except as otherwise provided in these Rules. Comparison requested(advisory) data represents trades submitted by another Member against a Member.
Section 2 – Submission Method Requirements
Trade data may be submitted to the Corporation for Bilateral Comparison using theInteractive Submission Method, Multiple Batch Submission Method, or Single Batch Submission
Method. A Member may use a different submission method than its counterparty or the Submitting
Member acting on the counterparty’s behalf.
Section 3 – Cancellation and Modification of Trade Data by Members
A Member that has submitted to the Corporation trade data for Bilateral Comparison thathave not been compared may cancel such data from the Comparison System, or may modify such160

data, by providing appropriate instructions to the Corporation, pursuant to the communication
links, formats, timeframes, and deadlines established by the Corporation for such purpose.
Trade data submitted for Bilateral Comparison that have been compared may be cancelledfrom the Comparison System upon receipt by the Corporation of appropriate instructions,submitted pursuant to the communication links, formats, timeframes, and deadlines established by
the Corporation for such purpose, from both Members that submitted data on the trade.
Trade data submitted for Bilateral Comparison that have been compared may be modified
upon receipt by the Corporation of appropriate instructions, submitted pursuant to thecommunication links, formats, timeframes, and deadlines established by the Corporation for such
purpose, from both Members that submitted data on the trade, except that a Compared Tradecannot be modified unilaterally by a Member if the modification would cause the trade to become
uncompared.
Section 4 – Timing of Comparison
The comparison of trade data submitted to the Corporation for Bilateral Comparison shallbe deemed to have occurred at the point in time at which the Corporation makes available to theMembers on both sides of the Transaction a Report indicating that such trade data have been
compared.

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RULE 6B – DEMAND COMPARISON
Section 1 – General
In order for the Corporation to process a trade for Demand Comparison, the Corporationmust receive the trade data from a Demand Trade Source.
The Corporation has designated the Repo Brokers as Demand Trade Sources with respect
to Brokered Repo Transactions (other than GCF Repo Transactions) that are submitted to the
Corporation by the deadline established for this purpose in the Schedule of Timeframes. Brokered
Repo Transactions (other than GCF Repo Transactions) submitted by the deadline noted in theprevious sentence will be processed for Demand Comparison. With respect to such transactions,
Repo Parties remain subject to Section 1 of Rule 5 which requires the Repo Party to also submit
the transaction data to the Corporation. Brokered Repo Transactions submitted after the deadline
noted in the first sentence of this paragraph will be processed for Bilateral Comparison.
Section 2 – Authorization of Transmission and Receipt by the Corporation of Data on Demand
TradesWith the exception of Brokered Repo Transactions (other than GCF Repo Transactions)that are required to be submitted for Demand Comparison as per Section 1 of this Rule, each
Member that wishes to have a Demand Trade Source submit trade data on its behalf shall provide
the Corporation, prior to the time of the making of such Demand Trade and in the form and mannerrequired by the Corporation, with authorization for the Corporation to receive from the Demand
Trade Source data on the Demand Trade. The Corporation shall not accept data from a Demand
Trade Source with regard to a Member unless the Corporation previously has received such
authorization from such Member.
Moreover, each Member that makes a Demand Trade shall provide the Demand Trade
Source, prior to or at the time of the making of such Demand Trade and in the form and mannerrequired by such Demand Trade Source, with sufficient authorization for the Demand Trade
Source to transmit to the Corporation such data on the Demand Trade as the Corporation deems
necessary.
Section 3 – Submission Requirements
A Demand Trade shall be eligible for comparison by the Corporation if the submission
contains all of the required data and is submitted pursuant to communications links, formats,timeframes, and deadlines established by the Corporation for such purpose. A Demand Trade
Source must submit data on Demand Trades to the Corporation using the computer-to-computer
Interactive Submission Method or such other means as the Corporation shall require from time totime after providing appropriate notice to Members.
Section 4 – DK Notices
A Member may transmit a DK Notice to the Corporation with respect to a Demand Tradethat has been submitted to the Corporation on the Member’s behalf and which the Member believes

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is invalid or incorrect. The receipt of a DK Notice by the Corporation with respect to a Demand
Trade in the form and manner, and within the applicable timeframe for such, as established by the
Corporation, shall cause the trade to become uncompared. A Member who does not submit a DK
Notice with respect to a Demand Trade remains responsible for such trade under these Rules.
A Member that transmitted a DK Notice erroneously with respect to a trade submitted for
Demand Comparison may withdraw the DK Notice in order to enable comparison. Suchwithdrawal of a DK Notice must be made in the form and manner, and within the applicable
timeframe for such, as established by the Corporation for such purpose.
Section 5 – Modification and Cancellation of Data
A Demand Trade Source that has submitted trade data to the Corporation for DemandComparison may have such data cancelled from the Comparison System, or may modify such data,by providing appropriate instructions to the Corporation, in the form and manner, and within theapplicable timeframe for such, as established by the Corporation for such purpose. Such unilateralmodification or cancellation on the part of the Demand Trade Source may be made only until suchtime as the trade has been matched in the Corporation’s real-time trade matching system or theMember receives comparison output from the Corporation.
A Demand Trade Source may modify a trade against which a DK Notice has been
submitted in order to enable comparison. Such modification must occur by use of the appropriate
instruction and within the applicable timeframe for such, as established by the Corporation forsuch purpose.
Section 6 – Reporting of Demand Trades
Data on Demand Trades shall be reported by the Corporation to Members as part of its
Comparison System output with an indication that such data have been received from a Demand
Trade Source.
Section 7 – Discretion of the Corporation Not to Accept Data or to Modify, Add or Cancel Data
In its sole discretion, the Corporation may decline to accept from a Demand Trade Source
data on the Demand Trades of a particular Member or Members.
Notwithstanding anything to the contrary in the Rules, the Corporation shall have theauthority, in order to correct or avoid an error, to unilaterally modify, add, or cancel data on any
Demand Trade.
Section 8 – Binding Nature of Comparison System Output on Demand Trades
Comparison System output made available by the Corporation on Demand Trades of a
Member shall evidence a valid, binding and enforceable Compared Trade for purposes of theseRules, notwithstanding that such data may not be matched with corresponding data submitted to
the Corporation by such Member.

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Section 9 – Timing of Comparison
The comparison of trade data submitted to the Corporation for Demand Comparison thatmeets the requirements set forth in this Rule shall be deemed to have occurred upon receipt of suchtrade data from the Demand Trade Source by the Corporation.

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RULE 6C – LOCKED-IN COMPARISON
Section 1 – General
In order for the Corporation to process a trade for Locked-In Comparison, the Corporationmust receive the trade data from a Locked-In Trade Source.
Section 2 – Authorizations of Transmission to and Receipt by the Corporation of Data on LockedIn Trades
Except with respect to Auction Purchases, which are governed by Section 3 of this Rule,each Member that wishes to have a Locked-In Trade Source submit trade data on its behalf shallprovide the Corporation, prior to the time of the making of such Locked-In Trade and in the form
and manner required by the Corporation, with authorization for the Corporation to receive fromthe Locked-In Trade Source data on the Locked-In Trade. The Corporation shall not accept datafrom a Locked-In Trade Source with regard to a Member unless the Corporation previously hasreceived such authorization from such Member. With regard to GCF Repo Transactions, theCorporation shall not accept data from a GCF-Authorized Inter-Dealer Broker regarding any such
GCF Repo Transaction unless the Corporation previously has received authorization to do so fromeach of the two GCF Counterparties to the GCF-Authorized Inter-Dealer Broker on such GCF
Repo Transaction.
Moreover, each member that makes a Locked-In Trade shall provide the Locked-In Trade
Source, prior to or at the time of the making of such trade and in the form and manner required bysuch Locked-In Trade Source, with sufficient authorization for the Locked-In Trade Source totransmit to the Corporation such data as the Corporation deems necessary on the Locked-In Trade.
Section 3 – Authorizations of Transmission to and Receipt by the Corporation of Data on NettingEligible Auction PurchasesWith respect to Treasury Department auctions, a Netting Member that makes a NettingEligible Auction Purchase shall provide the Corporation and the Federal Reserve Bank throughwhich it makes such Auction Purchase, prior to the time of the making of such Auction Purchaseand in the form and manner required by the Treasury Department or the Federal Reserve Bank, as
fiscal agent of the United States, and agreed to by the Corporation, with authorization for theFederal Reserve Bank to transmit to the Corporation, and the Corporation to receive from theFederal Reserve Bank, data on the Member’s Auction Purchase. The Corporation shall not accept
data from the Federal Reserve Bank with regard to a Member, unless the Corporation previously
has received this authorization from the Member.
Section 4 – Submission Requirements
A Locked-In Trade shall be eligible for comparison by the Corporation if the submission
contains all of the required data and is submitted pursuant to communications links, formats, timeframes, and deadlines established by the Corporation for such purpose. Except with respect to
Netting-Eligible Auction Purchases, GCF Repo Transactions, and any other type of locked-inarrangement exempted from this requirement by the Corporation, a Locked-In Trade Source must

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submit data on Locked-In Trades using the computer-to-computer Interactive Submission Methodor such other means as the Corporation shall require from time to time after providing appropriate
notice to the Members.
Section 5 – GCF Repo Transactions
A GCF Repo Transaction shall be eligible for comparison by the Corporation subject tothe following conditions: (a) the data on such GCF Repo Transaction are submitted to the
Corporation by a GCF-Authorized Inter-Dealer Broker; (b) the data are submitted pursuant tocommunications links, formats, timeframes and deadlines established by the Corporation for such
purpose; (c) the data submission meets the requirements set forth in the Schedule of Required andOther Data Submission Items for GCF Repo Transactions; (d) the data submission meets theauthorization requirements of Section 2 of this Rule; (e) the data submission meets the nettingeligibility requirements provided for in Section 2 of Rule 11; and (f) each of the two GCF
Counterparties that are the counterparties (or are acting as Submitting Member for an Executing
Firm that is the counterparty) to the GCF-Authorized Inter-Dealer Broker on such GCF Repo
Transaction has a clearing arrangement with a bank authorized by the Corporation for such
purpose.
Section 6 – DK Notices
Except with respect to Netting-Eligible Auction Purchases, and GCF Repo Transactions, aMember may transmit a DK Notice to the Corporation with respect to a Locked-In Trade that has
been submitted to the Corporation on its behalf and which the Member believes is invalid orincorrect. The receipt of a DK Notice by the Corporation with respect to a Locked-In Trade in theform and manner, and within the applicable timeframe for such, as established by the Corporation,
shall be deemed to be a request for cancellation which the Corporation shall forward to the LockedIn Trade Source. The Corporation shall make such cancellation from the Comparison System only
if it receives instructions from the Locked-In Trade Source to do so in the form and manner, andsubject to the applicable timeframes for such, as established by the Corporation for such purpose.
In response to a DK Notice, the Locked-In Trade Source may modify the trade data in order toremove the DK status.
A Member that transmitted a DK Notice erroneously with respect to a Locked-In Trademay withdraw the DK Notice, as long as the Locked-In Trade Source has not already cancelled
the Locked-In Trade. Such withdrawal of a DK Notice must be made in the form and manner, andwithin the applicable timeframe for such, as established by the Corporation for such purpose.
Section 7 – Reporting of Locked-In Trades
Data on Locked-In Trades shall be reported by the Corporation to Members as part of its
Comparison System output with an indication that such data have been received from a LockedIn Trade Source.
Section 8 – Discretion to not Accept Data
In its sole discretion, the Corporation may decline to accept from a Locked-In Trade Source
data on the Locked-In Trades of a particular Member or Members, including Netting-Eligible
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Auction Purchases (subject to applicable Treasury Department regulations regarding NettingEligible Auction Purchases).
Section 9 – Binding Nature of Comparison System Output on Locked-In Trades
Comparison System output made available by the Corporation on Locked-In Trades of a
Member based on data received from a Locked-In Trade Source shall evidence a valid, binding
and enforceable Compared Trade for purposes of these Rules, notwithstanding that such data are
not matched with corresponding data submitted to the Corporation by such Member.
Section 10 – Modification and Cancellation of Data
A Locked-In Trade Source that has submitted to the Corporation trade data may have suchdata cancelled from the Comparison System, or may modify such data, by providing appropriate
instructions to the Corporation, in the format and subject to the time schedules required by the
Corporation.
A cancellation of a Locked-In Trade by a Locked-In Trade Source in response to a DK
Notice submitted by a Member, as provided in the preceding paragraph or as provided below shallcause the trade to become uncompared.
If the Locked-In Trade Source from which a Locked-In Trade derives is a party to such
Locked-In Trade, the data on the Locked-In Trade may be cancelled from the Comparison System,or may be modified, only by the provision to the Corporation of appropriate instructions from the
Locked-In Trade Source.
If the Locked-In Trade Source from which a Locked-In Trade derives is not a party to such
Locked-In Trade, the data on the Locked-In Trade may be cancelled from the Comparison System,or modified, upon receipt by the Corporation, in the format and subject to the time schedules
required by the Corporation, of appropriate, matching instructions from each Member that is, or is
submitting on behalf of a party to such Locked-In Trade, and such matching instructions shallsupersede any instructions to the contrary received by the Corporation from the Locked-In Trade
Source.
This Section shall not apply to Netting-Eligible Auction Purchases or GCF Repo
Transactions. The cancellation and modification of data regarding such Auction Purchases aregoverned by the provisions of Section 11 of this Rule. The affirmation, cancellation andmodification of data regarding GCF Repo Transactions are governed by the provisions of Section
12 of this Rule.
Notwithstanding anything to the contrary in this Section, the Corporation shall have theauthority, in order to correct or avoid an error, to unilaterally modify, add, or cancel data on any
Locked-In Trade.

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Section 11 – Modification and Cancellation of Data on Netting-Eligible Auction Purchases andRelated When Issued Transactions
A Federal Reserve Bank that has submitted data regarding a Netting-Eligible Auction
Purchase to the Corporation may have such data cancelled from the Comparison System or may
modify such data, by providing appropriate instructions to the Corporation. If a Federal Reserve
Bank instructs the Corporation to cancel or modify data regarding a Netting-Eligible Auction
Purchase, the Corporation shall promptly make available, in its Comparison System output, thecancellation or modification to the Member that made such Auction Purchase.
In addition, a Member that has made a Netting-Eligible Auction Purchase in connection
with a Treasury Department auction may request, through the Corporation, that the appropriate
Federal Reserve Bank cancel or modify the data regarding such Auction Purchase. The
Corporation shall make such a Member-requested cancellation or modification to its Comparison
System, only if it receives instructions from a Federal Reserve Bank to do so.
Any cancellation of a Netting-Eligible Auction Purchase pursuant to this section shallcause the Netting-Eligible Auction Purchase to become uncompared.
The Corporation shall have the right to unilaterally modify, add or cancel data on any When
Issued Transaction, in the event (i) a Treasury Department auction is cancelled or indefinitely
postponed, (ii) the original Issue Date (settlement date) of a Treasury Department auction ischanged, (iii) the original maturity date for a security auctioned or to be auctioned in a Treasury
Department auction is changed, (iv) the original issuance amount in a Treasury Department auction
is reduced, (v) a security auctioned in a Treasury Department auction that is the subject of a When
Issued Transaction is not issued, or (vi) any event occurs with respect to a Treasury auction thatcreates an obligation to substitute securities or otherwise alter the terms of the trade pursuant toguidelines published by the Securities Industry and Financial Markets Association.
Notwithstanding anything to the contrary in this Section, the Corporation shall have theauthority, in order to correct or avoid an error, to unilaterally modify, add, or cancel data on any
Netting-Eligible Auction Purchase (subject to applicable Treasury Department regulations
regarding Netting-Eligible Auction Purchases).
Notwithstanding anything to the contrary in this Section, in the event that a security
auctioned in a Treasury Department auction is not issued, the Corporation shall have the authority
to unilaterally modify, add, or cancel data on any Netting-Eligible Auction Purchase involving that
security (subject to applicable Treasury Department regulations regarding Netting-Eligible
Auction Purchases).
Section 12 – Affirmation, Cancellation, and Modification Requirements for Data on GCF Repo
Transactions
Upon receipt by the Corporation of data on a GCF Repo Transaction, the Corporation shallpromptly provide each of the two GCF Counterparties with such data. Each GCF Counterparty
shall have the obligation to review such data, and either affirm or cancel such data, within thetimeframe, and pursuant to procedures, established by the Corporation for such purpose. If a GCF
Counterparty affirms such data within the timeframe established by the Corporation for such
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purpose, the GCF Repo Transaction shall remain compared by the Corporation. If a GCF
Counterparty cancels such data within the timeframe established by the Corporation for such
purpose, the GCF Repo Transaction shall be canceled and deleted by the Corporation.
If a GCF Counterparty does not either affirm or cancel such data within the timeframe
established by the Corporation for such purpose, such GCF Counterparty shall be deemed to haveaffirmed such data. Should a GCF Repo Transaction be affirmed in this manner, the GCFAuthorized Inter-Dealer Broker that submitted data on such GCF Repo Transaction nonethelessshall have an ongoing obligation to the GCF-Counterparty to respond promptly to such GCFCounterparty’s inquiries regarding trade data errors, and to act in good faith to promptly resolve
any such alleged errors.
During the time period between receipt by the Corporation of data on a GCF Repo
Transaction and its affirmation pursuant to the above paragraph, such data may be unilaterally
cancelled by either: (a) the GCF-Authorized Inter-Dealer Broker as regards either or both sides of
the GCF Repo Transaction, or (b) a GCF Counterparty as regards the side of the GCF Repo
Transaction involving it and the GCF-Authorized Inter-Dealer Broker.
After data on a GCF Repo Transaction has been affirmed, such data may be cancelled onlyby the combined action of the GCF-Authorized Inter-Dealer Broker and a GCF Counterparty as
regards their side of the GCF Repo Transactions; one of the two parties must request a cancellationand the other must approve such request.
Any data input field on an unaffirmed GCF Repo Transaction may be modified unilaterally
by a GCF-Authorized Inter-Dealer Broker. A GCF Counterparty may not modify any data on a
GCF Repo Transaction except for the external reference number that has been assigned to such
GCF Repo Transaction by the Corporation. If a GCF Counterparty modifies the external reference
number that has been assigned to a GCF Repo Transaction by the Corporation, such action shallbe the equivalent of an affirmation of the GCF Repo Transaction by such GCF Counterparty.
Notwithstanding anything to the contrary in this Section, the Corporation shall have theauthority, in order to correct or avoid an error, to unilaterally correct, add, or cancel data on a GCF
Repo Transaction.
Any cancellation of a GCF Repo Transaction pursuant to this section shall cause the GCF
Repo Transaction to become uncompared.
Section 13 – Timing of Comparison
The comparison of trade data submitted to the Corporation for Locked-In Comparison thatmeets the requirements of this rule shall be deemed to have occurred upon the receipt of such trade
data from the Locked-In Trade Source by the Corporation.

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RULE 7 – REPO TRANSACTIONS
Section 1 – General
The comparison by the Corporation of Repo Transactions shall be subject to the special
provisions of this Rule, which shall supersede any conflicting provisions of any other Rule, except,
as regards Brokered Repo Transactions, the provisions of Rules 7 and 19.
Section 2 – Comparison of General Collateral Repo Transactions
The comparison of General Collateral Repo Transactions shall be performed by the
Corporation in the same manner as the comparison of all other Repo Transactions is performed
pursuant to these Rules, except that: (a) the comparison of security type shall be based on a matchof Generic CUSIP Numbers, and (b) there need not be a match of par amounts.

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RULE 8 – EXECUTING FIRM TRADES
Section 1 – General
Notwithstanding anything to the contrary in these Rules, and subject to the requirementsof Section 3 below a Submitting Member must submit to the Corporation for comparison and/or
netting data on any transaction calling for the delivery of Eligible Securities between an Executing
Firm on whose behalf it is acting pursuant to these Rules and either another Member of the Netting
System, Comparison System or another Executing Firm on whose behalf it or another Member isacting pursuant to these Rules.
Section 2 – Comparison of Trade Data
Except as otherwise provided in Rule 10, for a comparison to be generated by the
Corporation as regards a trade submitted for Bilateral Comparison involving an Executing Firm,in addition to the requirements contained in Rules 5 or 6A, there must be a match of information
as to the identity of the Executing Firms involved in the trade. If the identity of an Executing Firm
on a side of a trade is omitted by a Submitting Member, until and unless the Submitting Member
provides additional or corrected data to the Corporation pursuant to these Rules, the Corporation
shall assume that there is no Executing Firm for that side of the trade.
Section 3 – Obligation of the Submitting Member to Provide Notice
A Submitting Member shall provide the Corporation, in a form and manner satisfactory to
the Corporation, notice of each Executing Firm that such Member intends to act on behalf of
pursuant to these Rules; such notice shall indicate the types of eligible transactions that will be
submitted for Comparison System and/or Netting System processing. Notice must be provided so
as to be received by the Corporation not less than 3 Business Days prior to the commencement ofsuch Member’s initial data submission on behalf of each such Executing Firm.
A Submitting Member must also provide the Corporation, in a form and manner
satisfactory to the Corporation, notice of each Executing Firm on whose behalf it has ceased to act
as a Submitting Member pursuant to these Rules; such notice must be provided so as to be received
by the Corporation not less than 3 Business Days before the Member ceases to act as a Submitting
Member for each such Executing Firm. Thereafter, any modifications thereto shall require not lessthan 3 Business Days’ notice to the Corporation.
Notwithstanding the above, the Corporation, in its sole discretion, may accept datasubmitted by a Submitting Member on behalf of an Executing Firm even though a written noticerequired by this Section has not been received by the Corporation from the Submitting Member.
Section 4 – Rights and Responsibilities of the Submitting Member as a Member of the Comparison
System or Netting System
A Submitting Member shall have the same rights, and incur the same responsibilities, asregards trade data by it to the Corporation on behalf of an Executing Firm as it does, pursuant tothese Rules, regarding data submitted to the Corporation on its own trades.

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Section 5 – Discretion of the Corporation to Decline to Accept Certain Trade Data
The Corporation, in its sole discretion, may decline to accept trade data involving one ormore Executing Firms, either generally for all trade data submitted to the Corporation or by
Submitting Member.
Section 6 – Reports to Reflect Executing Firm Trade Data
Comparison output made available by the Corporation to Members shall reflect, as
appropriate, the fact that a trade involves an Executing Firm.

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RULE 9 – YIELD TO PRICE CONVERSION
Section 1 – General
The conversion by the Corporation of data on Eligible Conversion Trades from a yieldbasis to a price basis, and the comparison of such converted data, is subject to the special provisionsof this Rule, and such provisions supersede any conflicting provisions of Rules 5, 6A, 6B, or 6C.
Section 2 – Conversion
The Corporation shall convert from a yield basis to a price basis data submitted to the
Corporation by a Member on an Eligible Conversion Trade in accordance with the then applicableformulas for conversion of yields to equivalent prices that have been established by the Departmentof the Treasury. The annual coupon rate used by the Corporation to calculate the price of suchtrades shall be an assumed rate that shall be determined by the Corporation on a per-CUSIP basis
using the applicable par-weighted average yield, unless the Corporation, in its sole discretion,
determines that an alternate method of determination of the assumed coupon rate is more
appropriate; such assumed rate shall be adjusted down to the nearest one-eighth of one percent.
This assumed rate shall be adjusted prior to and on the Final Price Date by increments of oneeighth of a percentage point based on changes in the applicable par-weighted average yield, orotherwise as deemed appropriate by the Corporation in its sole discretion.
On the Final Price Date, or as soon as possible thereafter, each assumed coupon rate set by
the Corporation shall be adjusted to the applicable actual coupon rate. On and after the Final Price
Date, the Corporation shall convert from a yield basis to a price basis data submitted to the
Corporation by a Member on an Eligible Conversion Trade based on the actual coupon for the
Eligible Securities that underlie the trade.
The conversion by the Corporation from a yield basis to a price basis of data on an Eligible
Conversion Trade submitted to the Corporation prior to the Final Price Date for such trade by aMember shall: (1) if such trade is eligible for netting by the Corporation pursuant to these Rules,
be deemed to have occurred during the same processing cycle during which such data arecompared by the Corporation on a yield basis, and (2) if such trade is not eligible for netting by
the Corporation pursuant to these Rules, be deemed to have occurred on Final Price Date. The
conversion by the Corporation from a yield basis to a price basis of data on an Eligible Conversion
Trade submitted to the Corporation by a Member on or after the Final Price Date for such tradeshall be deemed to have occurred on the Business Day of receipt by the Corporation of such
submission.
Section 3 – Comparison
After the Final Price Date, the comparison of trade data submitted to the Corporation by aMember on a yield basis may be established by the Corporation as the result of the matching ofdata after its conversion by the Corporation to a price basis with data submitted by another Member
either: (1) on a yield basis that has been converted to a price basis by the Corporation, or (2) on aprice basis.

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Section 4 – Report of Comparison Involving Converted Data
On each Business Day, the Corporation shall report to its Members, through an appropriate
indication in its Comparison System output, each of the compared trades of a Member that is a
Converted Trade.

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RULE 10 – ENHANCED COMPARISON PROCESSESPRESUMED MATCH DATA
Section 1 – Commission Data
If: (1) trade data have been submitted to the Corporation by two Members, one of which
is a Broker and the other of which is a Dealer, (2) such data meet all of the Corporation’s criteria
for comparison other than the matching of the information submitted regarding the amount ofcommission that is payable on such trade, and (3) such Dealer has submitted a commission amountthat does not match the commission amount owing on such trade that was submitted by suchBroker, the trade shall be compared by the Corporation based on the commission amount being
equal to that amount submitted by such Broker. A Broker may provide the Corporation withrevised information as to commission amount and/or final money on a trade, within a tolerance
specified by the Corporation in the Schedule of Money Tolerances.
Notwithstanding the above, if such Dealer has provided notice to the Corporation, in a form
and manner satisfactory to the Corporation, that it is able to and will submit commission amounts
to the Corporation and does not wish to have a trade the data on which it has submitted to the
Corporation be compared unless there is matching commission information, the Corporation shallnot compare such trade if there is not a match of commission information.
The comparison by the Corporation of a trade involving unmatched commission amounts
pursuant to this Section, while evidencing a valid, binding, and enforceable contract between theparties to the trade to the same degree as if the commission amounts matched, shall not constitutea final, binding determination by the Corporation as to the correct commission amount owing onsuch trade. The Broker that submitted data on such trade shall have an ongoing obligation to the
Dealer that submitted data on such trade to respond promptly to such Dealer’s commission
difference inquiries, and to act in good faith to promptly resolve any such alleged differences.
On each Business Day, with regard to each trade with a commission difference that iscompared as of such day pursuant to this Section, the Corporation shall provide Members in its
Comparison System output with information as to the unmatched commission amounts.
Section 2 – Trades Involving An Executing Firm
If the data on a trade do not match because the information submitted as regards the identityof the Executing Firm on either side of the trade does not match, the Corporation may, in its
discretion, compare the trade based on the identities of the two Submitting Members matching. If
the data on a trade do not match because the data on either side of the trade identify the contraparty Executing Firm but either omit or incorrectly indicate the information regarding the identityof the Submitting Member for the contra-party Executing Firm, the Corporation may, in its
discretion, if it has received notice, in a form and manner satisfactory to the Corporation (whichnotice may vary on a product-by-product basis), from a Member stating that the Member wishes
to be deemed a Submitting Member for such Executing Firm should that the Executing Firm be
identified as the contra-party Executing Firm on a side of a trade but no Submitting Member forsuch Executing Firm is properly identified, compare the trade based on such Member being thecontra-party Submitting Member for that side.
175Section 3 – Affiliated Members
Members that are Affiliates may submit written authorization to the Corporation statingthat each Affiliate wishes to be presumed to be the correct contra-party to a side of a trade, if thispresumption would allow the data on a trade that has differing contra member identifying numbers
to match. Such written authorization must be in a form and manner satisfactory to the Corporationand may vary on a product-by-product basis. If a trade between two contra-parties (hereinafter,
the “First Member” and “Second Member”) submitted to the Corporation does not match because
the First Member submitted the contra member identifying number of the Second Member’sAffiliate instead of the Second Member, the Corporation shall compare the trade based on theSecond Member’s trade submission as if the First Member submitted the contra member
identifying number of the Second Member and the Corporation has received the written
authorization referred to in this paragraph from the Second Member and the Second Member’sAffiliate.
Section 4 – Summarization of Par Amounts
If the data on a trade do not compare because the information submitted regarding par
amount, viewed on an individual buy/sell basis, does not match, the Corporation may, in its
discretion, compare the trade based on a match of either the total of the par amounts on two or
more buy sides equaling the par amount(s) on one or more sell sides, or the total of the par amounts
on two or more sell sides equaling the par amount(s) on one or more buy sides. This Section shallnot apply to Repo Transactions.
If the data on a Full-Sized Trade do not compare because: (i) one side of a trade submitted
a Full-Sized Trade and the other side of the trade did not, and (ii) the Corporation was not able tocompare the trade pursuant to the procedures referred to in Section 4 of Rule 5, the Corporation
may, in its discretion, perform a par summarization or similar process in order to attempt to matchthe trade.
Section 5 – Trade Date Information
If the data on a trade do not compare because the information submitted regarding tradedate does not match, the Corporation shall, compare the trade based on a presumption that theearlier trade date submitted is the correct trade date.
Notwithstanding the above, if the First Member submits a side of a buy/sell transaction to
the Corporation, and the Second Member as contra-party submits more than one (1) side of abuy/sell transaction with similar trade data to the Corporation where the trade date does not match,
the Corporation shall compare the side of the buy/sell transaction submitted by the First Member
with a side of a buy/sell transaction submitted by the Second Member where the trade date on theSecond Member’s buy/sell transaction is closest in date range to the trade date submitted by theFirst Member.
The enhanced comparison process referenced in this Section shall not apply to Repo
Transactions when such process is performed at end of day.

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Section 6 – Money Tolerances
If the data of a Required Match Data item on a trade do not compare because the dollar
amount(s) submitted by two Members differs, the Corporation shall compare the trade if thedifference in the Required Match Data item is within the tolerance specifications set by the
Corporation in the Schedule of Money Tolerances.
Section 7 – Timing and Cumulative Effect of Presumptions
Notwithstanding anything to the contrary in this Rule, the Corporation may apply morethan one presumption of a match of data to generate a comparison of a trade.
The Corporation shall perform the enhanced comparison processes regarding the presumed
match of data set forth in Sections 1, 2, 5 and 6 of this Rule 10 in Real Time. The Corporation
shall also perform the enhanced comparison processes regarding the presumed match of data set
forth in Sections 1, 2, 3, 4, 5 and 6 of this Rule 10 at end of day, with the exception that, at end ofday, Sections 4 and 5 shall not apply to Repo Transactions.

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RULE 11 – NETTING SYSTEM
Section 1 – General
The Netting System is a system for aggregating and matching offsetting obligations
resulting from trades, including Repo Transactions, submitted by or on behalf of Netting Members
in Eligible Netting Securities. Each Business Day, the Corporation will calculate and report toeach Netting Member, in a manner that does not disclose to any Netting Member, with respect to
any Net Settlement Position or Forward Net Settlement Position, the identity of any other Netting
Member, each Net Settlement Position and Forward Net Settlement Position of a Member. With
respect to each such Net Settlement Position, the Corporation will report to the Member the extent
to which the Member is obligated to deliver Eligible Netting Securities to the Corporation and/or
to receive Eligible Netting Securities from the Corporation, in accordance with each such Net
Settlement Position.
The provisions of this Rule apply to Brokered Repo Transactions, except to the extent thatthey are inconsistent with the provisions of Rule 19.
Section 2 – Eligibility for Netting
A trade, other than a Repo Transaction, is eligible for netting and settlement through theNetting System if it meets all of the following requirements:(a)the trade is a Compared Trade;(b)the number of Business Days between the Scheduled Settlement Date for the trade,and the Business Day on which the Report of comparison of the data on the trade is issued toMembers is not greater than the maximum number of Business Days established by the
Corporation for such purpose and published in a schedule made available to Members, unless the
Corporation determines a different timeframe to be appropriate;(c)Members;(d)

the data on the trade are listed on a Report that has been made available to Netting
netting of the trade will occur on or before its Scheduled Settlement Date;(e)data on each side of the trade have been submitted to the Corporation by a Netting
Member, in accordance with these Rules, or the trade is a Demand Trade or a Locked-In Trade;and(f)the underlying securities are Eligible Netting Securities.

Except to the extent that, for a Brokered Repo Transaction, there is a conflict with theprovisions of Rule 19 (in which case the provisions of Rule 19 govern), a Start Leg of a Repo
Transaction, and an End Leg of a Repo Transaction, each is eligible for netting and settlement
through the Netting System if it meets all of the following requirements:

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(i)

the Repo Transaction is a Compared Trade;(ii)
if the Repo Transaction has a Forward-Settling Start Leg, the number of calendar
days between the Scheduled Settlement Date for the associated End Leg and the Business Day on
which the data on the trade are submitted is not greater than the maximum number of Business
Days established by the Corporation for such purpose and published in a schedule made available
to Members, unless the Corporation determines a different timeframe to be appropriate;(iii) if the Start Leg of the Repo Transaction has settled, the number of calendar days
between the Scheduled Settlement Date for the End Leg and the Business Day on which the dataon the trade are submitted is not greater than the maximum number of Business Days establishedby the Corporation for such purpose and published in a schedule made available to Members,
unless the Corporation determines a different timeframe to be appropriate;(iv)
Members;

the data on the trade are listed on a Report that has been made available to Netting(v)
netting of the Start Leg (other than a Same-Day Settling Trade, which shall not be
netted) or the End Leg will occur before the opening of the Netting System on its Scheduled
Settlement Date; and(vi)

the underlying securities are Eligible Netting Securities.

Same-Day Settling Trades will settle on a trade-for-trade basis at Contract Value unlesssuch Same-Day Settling Trades fail to settle. In the event that such Same-Day Settling Trades failto settle, they will be netted for settlement on the next Business Day. Those that fail to settle will
be subject to the fails charge pursuant to Rule 11, Section 14.
Notwithstanding anything to the contrary above, an Auction Purchase is eligible for netting
and settlement through the Netting System only if it is a Netting-Eligible Auction Purchase.
Notwithstanding the above, a trade eligible for netting and settlement through the Netting
System to which an Executing Firm is a party, the data on which have been submitted to the
Corporation on behalf of such Executing Firm by a Submitting Member that is a Netting Member,shall not be netted and settled through the Netting System if the Submitting Member has provided
the Corporation with notice, in a form and manner satisfactory to the Corporation, that it does notwish to have trades submitted by it on behalf of that Executing Firm be netted and settled throughthe Netting System. Also notwithstanding the above, a trade shall not be netted and settled throughthe Netting System if either Submitting Member had submitted data on a side of the trade on behalfof an Executing Firm whose trades it had provided the Corporation with notice pursuant to theseRules that it did not wish to be netted and settled through the Netting System.
Notwithstanding the above, the Corporation may, in its sole discretion, exclude any tradeor trades from the Netting System, including Netting-Eligible Auction Purchases (subject to theterms and conditions agreed to by the Corporation and the Treasury Department or Freddie Mac,
as applicable, regarding Auction Purchases), by Netting Member or by Eligible Netting Security.

179Section 3 – Obligation to Submit Trades
Each Netting Member must submit to the Corporation for comparison and netting, pursuant
to these Rules, data on all of its trades, (including trades executed and settled on the same day andtrades executed between it or an Executing Firm on whose behalf it is acting) with other Netting
Members (or an Executing Firm on whose behalf it or another Member is acting) that are eligible
for netting pursuant to these Rules, except that this requirement is not applicable to a Netting
Member’s Repo Transactions (a Netting Member’s obligation to submit to the Corporation dataon its Repo Transactions is governed by Rule 18).
Each Netting Member must also submit to the Corporation for netting and settlement
pursuant to these Rules data on each trade (hereinafter an “Eligible Trade”) executed by a Covered
Affiliate that satisfies the following criteria: (i) the trade is eligible for netting pursuant to theseRules, and (ii) the trade is executed with another Netting Member or with a Covered Affiliate ofanother Netting Member. For purposes of this Section the term “executed” shall include tradesthat are cleared and guaranteed as to their settlement by the Covered Affiliate.
The preceding paragraph shall not apply to: (i) a trade that is executed between a Member
and its Affiliates or between Affiliates of the same Member (an “Affiliate Trade”), (ii) a trade ofa Covered Affiliate that has executed less than an average of 30 Eligible Trades plus Eligible Repo
Transactions (as defined in Section 3 of Rule 18) (excluding Affiliate Trades) per business day permonth within the prior twelve-month period, or (iii) a trade the submission of which to the
Corporation would cause the Member to be in violation of any applicable law, rule or regulation.
All trade data required to be submitted to the Corporation under this Section must be
submitted on a trade-by-trade basis with the original terms of the trades unaltered. A Member or
any of its Affiliates may not engage in the Pre-Netting of Trades prior to their submission to the
Corporation in contravention of this section. In addition, a Member or any of its Affiliates may
not engage in any practice designed to contravene the prohibition against the Pre-Netting ofTrades.
If the Corporation determines that a Netting Member has, without good cause, violated its
obligations pursuant to this Section, such Netting Member may be reported to the appropriate
regulatory body, placed on the Watch List and/or subject to an additional fee. In addition, theCorporation may discipline a Netting Member for a violation of this section in accordance with
Rule 48.
Notwithstanding the above, the trade submission requirements related to Repo
Transactions are governed by Rule 18.
Section 4 – Calculation of Net Settlement Positions
On each Business Day, for each Eligible Netting Security with a separate CUSIP number,
except as otherwise provided in Rule 14 with respect to Forward Trades that comprise one or more
Forward Net Settlement Positions, the Corporation will establish a Net Settlement Position for
trades, and Fail Deliver Obligations and Fail Receive Obligations of a Netting Member that havenot previously been settled, by comparing the aggregate par value amount of each Long
Transaction and/or Fail Receive Obligation in an Eligible Netting Security by the Netting Member180

(hereinafter, the “Long Total”) and each Short Transaction and/or Fail Deliver Obligation in an
Eligible Netting Security by the Netting Member (hereinafter, the “Short Total”). If the Long Total
exceeds the Short Total, the resulting difference will constitute the Net Long Position. If the Short
Total exceeds the Long Total, the resulting difference will constitute the Net Short Position. All
Net Settlement Positions shall be reported, by CUSIP Number, by the Corporation in a Reportissued and made available to each Netting Member by the time stated in the Schedule ofTimeframes.
Section 5 – Allocation of Deliver and Receive Obligations
On each Business Day, except as otherwise provided in Rule 14 with regard to Forward
Trades that comprise Forward Net Settlement Positions, the Corporation will establish Deliver
Obligations and Receive Obligations as necessary to accomplish the settlement of Net Settlement
Positions. Deliver Obligations and Receive Obligations shall be allocated by the Corporation on
an equitable basis to Netting Members with corresponding Receive Obligations and Deliver
Obligations that involve Eligible Netting Securities with the same CUSIP Number. A single Net
Settlement Position may result in the establishment of more than one Deliver Obligation or
Receive Obligation in an Eligible Netting Security. Each Deliver Obligation and Receive
Obligation of a Netting Member shall be listed in the Report that, pursuant to Section 4 of thisRule, will be issued on each Business Day to each Netting Member.
Section 6 – Netting of Obligations
Net Settlement Positions and resultant Deliver Obligations and Receive Obligations of a
Netting Member, either as originally established by the Corporation or as may be adjusted by the
Corporation as the result of a correction of compared data made pursuant to these Rules, shall be
fixed at the time the Report of such Net Settlement Positions and Deliver Obligations is madeavailable by the Corporation to a Netting Member, as provided in Section 10 of this Rule. At thattime, all deliver, receive, and related payment obligations between such Netting Member and the
Corporation that were created by the trades, Novated pursuant to Section 8 of Rule 5, and thatcomprise a Net Settlement Position or Net Settlement Positions are terminated and replaced by the
Deliver Obligations, Receive Obligations, and related payment obligations for such Members thatare listed in the Report.
Notwithstanding anything to the contrary in the above paragraph, a Right of Substitution
applicable to a Repo Transaction that constitutes all or part of a Net Settlement Position shall berecognized by the Corporation pursuant to these Rules.
Section 7 – Settlement at the Settlement ValueOn each Business Day, each Deliver Obligation and Receive Obligation of a Netting
Member shall be settled at the Settlement Value reported on such Business Day for such
Obligation.
Section 8 – Fail Deliver Obligations and Fail Receive Obligations
On each Business Day, from their Scheduled Settlement Date, Fail Deliver Obligations andFail Receive Obligations, as applicable, shall, pursuant to Rule 13, be marked to market, taking
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into account accrued interest, until the Actual Settlement Date for such Fail Deliver Obligations
and Fail Receive Obligations. Notwithstanding the above, the Corporation, in its sole discretion inorder to promote an orderly settlement process, may elect to not mark to market, pursuant to Rule13, a Fail Receive Obligation where the Eligible Netting Securities that comprise such Fail Receive
Obligation have been appropriately delivered to the Corporation pursuant to these Rules and the
Corporation has not re-delivered such Eligible Netting Securities and, as a result, has held themovernight. Fail Deliver Obligations and Fail Receive Obligations shall be netted with any otherReceive Obligations and Deliver Obligations.
The Corporation shall be obligated to deliver Eligible Netting Securities to a Netting
Member with a Net Long Position as required by this Rule in order to settle such Net Long
Position; however, the Corporation shall not be obligated to attempt to make any such delivery ordeliveries until the Business Day on which the Corporation has received, as the result of a delivery
to it from a Netting Member with a Net Short Position, Eligible Netting Securities with the same
CUSIP number that: (1) are at least equal in quantity to such Net Long Position, and (2) have not,pursuant to this Rule, been allocated for delivery by the Corporation to another Netting Member.
Section 9 – Obligation to Make Settlement
Each Netting Member shall be obligated to satisfy all of its securities settlement and fundsonly settlement obligations pursuant to these Rules on each day on which both the Corporationand the Federal Reserve Bank of New York are open for business, regardless of the days on which
any third party, including a clearing bank or depository institution acting on behalf of such
Member, is open for business.
Section 10 – Receipt of Netting Output
On each Business Day, Reports shall be deemed to have been made available by the
Corporation to a Netting Member at the time at which the Corporation has both completed its
processing cycle for the preparation of such Reports and has released such Reports to the
Corporation’s data output facility or facilities, unless the Corporation has notified such Member
on such Business Day of a delay in the Corporation’s making available such Reports or output tothe Member.
The inability of a Netting Member, because of automation problems that it incurs or for
any other reason, to receive a Report that has been made available to it by the Corporation shallnot excuse or otherwise affect such Member’s obligations pursuant to these Rules. A Netting
Member shall be obligated to accept Reports from the Corporation in at least one (1) of the formats
or mediums prescribed by the Corporation, that is usable by such Member.
Section 11 -– Responsibility for Third Party Actions
No improper or unauthorized action, or failure to act, of a third party acting on behalf of a
Netting Member (including, but not limited to, a service bureau) shall excuse or otherwise affectsuch Member’s obligations pursuant to this Rule.

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Section 12 – Obligation to Inform the Corporation
Each Netting Member shall be obligated to inform the Corporation promptly if any of thefollowing events were to occur:(a)difficulty in providing, or inability to provide, data input to the Corporation, ordifficulty in receiving, or inability to receive, Reports from the Corporation, in the manner, or
within the timeframes, that such Member ordinarily inputs or receives such information;(b)
the receipt by such Member from the Corporation of a Report that it believescontains erroneous information, omits material information, or has any other type of problem; and,(c)potential difficulty in satisfying, or inability to satisfy, in a timely manner any of
its obligations with respect to the delivery or receipt of securities, or the payment of monies, thatarise pursuant to these Rules.
Section 13 – Buy-in Notices
If a Netting Member (hereinafter, the “Notifying Netting Member”) submits to the
Corporation a retransmitted notice of a buy-in with respect to Eligible Netting Securities thatcomprise a Fail Receive Obligation (hereinafter, the “Allocated Fail Receive Obligation”), theCorporation shall promptly retransmit such notice, on a random basis, to a Netting Member orMembers (hereinafter, the “Allocated Netting Member”) with a Fail Deliver Obligation or Fail
Deliver Obligations (hereinafter, the “Allocated Fail Deliver Obligation”):(a)that is comprised of Eligible Netting Securities having the same CUSIP number as
the Eligible Netting Securities that are the subject of the notice,(b)that is equal to or greater than, in size, the Allocated Fail Receive Obligation (or, if
there is no such Allocated Fail Receive Obligation at least equal in size to the Allocated Fail
Deliver Obligation, the largest such Allocated Fail Deliver Obligations), and(c)that has been unsettled for the longest period of time. The Corporation shall haveno obligation to execute on such notice, by buying in securities or in any other manner. If, in
accordance with the Buy-in Regulations, a Netting Member that has submitted a notice ofretransmitted buy-in informs the Corporation that it has executed on such notice by buying in the
Eligible Netting Securities that are the subject of such notice, and provides evidence satisfactory
to the Corporation of the price (hereinafter, the “Buy-in Price”) at which such Eligible Netting
Securities were bought in by such Member, the Corporation shall promptly notify the AllocatedNetting Member of such.
Notwithstanding anything to the contrary in this Rule or in Rules 12 or 13:(d)the Notifying Netting Member’s obligation to settle with the Corporation the
Allocated Fail Receive Obligation pursuant to these Rules through receipt of the underlying
Eligible Netting Securities, and the Allocated Netting Member’s obligation to settle with the
Corporation the Allocated Fail Deliver Obligation pursuant to these Rules through delivery of the183underlying Eligible Netting Securities, each are terminated as of the time of such notification by
the Corporation, and(e)for purposes of settlement pursuant to Rule 13 of the funds-only settlement
obligations of the Notifying Netting Member with respect to the Allocated Fail Receive
Obligation, and the funds-only settlement obligations of the Allocated Netting Member withrespect to the Allocated Fail Deliver Obligation, the Allocated Fail Receive Obligation and the
Allocated Fail Deliver Obligation shall be deemed to have been settled among such Members andthe Corporation in accordance with this Rule and Rule 12, with the System Value for such purpose
being deemed to be, for each Position, equal to the Buy-in Price.
Section 14 – Fails Charge
If a Netting Member does not satisfy a Deliver Obligation of Treasury securities ordebentures issued by Fannie Mae, Freddie Mac or the Federal Home Loan Banks on a particularBusiness Day, the Corporation shall apply a debit charge on the funds amount associated with theNetting Member’s failed position (hereinafter, the “fails charge”). If a Netting Member fails toreceive Securities representing its Receive Obligation of Treasury securities or debentures issued
by Fannie Mae, Freddie Mac or the Federal Home Loan Banks on a particular Business Day, theCorporation shall credit the Member in the amount of the fails charge.
The fails charge shall be the product of the (i) funds associated with a failed position and(ii) the greater of (a) 1 percent or (b) 3 percent per annum minus the target level for the Federal
Funds Rate that is effective at 5 p.m. EST on the Business Day prior to the originally scheduled
settlement date, capped at 3 percent per annum. If the FOMC specifies a target range in lieu of atarget level, the lower limit of the target range announced by the FOMC would be used in thecalculation of the fails charge. Further, if the FOMC were to terminate its policy of specifying or
announcing a target level or range for the Federal Funds Rate, then the rate that is used for the
calculation of the fails charge would be a successor rate and source recommended by the TMPG.
In the event that the Corporation is the failing party because the Corporation received
Securities too near the close of Fedwire for redelivery or for any other reason, the fail charge will
be distributed pro rata to the Netting Members based upon usage of the Corporation’s services.
At the end of each calendar month, the Corporation shall accrue a Netting Member’s debits
and credits and the resulting amount (either a debit or credit) shall be included in the Member’smonthly bill.
The Board shall have the right, in its sole discretion, to revoke application of the charge if
industry events or practices warrant such revocation.
The Corporation shall not be under any obligation to pay fails charge proceeds in the eventof a default (i.e., if the Defaulting Member does not pay its fails charge, Members due to receive
fails charge proceeds will have those proceeds reduced pro-rata by the Defaulting Member’s
unpaid amount).

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RULE 11A – RESERVEDThis rule is reserved for future use.

185

RULE 12 – SECURITIES SETTLEMENT
Section 1 – General
Deliver Obligations of a Netting Member must be satisfied by delivery of the appropriate
Eligible Netting Securities from a clearing bank or banks designated by the Member for such
purpose to a clearing bank or banks designated by the Corporation for such purpose. Receive
Obligations of a Netting Member must be satisfied by receipt of the appropriate Eligible Netting
Securities by a clearing bank or banks designated by the Member for such purpose from a clearing
bank or banks designated by the Corporation for such purpose.
All deliveries of Eligible Netting Securities in satisfaction of Deliver Obligations, and allreceipts of Eligible Netting Securities in satisfaction of Receive Obligations, must be made against
simultaneous payment or receipt in Federal funds at the Settlement Value for each such Obligation
for the Business Day of such delivery or receipt.
All deliveries of Eligible Netting Securities in satisfaction of Deliver Obligations shall beidentified by standard industry delivery codes indicating a new origination delivery. Reversal
codes shall not be used to identify any delivery of securities to the Corporation without the expressprior permission of the Corporation.
The Corporation shall offer a voluntary automated Pair-Off Service for Netting Members(other than Repo Brokers) who choose to participate. The Pair-Off Service shall apply to all
eligible activity of a participating Netting Member. The Pair-Off Service shall consist of thematching and offset of a participating Netting Member’s outstanding Deliver Obligations andoutstanding Receive Obligations in equal par amounts in the same Eligible Netting Security. The
participating Netting Member shall receive a debit or credit Pair-Off Adjustment Amount (which
the Corporation may collect as a Miscellaneous Adjustment Amount), as applicable, of thedifference in the Settlement Values of the applicable Deliver Obligations and Receive Obligationsin the funds-only settlement process under Rule 13. The Corporation may delay or suspend thePair-Off Service on any Business Day due to FRB extensions and/or system or operational issues.
The Corporation shall notify Members of any such occurrence.
Any Securities Settlement Obligations remaining after the pair-off of eligible Securities
Settlement Obligations will constitute either a Fail Deliver Obligation or Fail Receive Obligation,
as the context requires.
Section 2 – Designation of Clearing Banks
The Corporation shall notify each Person, no later than ten Business Days prior to its
becoming a Netting Member, of the clearing bank or banks that the Corporation will use to deliver
Eligible Netting Securities to Netting Members and to receive Eligible Netting Securities from
Netting Members, and, by product, of the types of Eligible Netting Securities that each suchclearing bank will so deliver and receive. Thereafter, the Corporation shall notify each Netting
Member of any change in the Corporation’s designation of the clearing bank or banks that will act
on the Corporation’s behalf, or in the product that any such clearing bank is designated to deliver
or to receive, no later than ten Business Days prior to the effective date of such change.
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A Person must notify the Corporation, in such manner as the Corporation may prescribe,no later than ten Business Days prior to its becoming a Netting Member, of the clearing bank orbanks that it has designated to act on its behalf, pursuant to this Rule, in the delivery of Eligible
Netting Securities to the Corporation and in the receipt of Eligible Netting Securities from the
Corporation. Each Netting Member must notify the Corporation of any change in suchdesignation, no later than ten Business Days prior to the effective date of such change. Suchdesignation is subject to the Corporation’s determination, in its reasonable judgment, that suchclearing bank or banks (a) has and will maintain access to Fedwire, (b) has and will maintain theoperational capability to interact satisfactorily with the clearing bank or banks that act on behalfof the Corporation, and (c) has agreed to act on behalf of such Netting Member in accordance withthis Rule.
Section 3 – Instructions to Clearing Banks
On each Business Day, the Corporation shall make available to each Netting Member aReport that provides information (for example, type of obligation (Deliver or Receive), name andreference number of clearing bank or banks, and CUSIP number, settlement date, par value, final
dollar value, and other information descriptive of an Eligible Netting Security) that the Corporation
deems sufficient to enable such Member to be able to settle its Net Settlement Positions on suchBusiness Day. Each such Member, based on the information provided in such Report, shallpromptly provide appropriate instructions to its clearing bank or banks to deliver to the
Corporation on that Business Day as provided in these Rules, and/or to receive from the
Corporation on that Business Day as provided in these Rules, on behalf of the Member, Eligible
Netting Securities of specified types and amounts, against payment or receipt at the appropriate
Settlement Value, exactly as set forth in such Report.
Section 4 – Fail Deliver Obligations and Fail Receive Obligations
Each Fail Deliver Obligation and Fail Receive Obligation shall be maintained by the
Corporation on each Business Day subsequent to its Scheduled Settlement Date until andincluding the Actual Settlement Date for such Fail Deliver Obligation and Fail Receive Obligation.
Section 5 – Partial Deliveries
In its sole discretion, the Corporation may accept a delivery from a Netting Member witha Net Short Position of only a portion of the Eligible Netting Securities that comprise such Net
Short Position. The Corporation will do so only upon obtaining the consent of a Netting Member
or Members with a Net Long Position or Net Long Positions comprised of Eligible Netting
Securities with the same CUSIP number to a receipt by the Netting Member or Members from the
Corporation of a like amount of such securities. If a partial delivery of Eligible Netting Securities
by a Netting Member is accepted by the Corporation, the remaining securities that were notdelivered to the Corporation will constitute a Fail Deliver Obligation.
Section 6 – Financing Costs
If a Netting Member with a Net Short Position delivers Eligible Netting Securities to the
Corporation and the Corporation is unable, because the delivery was made near the close ofFedwire or for any other reason, to redeliver such securities on the same Business Day to a Netting
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Member or Members with Net Long Positions in such securities and, as a result, the Corporation
incurs costs, expenses, or charges related to financing such securities (hereinafter, the “financing
costs”), the Netting Members, as a group, shall be obligated to pay, or to reimburse the
Corporation, for such financing costs. Such payment or reimbursement of financing costs shall beallocated by the Corporation pro rata, based on usage of the Corporation’s services.
Notwithstanding the above, if the Corporation, in its sole discretion, determines that a Netting
Member has, on a frequent basis and without good cause, caused the Corporation to incur financing
costs, the Corporation shall notify the Member of such determination, and such Member(hereinafter, the “Late Delivering Member”) shall be obligated to pay for, or to reimburse the
Corporation for, the entire amount of any financing costs incurred by the Corporation on or after
the date of such notification as the result of a delivery of Eligible Netting Securities made by theLate Delivering Member to the Corporation pursuant to this Rule, until the Board determines thatsuch is no longer appropriate. A Late Delivering Member also may be subject to fine by the
Corporation, if the Corporation determines that such is appropriate in order to promote an orderly
settlement process.
Notwithstanding the above, if the Corporation, as the result of a violation by a Netting
Member of the Rules, is obligated to obtain overnight financing for securities, the Netting Member
shall be obligated to pay for, or to reimburse the Corporation for, the entire amount of any
financing cost incurred by the Corporation.
Section 7 – Obligation to Receive Securities
If the Corporation has, in accordance with this Rule, delivered Eligible Netting Securities
to a Netting Member with a Net Long Position, such Member shall be obligated to accept deliveryof all such securities at the Settlement Value for the Receive Obligation or Receive Obligations
that comprise such Net Long Position. If such Member fails to do so (hereinafter, the “NonReceiving Member”), it shall be obligated to pay, or to reimburse the Corporation for, all costs,
expenses, and charges incurred by the Corporation as the result thereof, and it may be subject to afine by the Corporation if the Corporation, in its sole discretion, determines that such failure toaccept securities was done without good cause.
The Corporation may, but shall have no obligation to, accept receipt, and otherwise shallreturn, Eligible Netting Securities delivered to it that either are securities that have not been
designated by Report to be delivered to the Corporation on such Business Day (hereinafter, the“Exception Securities”) or are securities (hereinafter, the “Mispriced Securities”) that have beendelivered to it at other than the appropriate Settlement Value for the Deliver Obligation or Deliver
Obligations composed by such Eligible Netting Securities. If a Netting Member makes such adelivery to the Corporation (hereinafter, an “Exception Delivery”), such Member shall pay, or
reimburse the Corporation, for any costs, expenses, and charges incurred by the Corporation as theresult of such Exception Delivery, and such Member may be subject to fine by the Corporation if
the Corporation, in its sole discretion, determines that the Member (hereinafter, the “Exception
Delivering Member”) has, on a frequent basis without good cause, made Exception Deliveries to
the Corporation.
If the Corporation accepts an Exception Delivery of Exception Securities, the Exception
Delivering Member shall be deemed to have loaned such Exception Securities to the Corporation,
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and such Exception Securities shall constitute a Net Long Position of such Member. The
Corporation shall, as soon as practicable, redeliver to such Member a like amount of Eligible
Netting Securities with the same CUSIP number, with such redelivery to be made at the Settlement
Value of the Receive Obligation or Receive Obligations composed by such Eligible Netting
Securities as of the Business Day on which the Exception Delivery was made. If the Corporation
accepts an Exception Delivery of Mispriced Securities, an appropriate Clearance Difference
Amount adjustment shall be made, pursuant to Rule 13, between the Corporation and the Netting
Member that made such Exception Delivery. Until redelivery of such Exception Securities, theCorporation shall have all of the incidents of ownership of the Exception Securities, including both
the right to transfer such Exception Securities and the right to pledge, repledge, assign or create asecurity interest in such Exception Securities to secure financing obtained by the Corporation toreceive or carry such Exception Securities or for any other purpose.
Section 8 – Obligation to Facilitate Financing
If the Corporation deems it appropriate, in its sole discretion, in order to obtain financing
necessary for the provision of the securities settlement services contemplated by these Rules,
including, without limitation, fail financing of an outstanding Receive Obligation or Receive
Obligations arising out of the delivery by Netting Members to the Corporation of Eligible Netting
Securities, the Corporation may: (i) create, and each Netting Member shall not take any action toadversely affect the creation of, such security interests in Eligible Netting Securities in favor ofany entity or entities, including any depository institution, from which the Corporation, in its sole
discretion, deems it necessary or desirable to obtain and maintain such financing and/or (ii) enter
into repurchase transactions involving Eligible Netting Securities with any Netting Member or
Clearing Agent Bank, and each Netting Member shall not take any action to adversely affect such
repurchase transactions. Any such financing obtained by the Corporation may be on terms andconditions deemed necessary or advisable by the Corporation in its sole discretion. Any suchsecurity interests or repurchase transaction obligations created by the Corporation in or withrespect to any Eligible Netting Securities may be to obtain an amount greater, and may extend fora period of time longer, than the obligation of any Netting Member to the Corporation relating tosuch Eligible Netting Securities. Notwithstanding the above, the Corporation shall remain
obligated to make delivery to Members of Eligible Netting Securities under the circumstances andwithin the timeframes specified in these Rules.
If an Inter-Dealer Broker Netting Member obtains financing of a Net Settlement Position,
it must obtain such financing by entering into overnight repurchase transactions only with a
Netting Member or Clearing Agent Bank.
Section 9 – Relationship with Clearing Banks
No improper or unauthorized action, or failure to act, by a clearing bank acting on behalfof a Netting Member shall excuse or otherwise affect the obligations of a Netting Member to the
Corporation pursuant to these Rules.
If a Netting Member terminates an autocharge agreement that it, along with its clearing
bank, has provided to a Federal Reserve Bank, as Fiscal agent of the United States, the Netting
Member shall promptly inform the Corporation of such. Also, if a Netting Member is informed by189its clearing bank that such clearing bank has terminated an autocharge agreement that Member
and the bank have provided to a Federal Reserve Bank, as fiscal agent of the United States, theNetting Member shall promptly inform the Corporation of such. Moreover, if a Netting Member
uses a clearing bank that also provides clearing services for the Corporation, the Netting Member
hereby consents to the disclosure by such clearing bank to the Corporation of the following: (a)that the clearing bank has terminated an autocharge agreement that it and the Netting Member haveprovided to a Federal Reserve Bank, as fiscal agent of the United States, and (b) that the bank has
been informed by the Netting Member that an autocharge agreement that the Netting Member andthe clearing bank have provided to the Federal Reserve Bank, as fiscal agent of the United States,
has been terminated.
Section 10 – Definition of “Good Cause”
As used in this Rule, “good cause” means a causal event or occurrence that the Corporation,in its sole discretion, determines to have been beyond the reasonable control of a Netting Member;depending upon the specific circumstances, this may include an extended failure of Fedwire or theinability of a clearing bank acting on behalf of a Netting Member or the Corporation to gain accessto Fedwire.
Section 11 – Settlement of Same-Day Settling Trades with the Corporation(i)
Settlement of Same-Day Settling Trades with the Corporation shall be voluntaryfor Repo Brokers and shall be mandatory for all other Netting Members.
(ii)

Eligibility for Settlement

A Same-Day Settling Trade is eligible for settlement with the Corporation if it meets all of
the following requirements:(a)the Same-Day Settling Trade is a Compared Trade;(b)the data on the Same-Day Settling Trade are listed on a Report that has been
made available to Netting Members;(c)(i) the End Leg of the Same-Day Settling Trade meets the eligibility
requirements for netting in Rule 11, or (ii) the Repo Transaction is an As-Of Trade and its
End Leg settles on the current Business Day or thereafter;(d)the underlying securities are Eligible Netting Securities, and(e)regarding the form and manner in which Same-Day Settling Trades are
submitted to the Corporation, the Same-Day Settling Trade is submitted in equal andidentical size and shapes between Netting Members. For the avoidance of doubt, “identicalsize and shapes” means that each counterparty submit trade data reflecting equal par
amounts and number of sides.
The Corporation shall attempt to settle, on a reasonable efforts basis, any Same-Day
Settling Trades that are compared in the timeframe specified by the Corporation in notices made190

available to Members from time to time, provided (i) the Corporation is able to contact thecounterparties to the trade and the Corporation’s Clearing Agent Bank and (ii) the Corporation’s
Clearing Agent Bank and the counterparties to the trade agree to settle such trade. The foregoingsentence shall only apply to Same-Day Settling Trades of Members that clear at the Corporation’s
Clearing Agent Bank. Reasonable efforts basis shall mean that the Corporation will attempt tocontact the counterparties to the trade and the Corporation’s Clearing Agent Bank to confirm thatthey agree to settle such trade.
For those Members that do not clear at the Corporation’s Clearing Agent Bank, theCorporation shall attempt to settle, on a reasonable efforts basis, Same-Day Settling Trades thatare compared after the time specified by the Corporation in notices made available to Members
from time to time during the reversal period of the Fedwire Securities Service, provided (i) the
Corporation is able to contact the Corporation’s Clearing Agent Bank, (ii) the Corporation is able
to contact the counterparties to the trade to confirm that they agree to settle the trade, and (iii) the
Corporation’s Clearing Agent Bank, the Member’s Clearing Agent Bank, and the Federal Reserve
Bank of New York each permit settlement of the trade. Reasonable efforts basis shall mean the
Corporation will attempt to contact the counterparties to the trade and the Corporation’s Clearing
Agent Bank to confirm that they agree to settle such trade.
Notwithstanding the above, a Same-Day Settling Trade eligible for settlement to which an
Executing Firm is a party, the data on which have been submitted to the Corporation on behalf ofsuch Executing Firm by a Submitting Member that is a Netting Member, shall not be settled if theSubmitting Member has provided the Corporation with notice, in a form and manner satisfactory
to the Corporation, that it does not wish to have trades submitted by it on behalf of that Executing
Firm be settled through the Comparison System. Also notwithstanding the above, a trade shall not
be settled if either Submitting Member had submitted data on a side of the trade on behalf of an
Executing Firm whose trades it had provided the Corporation with notice pursuant to these Rules
that it did not wish to be settled.
Notwithstanding the above, the Corporation may, in its sole discretion, exclude any SameDay Settling Trade or Same-Day Settling Trades from the Comparison System, by Netting
Member or by Eligible Netting Security, including cancelling any Same-Day Settling Trade that
does not meet the eligibility requirements set forth in this Rule.
(iii)

Settlement

Same-Day Settling Trades that are Novated and that meet the eligibility requirements by
the Corporation pursuant to Section 11(ii) of Rule 12 shall settle with the Corporation on a tradeby-trade basis. The Deliver Obligations of a Netting Member with respect to such transactions
must be satisfied by delivery of the appropriate Eligible Netting Securities from a clearing bank orbanks designated by the Member for such purpose to a clearing bank or banks designated by the
Corporation for such purpose. The Receive Obligations of a Netting Member with respect to suchtransactions must be satisfied by receipt of the appropriate Eligible Netting Securities by a clearing
bank or banks designated by the Member for such purpose from a clearing bank or banks
designated by the Corporation for such purpose.

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All deliveries of Eligible Netting Securities in satisfaction of the Deliver Obligations
referenced in the previous paragraph, and all receipts of Eligible Netting Securities in satisfactionof the Receive Obligations referenced in the previous paragraph, must be made against
simultaneous payment or receipt at the Contract Value for each such obligation for the BusinessDay.
All deliveries of Eligible Netting Securities in satisfaction of the Deliver Obligations
discussed in this section shall be identified by standard industry deliver codes indicating a new
origination delivery. Reversal codes shall not be used to identify any delivery of securities to the
Corporation without the express prior permission of the Corporation.
If a Novated Same-Day Settling Trade becomes uncompared or is cancelled pursuant tothese Rules, the deliver, receive, and related payment obligations between the Corporation and theNetting Members created by the Novation of such trade shall be terminated and cancelled, and noamounts shall be owing between the Corporation and the Netting Members on account of suchtrade. In the event that such transaction is uncompared or cancelled after the satisfaction of thedeliver, receive, and related payment obligations between the Corporation and the applicable
Netting Members, the Corporation shall establish reverse Securities Settlement Obligations in theform of a Receive Obligation or Deliver Obligation for the amount of the Contract Value of theuncompared or cancelled Same-Day Settling Trade between the Corporation and the applicable
Netting Members. If such Receive Obligation or Deliver Obligation fails to settle, it shall be netted
for settlement on the next Business Day. Those that fail to settle will be subject to the fails charge
pursuant to Rule 11, Section 14.
Sections 6, 7, 8 and 9 of Rule 12 shall be applicable in connection with the settlement ofSame-Day Settling Trades with the Corporation.

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RULE 13 – FUNDS-ONLY SETTLEMENT
Section 1 – General
One or more times on each Business Day, each Netting Member, as appropriate inaccordance with this Rule, shall be obligated to pay to the Corporation, and/or shall be entitled tocollect from the Corporation, the following (determined separately, where applicable, for theMarket Professional Cross-Margining Account of a Netting Member):(a)With regard to every Net Settlement Position, other than a Forward Net Settlement
Position, either pay to the Corporation a Debit Transaction Adjustment Payment or collect fromthe Corporation a Credit Transaction Adjustment Payment;(b)With regard to certain Deliver Obligation and Receive Obligation, either pay to the
Corporation a Debit Delivery Differential Adjustment Payment or collect from the Corporation a
Credit Delivery Differential Adjustment Payment;(c)With regard to every Forward Net Settlement Position, either pay to the Corporationa Debit Forward Mark Adjustment Payment or collect from the Corporation a Credit Forward
Mark Adjustment Payment;(d)With regard to each of its Debit Forward Mark Adjustment Payments, collect fromthe Corporation a related Credit Interest Adjustment Payment, and with regard to each of its Credit
Forward Mark Adjustment Payments, pay to the Corporation a related Debit Interest Adjustment
Payment;(e)With regard to every Fail Deliver Obligation and Fail Receive Obligation, either
pay to the Corporation a Debit Fail Mark Adjustment Payment or collect from the Corporation a
Credit Fail Mark Adjustment Payment;(f)With regard to every Fail Deliver Obligation and Fail Receive Obligation on a
coupon payment date for the Eligible Netting Securities that comprise such Fail Deliver Obligation
and Fail Receive Obligation: (1) if the Member has a Fail Deliver Obligation, it shall pay to the
Corporation a Debit Coupon Adjustment Payment, and (2) if the Member has a Fail Receive
Obligation, it shall collect from the Corporation a Credit Coupon Adjustment Payment;(g)With regard to every Coupon-Eligible End Leg on a coupon payment date for the
Position, it shall pay to the Corporation a Debit Coupon Adjustment Payment, and (2) if theMember is in a Net Long Position, it shall collect from the Corporation a Credit Coupon
Adjustment Payment;(h)With regard to every Net Settlement Position or End Leg of a Repo Transaction on
the maturity date for the Eligible Netting Security that comprises such Net Settlement Position or
Repo Transaction: (1) if the Redemption Adjustment Payment is a positive amount, then theMember shall collect a Credit Redemption Adjustment Payment from the Corporation, and (2) if
the Redemption Adjustment Payment is a negative amount, then Member shall pay to the
Corporation a Debit Redemption Adjustment Payment;

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(i)
With regard to any settlement made pursuant to Rule 12 where there is a difference
between the Settlement Value at which a Deliver Obligation or Receive Obligation was obligatedto have been made and the dollar value at which such Obligation actually was settled, either pay
to the Corporation a Debit Clearance Difference Amount or collect from the Corporation a Credit
Clearance Difference Amount;(j)With regard to every GCF Net Settlement Position, either pay to the Corporation a
Debit GCF Transaction Adjustment Payment or collect from the Corporation a Credit GCF
Transaction Adjustment Payment;(k)With regard to any GCF Repo Transaction that is not scheduled to settle on thatday, either pay to the Corporation a Debit GCF Forward Mark Adjustment Payment or collectfrom the Corporation a Credit GCF Forward Mark Adjustment Payment;(l)With regard to each of its Debit GCF Forward Mark Adjustment Payments, collectfrom the Corporation a related Credit GCF Interest Adjustment Payment, and with regard to eachof its Credit GCF Forward Mark Adjustment Payments, pay to the Corporation a related Debit
GCF Interest Adjustment Payment;(m)With regard to any fees due and owing by a Netting Member to the Corporation it
shall pay to the Corporation an Invoice Amount; and(n)With regard to any other cash payments owing from a Netting Member to the
Corporation or entitled to be collected by a Netting Member from the Corporation, theMiscellaneous Adjustment Amount.
Notwithstanding anything to the contrary in Rule 1 or in this Rule, a Netting Member or a
Locked-In Trade Source (hereinafter, the “Exempt Member/Source”) that is not obligated,pursuant to these Rules, to pay to the Corporation some or all of the Debit Forward Mark
Adjustment Payments that ordinarily would be associated with its Forward Net Settlement
Positions shall not be entitled to collect from the Corporation any Credit Forward Mark
Adjustment Payments.
Notwithstanding anything to the contrary in Rule 1 or in this Rule, if a Member’s has
engaged in transactions involving Eligible Netting Securities with an Exempt Member/Source, theCorporation’s obligation to pay to such Member a Credit Forward Mark Adjustment Payment, orCredit Forward Mark Adjustment Payments associated with such transactions shall be limited by,
and shall be no greater than, the Amount of Debit Forward Mark Adjustment Payment or Payments
payable to the Corporation under these Rules from the Exempt Member/Source.
Notwithstanding anything to the contrary in Rule 1 or in this Rule, if a Member has engaged
in transactions involving Eligible Netting Securities with an Exempt Member/Source, theCorporation’s obligation to pay to such Member a Credit Interest Adjustment Payment on Debit
Forward Mark Adjustment Payments associated with resultant Forward Net Settlement Positions
shall be limited by, and shall be no longer greater than, the amount of interest earned by the
Corporation on such Debit Forward Mark Adjustment Payments.

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Notwithstanding anything to the contrary in these Rules, if a Netting Member that has
submitted an Off-the-Market Transaction to the Corporation has not paid to the Corporation, in atimely manner in accordance with these Rules, either a Debit Transaction Adjustment Payment ora Debit Forward Mark Adjustment Payment that is associated with the Off-the-Market
Transaction, the Corporation may, in its sole discretion, not pay any Credit Transaction
Adjustment Payment or a Credit Forward Mark Adjustment Payment associated with that Off-theMarket Transaction to the Netting Member or Members that otherwise would receive such
Payment or Payments from the Corporation pursuant to these Rules.
Except as otherwise provided in Section 3, all funds-only payment obligations andcollection rights that arise pursuant to this Rule shall be satisfied each Business Day on a net total
basis through payment or collection, as set forth in Section 2 of this Rule, of the Funds-OnlySettlement Amount.
Section 2 – Calculation of Funds-Only Settlement Amount
One or more times on each Business Day, the Corporation shall make available to each
Netting Member and to the Funds-Only Settling Bank Member acting on behalf of the Member aReport stating the Funds-Only Settlement Amount that is either to be paid from such Member tothe Corporation on such Business Day or to be collected by such Member from the Corporation
on such Business Day. The Funds-Only Settling Bank Member shall also receive the Funds-OnlySettlement amounts of all of the Netting Members for which it is acting and the Net Funds-OnlySettlement Figure.
The Funds-Only Settlement Amount of each Netting Member shall be determined by
calculating the net total, for a particular cycle, if applicable, of the following: (a) the Net
Transaction Adjustment Payment; (b) the Net Delivery Differential Adjustment Payment; (c) the
Net Forward Mark Adjustment Payment; (d) the return of the previous cycle’s Net Forward Mark
Adjustment Payment; (e) the Net Interest Adjustment Payment; (f) the Net Fail Mark Adjustment
Payment; (g) the Net Coupon Adjustment Payment; (h) the Net Clearance Difference Amount;(i) the Net GCF Transaction Adjustment Payment; (j) the Net GCF Forward Mark Adjustment
Payment; (k) the Net GCF Interest Adjustment Payment; (l) the Total Invoice Amount; (m) the
Miscellaneous Adjustment Amount; (n) the Net Redemption Adjustment Payment; (o) the
Opening Balance; and (p) the Collected/Paid Amount. If such net total is a negative amount, suchamount shall be owing by the Member to the Corporation; if such net total is a positive amount,such amount shall be owing by the Corporation to the Member. The amount of each component,
as listed above, of the Funds-Only Settlement Amount shall be reported on each Business Day toeach Netting Member. The components of the Funds-Only Settlement Amount that are calculated
at end of day and then collected or paid start of day, as applicable, on the following Business Day,are the amounts listed in (a) through (p) of this paragraph.
The Corporation shall determine an intraday Funds-Only Settlement Amount by
calculating a net total, for a particular cycle, if applicable, of the following: (a) the Net Forward
Mark Adjustment Payment, (b) the return of the previous cycle’s Net Forward Mark Adjustment
Payment, and (c) the Miscellaneous Adjustment Amount. If such amount is a positive amount,such amount shall be owing by the Corporation to the Member. The amount of such component,
as listed above, of the intraday Funds-Only Settlement Amount shall be reported on each Business
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Day to each Netting Member. In addition, Repo Parties will also be subject to this provision withrespect to their pending (non-DK’ed) Demand Trades with Repo Brokers. The components of theFunds-Only Settlement Amount that are calculated and collected or paid intraday, as applicable,
are the amounts listed in (a) through (c) of this paragraph.
One or more times on each Business Day, each Netting Member shall be obligated to fulfill
its Funds-Only Settlement Amount payment obligation, as established pursuant to these Rules andindicated in the Netting System output made available to such Member, regardless of the fact thatan adjustment has been made, or the possibility that an adjustment may later be made, by the
Corporation to such Amount pursuant to these Rules (including adjustments made as the result ofa correction of compared data or a change in coupon rate).
Section 3 – [Reserved]
Section 4 – Funds-Only Settling Bank Members(a)Each Netting Member shall be required to appoint a Funds-Only Settling Bank to
perform the Netting Member’s Funds-Only Settlement Amount obligations via the process set
forth in Section 5 of this Rule. A Netting Member must at all times have a Funds-Only Settling
Bank validly appointed and acting on its behalf. The Netting Member and the Funds-Only Settling
Bank shall execute an “Appointment of Funds-Only Settling Bank and Funds-Only Settling Bank
Agreement”.
(b)
The following entities shall be eligible to become Funds-Only Settling Bank
Members and to act as Funds-Only Settling Banks for Netting Members:(i)A bank or trust company that is a DTC Settling Bank may apply to become
a Funds-Only Settling Bank Member by signing the agreements described in subsection(d) below.
(ii)
A Netting Member that is a bank, trust company or other entity and that has
direct access to a relevant FRB and the NSS may apply to become a Funds-Only Settling
Bank Member by signing the agreements described in subsection (d) below.
(iii) A Mortgage-Backed Securities Division Cash Settling Bank may apply to
become a Funds-Only Settling Bank Member by signing the agreements described insubsection (d) below.
(iv)
A bank or trust company that does not fall into (i), (ii) or (iii) and has directaccess to a relevant FRB and the NSS may apply to become a Funds-Only Settling Bank
Member by submitting the requisite application, signing the agreements described insubsection (d) below and submitting such other information required by the Corporation.
The Corporation shall approve an application to become a Funds-Only Settling Bank
Member pursuant to this subsection (iv) only upon a determination by the Corporation thatthe applicant meets the standards of financial responsibility and operational capability as
the Corporation may require for this purpose as specified in important notices issued by
the Corporation.

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(c)

On an ongoing basis:(i)
Funds-Only Settling Bank Members approved as such pursuant tosubsection (b)(i) above shall be required to maintain their status as a DTC Settling Bank or
re-apply under subsections (b)(ii), (b)(iii) or (b)(iv).
(ii)
Funds-Only Settling Banks approved as such pursuant to subsection (b)(ii)
above must maintain their status as a Netting Member or re-apply under subsections (b)(i),(b)(iii) or (b)(iv).
(iii) Funds-Only Settling Banks approved as such pursuant to subsection (b)(iii)
above must maintain their status as a Mortgage-Backed Securities Division Cash Settling
Bank or re-apply under subsections (b)(i), (b)(ii) or (b)(iv).
(iv)
Funds-Only Settling Banks approved as such pursuant to subsection (b)(iv)
above must maintain the financial responsibility and operational capability standards as the
Corporation may require pursuant to subsection (b)(iv) above. If required by the
Corporation, such Funds-Only Settling Banks shall submit the financial and otherinformation (if applicable) specified by the Corporation in notices issued by the
Corporation from time to time. Such information must be submitted within the timeframes
specified in guidelines issued by the Corporation from time to time.
(v)
All Funds-Only Settling Banks that, in accordance with such entity’s
regulatory and/or statutory requirements, calculate a Tier 1 RBC Ratio must have a Tier 1
RBC Ratio equal to or greater than the Tier 1 RBC Ratio that would be required for such
Funds-Only Settling Bank to be Well Capitalized.
(d)Each Funds-Only Settling Bank Member:(i)

agrees:(1)

to abide by these Rules applicable to Funds-Only Settling Bank
Members and to be bound by all provisions thereof and that the
Corporation shall have all the rights and remedies contemplated by
the Rules; and(2)

to be bound by any amendment to these Rules with respect to anytransaction occurring subsequent to such time such amendment
takes effect as fully as though such amendment were now a part ofthese Rules.

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(ii)

shall sign and deliver to the Corporation:(1)

the “Appointment of Funds-Only Settling Bank and Funds-OnlySettling Bank Agreement”;(2)

the agreement(s) authorizing the Corporation’s Settlement Agent toutilize NSS for funds-only settlement as the relevant FRB may
require; and(3)

a Cybersecurity Confirmation.

(e)Notwithstanding that an applicant qualifies under subsection (b) above, if a materialchange in condition at the applicant occurs which could bring into question the entity’s ability toperform as a Funds-Only Settling Bank, and such material change becomes known to the
Corporation prior to the applicant commencing as a Funds-Only Settling Bank Member, theCorporation shall have the right to stay commencement of the applicant acting as a Funds-OnlySettling Bank until a reconsideration of the applicant’s financial responsibility and/or operational
capability (if applicable) can be completed. As a result of such reconsideration, the Corporation
may determine to withdraw approval or condition the approval upon the furnishing of additional
information or assurances.
(f)
Before denying an application to become a Funds-Only Settling Bank Member
pursuant to this Rule, the Corporation shall furnish the applicant with a concise written statement
setting forth the specific grounds under consideration upon which any such denial may be based
and shall notify the applicant of its right to request a hearing to determine whether the application
should be denied, such request to be filed by the applicant pursuant to Rule 37.
(g)
A Funds-Only Settling Bank shall not terminate its status as a Funds-Only Settling
Bank and shall not terminate its representation of a Netting Member without having given 10
Business Days advance written notice thereof to the Corporation; however, the Corporation, in its
discretion, may accept such termination within a shorter notice period. Such termination will not
be effective until accepted by the Corporation. The affected Netting Members must appoint new
Funds-Only Settling Banks prior to the termination.
(h)Based on its judgment that adequate cause exists to do so, the Corporation may at
any time terminate an entity’s membership status as a Funds-Only Settling Bank Member and its
right to act as a Funds-Only Settling Bank.
(i)
A Funds-Only Settling Bank’s books and records, insofar as they relate to the
Corporation’s funds-only settlement process, shall be open to the inspection of the duly authorized
representatives of the Corporation upon reasonable prior notice and during the Funds-Only SettlingBank’s normal business hours.
(j)Each Funds-Only Settling Bank shall comply in all material respects with allapplicable laws, including applicable laws relating to securities, taxation and money laundering inconnection with its acting as a Funds-Only Settling Bank.

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(k)
Each Funds-Only Settling Bank shall fulfill, within the timeframe established by
the Corporation, any operational testing requirements (the scope of such testing to be determinedby the Corporation in its sole discretion) and related reporting requirements (such as reporting test
results to the Corporation in a manner specified by the Corporation) that may be imposed by the
Corporation from time to time to ensure the continuing operational capability of the Funds-OnlySettling Bank.
(l)Each Funds-Only Settling Bank shall complete and deliver to the Corporation a
Cybersecurity Confirmation at least every two years, on a date that is set by the Corporation andfollowing notice that is provided no later than 180 calendar days prior to such due date.
(m)
In addition to this Rule 13 and applicable provisions of Rule 1, the following Rules
and any relevant schedules cited therein shall apply to Funds-Only Settling Bank Members in thesame manner as they apply to Netting Members: Rule 22D (Wind-down of the Corporation),
Rule 29 (Release of Clearing Data), Rule 32 (Signatures), Rule 33 (Procedures), Rule 36 (Rule
Changes), Rule 37 (Hearing Procedures), Rule 38 (Governing Law and Captions), Rule 39(Limitations of Liability), Rule 42 (Suspension of Rules), Rule 44 (Action by the Corporation),
Rule 45 (Notices), Rule 46 (Interpretation of Terms), Rule 47 (Interpretation of Rules), Rule 48(Disciplinary Proceedings), Rule 50 (Market Disruption and Force Majeure) and Rule 50A(Systems Disconnect: Threat of Significant Impact to the Corporation’s Systems).
Section 5 – Funds-Only Settlement Amount Payment Process
All payments of Funds-Only Settlement Amounts by a Netting Member to the Corporation,
and all collections of Funds-Only Settlement Amounts by a Netting Member from the Corporation,
shall be done through the Funds-Only Settling Banks pursuant to the following process:(a)
As stated in Section 2 above, one or more times on each Business Day, theCorporation shall make available to the Funds-Only Settling Banks the Funds-Only Settlement
Amounts of all of the Netting Members for which the Banks are acting and the Banks’ Net FundsOnly Settlement Figures. If the Funds-Only Settling Bank’s Net Funds-Only Settlement Figure isa debit, it shall pay such amount to the Corporation in the manner provided in this Section by thedeadline established by the Corporation in Section 6 of this Rule. If the Funds-Only SettlingBank’s Net Funds-Only Settlement Figure is a credit, it shall receive such amount from the
Corporation in the manner provided in this Section by the deadline established by the Corporationin Section 6 of this Rule.
(b)
By the Acknowledgement Cutoff Time, the Funds-Only Settling Banks, without
exception, must acknowledge to the Corporation via the designated terminal system their Net
Funds-Only Settlement Figures and (1) their intention to settle with the Corporation their Net
Funds-Only Settlement Figures, or (2) their refusal to settle for one or more particular Netting
Members. The Acknowledgement Cutoff Time shall be the later of: (i) 30 minutes after the FundsOnly Settling Bank has been notified that such payment is due, or (ii) 30 minutes prior to thepayment deadlines established by the Corporation. Notwithstanding the foregoing, a Funds-OnlySettling Bank that is a Netting Member and settles solely for its own account may not refuse tosettle for itself but may opt to not acknowledge its Funds-Only Settlement Amount; if such FundsOnly Settling Bank chooses to opt out, it shall not be subject to subsections (k) and (l) below.

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(c)
If the Funds-Only Settling Bank sends refusal messages and its new Net FundsOnly Settlement Figure is a credit, it must send a message to the Settlement Agent after the refusal
message acknowledging that amount. This new Net Funds-Only Settlement Figure shall be subject
to subsection (k) below. If its new Net Funds-Only Settlement Figure is a debit, the Funds-OnlySettling Bank must send a message to the Settlement Agent after the refusal messages
acknowledging its intention to settle the new amount with the Corporation by the payment
deadline.
(d)
A refusal to settle by the Funds-Only Settling Bank for a particular Netting Member
is a refusal to settle all Accounts of the Netting Member. The Funds-Only Settling Bank cannot
refuse to settle only some of the Accounts of the Member if the Member has multiple Accounts at
the Corporation.
(e)
If the Funds-Only Settling Bank does not acknowledge, or sends a refusal
regarding, the Netting Member’s Funds-Only Settlement Amount that is a debit or if the Bank
acknowledges the amount but then does not settle the payment, the Netting Member shall remain
obligated, pursuant to the Rules, to pay such Amount by the payment deadline and shall do so by
causing such payment to be made to the depository institution designated by the Corporation fromtime to time to receive such payment.
(f)
A Funds-Only Settling Bank with a Net Funds-Only Settlement Figure that is adebit that has sent an acknowledgement to the Corporation must settle such amount pursuant to
the process set forth herein by the payment deadline established by the Corporation in Section 6of this Rule.
(g)
DTC provides the Corporation with services with respect to the Corporation’sFunds-Only Settlement process as described herein and in accordance with the Rules. DTC will
act as Settlement Agent for the Corporation and for the Corporation’s Funds-Only Settling Banks
with respect to the FRB’s NSS, as the means of effecting Funds-Only Settlement.
(h)
A Funds-Only Settling Bank that cannot send an acknowledgement or refusal
message to the Settlement Agent due to an operational issue may instruct the Settlement Agent to
act on its behalf.
(i)
The Settlement Agent uses the most recent contact information provided by theFunds-Only Settling Bank to the Settlement Agent. Each Funds-Only Settling Bank must ensurethat it maintains up-to-date and accurate contact details with the Settlement Agent on an ongoingbasis when previously provided contact details are no longer accurate, to facilitate the Settlement
Agent’s ability to contact a Funds-Only Settling Bank regarding this settlement process and any
settlement issues.
(j)Funds-Only Settling Banks must settle their Net Funds-Only Settlement Figures via
the FRB’s NSS. The Settlement Agent will send a pre-advice to each Funds-Only Settling Bank,
notifying it that the Settlement Agent is about to send its NSS transmission to the FRB. NSS willallow the Corporation’s Settlement Agent to instruct the relevant FRB to debit or credit, asapplicable, the Funds-Only Settling Bank’s account at the FRB by the requisite amount.

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(k)
If a Funds-Only Settling Bank does not, by the Acknowledgement Cutoff Time,either: (i) affirmatively acknowledge its Net Funds-Only Settlement Figure or (ii) notify the
Settlement Agent that it refuses to settle for one or more Netting Members for which it is thedesignated Funds-Only Settling Bank, then, at the Acknowledgement Cutoff Time, the FundsOnly Settling Bank is deemed to have acknowledged its Net Funds-Only Settlement Figure. If the
Net Funds-Only Settlement Figure is a debit, then the Funds-Only Settling Bank’s FRB accountwill be charged; if the Net Funds-Only Settlement Figure is a credit, then the Funds-Only SettlingBank’s FRB account will be credited. This subsection (k) does not apply to a Funds-Only Settling
Bank that settles solely for its own account and opts not to acknowledge its Net Funds-OnlySettlement Figure.
(l)
The Settlement Agent will attempt to contact the Funds-Only Settling Bank if noacknowledgement or notice of a refusal to settle on behalf of one or more Netting Members forwhich it is designated as the Funds-Only Settling Bank is received by the Acknowledgement
Cutoff Time. If (x) the Settlement Agent is able to contact the Funds-Only Settling Bank, and(y) the Funds-Only Settling Bank notifies the Settlement Agent that it cannot, at that time,
acknowledge or refuse their Net Funds-Only Settlement Figure, then the Funds-Only Settling Bank
will not be deemed to have acknowledged its Net Funds-Only Settlement Figure. If the FundsOnly Settling Bank cannot be reached, the Funds-Only Settling Bank will be deemed to haveacknowledged its Net Funds-Only Settlement Figure.
The Corporation may exclude a Funds-Only Settling Bank’s balance from the NSS file if
the Funds-Only Settling Bank (i) does not acknowledge its Net Funds-Only Settlement Figure by
the Acknowledgement Cutoff Time or does not acknowledge its new Net Funds-Only Settlement
Figure pursuant to subsection (c) above by the Acknowledgement Cutoff Time and (ii) is notdeemed to have acknowledged its Net Funds-Only Settlement Figure or its new Net Funds-OnlySettlement Figure pursuant to subsection (c) above because the Funds-Only Settling Bank has
notified the Settlement Agent that it is unable to affirmatively acknowledge its Net Funds-OnlySettlement Figure or that it refuses to settle on behalf of a Member.
This subsection (l) does not apply to a Funds-Only Settling Bank that settles solely for its
own account and opts to not acknowledge its Net Funds-Only Settlement Figure.
(m)
If a Funds-Only Settling Bank is experiencing extenuating circumstances and, as aresult, needs to opt out of NSS for one Business Day, the Funds-Only Settling Bank must notify
the Settlement Agent prior to the Acknowledgement Cutoff Time. The Netting Member shallremain obligated, pursuant to the Rules, to pay such its Funds-Only Settlement Amount that is adebit by the payment deadline and shall do so by causing such payment to be made to thedepository institution designated by the Corporation from time to time to receive such payment.
(n)
If the Funds-Only Settling Bank’s account at the FRB has insufficient funds, theSettlement Agent will receive notification from the FRB that the account was not debited. The
affected Netting Member(s) must then promptly wire the requisite funds to the depository
institution designated by the Corporation for this purpose by the payment deadline.
(o)In the event a Funds-Only Settling Bank fails to settle in the manner and at the timeprescribed by the Corporation, due to insolvency or other cause, each Netting Member represented

201

by that Funds-Only Settling Bank shall be obligated to the Corporation for its Funds-OnlySettlement Amount and such payment must be made by the payment deadline; however, if the
Corporation has made payment to the failed Funds-Only Settling Bank the Corporation shall haveno obligation to any Netting Member for a Funds-Only Settlement Amount that is a credit.
(p)
The Netting Member must remain at all times in compliance with the Rules,
notwithstanding any circumstances related to its Funds-Only Settling Bank or NSS. Netting
Members must at all times be prepared to wire payment to the depository institution designated by
the Corporation for this purpose if its Funds-Only Settlement Amount is not satisfied via the NSS
process. If the Corporation does not receive a Netting Member’s Funds-Only Settlement Amountthat is a debit by the payment deadline, the Member shall be subject to the applicable fine and anyother disciplinary consequences under these Rules.
(q)
Each Funds-Only Settling Bank shall monitor its FRB account to ensure accuracyof debits and credits made through the NSS process.
(r)
Under FRB Operating Circular No. 12, FICC’s Settlement Agent has certain
processing responsibilities in allocating an indemnity claim made by an FRB as a result ofprocessing the Corporation’s funds-only settlement via NSS. The Corporation shall apportion theentirety of such liability to the Netting Members for whom the Funds-Only Settling Bank to which
the indemnity claim relates was acting. Such liability for each applicable Netting Member shallbe in proportion to the amount of such Members’ Funds-Only Settlement Amounts on the Business
Day in question. If for any reason such allocation is not sufficient to fully satisfy the FRB
indemnity claim, then the remaining loss shall be treated as a loss that is otherwise incident to theclearance and settlement business of the Corporation and allocated accordingly pursuant to
Section 7 of Rule 4.
(s)
No improper or unauthorized action, or failure to act, by a Funds-Only Settling
Bank or other depository institution on behalf of a Netting Member shall excuse or otherwise affectsuch Netting Member’s obligations to the Corporation pursuant to this Rule.
Section 6 – Acknowledgement and Payment Deadlines for Funds-Only Settlement Amounts(a)
The acknowledgement required to be made by the Funds-Only Settling Banks
regarding their Net Funds-Only Settlement Figures pursuant to Section 5 of this Rule shall be madeby the Acknowledgement Cutoff Time subject to Section 5(l) of this Rule.
(b)
A Netting Member that has an obligation, pursuant to this Rule, to pay a FundsOnly Settlement Amount to the Corporation shall cause such payment to be made, pursuant to theprocess set forth in Section 5 of this Rule, in Federal funds, by the time stated in the Schedule ofTimeframes.
(c)When a Netting Member is entitled, pursuant to this Rule, to collect a Funds-OnlySettlement Amount from the Corporation, the Corporation shall cause such payment to be made,in Federal funds, pursuant to the process set forth in Section 5 of this Rule, by the time stated in
the Schedule of Timeframes.

202Notwithstanding anything to the contrary elsewhere in this Rule or in Rule 4, on any
Business Day on which a Netting Member is notified by the Corporation that it must increase theamount of its Required Fund Deposit and the Netting Member has a Funds-Only Settlement
Amount due it from the Corporation, in lieu of paying the Funds-Only Settlement Amount to theNetting Member, the Corporation may retain the lesser of the requested increase in the Required
Fund Deposit or such Funds-Only Settlement Amount (or the entire Funds-Only Settlement
Amount if the difference between the amounts is zero) and apply such amount against the Netting
Member’s obligation to increase its Required Fund Deposit. Notwithstanding the foregoing, if the
Corporation receives from the Netting Member any portion of the requested increase in theRequired Fund Deposit by a pre-established time before the Corporation’s deadline to pay FundsOnly Settlement Amounts to Netting Members, the Corporation shall only be entitled to offset theFunds-Only Settlement Amount it owes to the Netting Member against the Netting Member’s
remaining obligation to increase its Required Fund Deposit, if any. The Corporation shall give
Netting Members prior written notice of the pre-established time referred to above (and anychanges thereto).
The obligations of the Corporation pursuant to this Rule shall not be affected by the latecollection or non-collection by it of any Funds-Only Settlement Amount of which payment isowing from any Netting Member.
Section 7 – Liability of a Netting Member
Each Netting Member shall pay, or reimburse the Corporation, for all losses, costs,
expenses, and charges (including attorney’s fees) incurred by the Corporation as the result of any
failure of such Netting Member to fulfill its obligations to the Corporation pursuant to this Rule.
If a Netting Member (hereinafter, the “Defaulting Netting Member”) fails to pay to the
Corporation in a timely manner any portion of a Funds-Only Settlement Amount as required
pursuant to this Rule (hereinafter, the “Unpaid Balance”), the Corporation, in its sole discretion,
may apply to payment of the Unpaid Balance all or a portion of any monies owing by the
Corporation to the Defaulting Netting Member, and/or all or a portion of such Member’s deposits
to the Clearing Fund or other collateral of such Member held by the Corporation. If the
Corporation satisfies all or a portion of the Unpaid Balance through use of the Corporation’s own
funds or funds borrowed from third parties, the Defaulting Member shall be liable, in addition to
the amount of the Unpaid Balance, for the costs of any such borrowing, including, without
limitation, interest from the Business Day on which the failure to pay the Unpaid Balance occurred
until and including the Business Day on which the Member pays to the Corporation the Unpaid
Balance (or, if later, the Business Day on which funds borrowed from a third party are repaid by
the Corporation to such party). The interest rate applicable to funds advanced by the Corporation
pursuant to this Section shall be the Federal Funds Rate plus one percent.
If the Corporation, in its sole discretion, determines that a Netting Member has, without
good cause, failed to pay to the Corporation in a timely manner pursuant to this Rule a Funds-OnlySettlement Amount, it may impose a fine upon such Member. As used in this Section, “good cause”
means a causal event or occurrence that the Corporation, in its sole discretion, determines was
beyond the reasonable control of a Netting Member; depending upon the specific circumstances,
this may include an extended failure of Fedwire or the inability to gain access to Fedwire by a203

depository institution acting on behalf of either a Netting Member or the Corporation. The failure
to pay the Corporation in a timely manner by a depository institution acting on behalf of a Netting
Member including the Netting Member’s Funds-Only Settling Bank, shall not automaticallyconstitute “good cause.”

204

RULE 14 – FORWARD TRADES
Section 1 – General
The netting, settlement, and margining of Forward Trades and Forward Net Settlement
Positions are subject to the special provisions of this Rule, and such provisions supersede any
conflicting provisions of any other Rule.
Section 2 – Forward Net Settlement Positions
Each Forward Net Settlement Position of a Netting Member shall be reported, by CUSIP
Number, by the Corporation in a Report issued by the time stated in the Schedule of Timeframes
for each Business Day during the Forward Period applicable to such Forward Net Settlement
Position to such Member. Such Forward Net Settlement Positions shall be established by the
Corporation by comparing the aggregate par value amount of each purchase and each sale of the
Eligible Netting Securities with a distinct CUSIP Number that comprise the Forward Trades that
underlie such Forward Net Settlement Positions from the first day during the Forward Period onwhich such trades are compared until the current Business Day on which such Forward Net
Settlement Position is being established.
A new Forward Net Settlement Position shall be established on each successive BusinessDay during the Forward Period applicable to such Forward Net Settlement Position. Each Forward
Net Settlement Position automatically converts into a Net Settlement Position on the Scheduled
Settlement Day for such Forward Net Settlement Positions. Except as otherwise provided for in
Rule 22A with regard to an insolvent Member or member for which that Corporation has otherwise
ceased to act, the Corporation will not establish or report Deliver Obligations or Receive
Obligations with regard to a Forward Net Settlement Position.
Section 3 – Netting
Forward Net Settlement Positions of a Netting Member, either as originally established by
the Corporation or as may be adjusted by the Corporation as the result of a correction of compareddata made pursuant to these Rules, shall be fixed at the time the Report of such Forward Net
Settlement Positions is made available by the Corporation to a Netting Member, as provided in
Section 10 of Rule 11. At that time, all deliver, receive, and related payment obligations between
such Netting Member and the Corporation that were created by the Forward Trades, Novated by
the Corporation pursuant to Section 8 of Rule 5, and that comprise each Forward Net Settlement
Position are terminated and replaced by the Deliver Obligations, Receive Obligations, and related
payment obligations that will be established and reported by the Corporation with respect to eachsuch Forward Net Settlement Position on and, as applicable, after the Scheduled Settlement Datefor such Forward Net Settlement Positions.
Notwithstanding anything to the contrary in the above paragraph, a Right of Substitution
applicable to a Repo Transaction that constitutes all or part of a Forward Net Settlement Position
shall be recognized by the Corporation pursuant to these Rules.

205

RULE 15 – SPECIAL PROVISIONS FOR CERTAIN NETTING MEMBERS
Section 1 – Submitting Members
A Submitting Member that has submitted to the Corporation pursuant to these Rules dataon a trade on behalf of an Executing Firm shall be obligated to the Corporation pursuant to theseRules (including, if the trade is netted and settled through the Netting System, as regards thecalculation of payment of Required Fund Deposit and Funds-Only Settlement Amounts) inconnection with such trades to the same degree as if it itself had executed such trades.
Section 2 – Repo Brokers
At the request of the Corporation, each Repo Broker shall submit to the Corporation, dataon all of its trades in Eligible Netting Securities, including trades done with Non-Members. Such
request may include such data as is necessary to indicate, by reference number, a buy side thatmatches in par amount, and is bound to, one or more sell sides, and vice versa. Moreover, for every
trade done by a Repo Broker involving an Eligible Netting Security, including trades done with
Non-Members, the identity of each buy side and sell side counterparty shall be disclosed to the
Corporation, in the form and manner prescribed by the Corporation for such disclosure. The
requirements of this paragraph shall not apply to Repo Transactions.
If a Repo Broker fails to comply with the requirements of this Section, the Corporation, in
its sole discretion, may treat such Member for purposes of these Rules as if it were a Dealer Netting
Member, upon providing notice of such to the Member.
Notwithstanding anything to the contrary elsewhere in these Rules, including Rule 1, tradesby a Repo Broker with a Non-Member that clears all of its trades in Eligible Netting Securities
through one or more Netting Members (excluding Netting Members that are Repo Brokers), eachof which in turn submits all of such trades of the Repo Broker to the Corporation for netting andsettlement through the Netting System, shall be treated by the Corporation for purposes ofdetermining the status of the Repo Broker as if they were trades with a Netting Member.

206

RULE 16 – NETTING OF LOCKED-IN TRADES
Section 1 – General
The obligations of the Corporation and each Netting Member regarding Demand Tradesand Locked-In Trades that are eligible for netting and settlement through the Netting System aresubject to the special provisions of this Rule, and such provisions supersede any conflicting
provisions of any other Rule, except Rules 17 through 20.
Section 2 – Net Settlement Positions Comprised of Locked-In Trades
Net Settlement Positions that are comprised in whole or in part of Demand Trades and/or
Locked-In Trades shall, except as otherwise provided in Rule 17, be treated by the Corporation in
the same manner as all other Net Settlement Positions.

207

RULE 17 – NETTING AND SETTLEMENT OFNETTING-ELIGIBLE AUCTION PURCHASES
Section 1 – General
The netting and settlement of Netting-Eligible Auction Purchases shall be subject generally
to the provisions of Rules 11 through 16; however, the provisions of this Rule shall supersede any
conflicting provisions of any other Rule.
Section 2 – Provision of Appropriate Deliver Instructions
A Netting Member that makes a Netting-Eligible Auction Purchase in connection with a
Treasury Department auction shall provide the Federal Reserve Bank through which it makes such
Auction Purchase, prior to the time of the making of such Auction Purchase and in the form andmanner required by the Treasury Department or the Federal Reserve Bank, as fiscal agent of theUnited States, with appropriate instructions providing that such Auction Purchase shall bedelivered to the agent bank or banks designated by the Corporation to act on its behalf with regard
to such Auction Purchase, in lieu of being delivered to such Member, or to its agent bank or banks,
for inclusion in the Corporation’s netting process.
Section 3 – Redeliveries of Auction Purchases
Notwithstanding anything to the contrary elsewhere in these Rules, the Settlement Valueof a Receive Obligation that reflects the initial redelivery by the Corporation of a Netting-Eligible
Auction Purchase or Netting-Eligible Auction Purchases received from a Federal Reserve Bank to
a Member in satisfaction of all or a part of a Net Long Position of Such Member shall be the greaterof: (a) that Business Day’s System Value for such Receive Obligation, or (b) the Average Auction
Price for such Auction Purchase or Auction Purchases.
Section 4 – Exception to Obligation of the Corporation to Accept Delivery and Make Payment for
Netting-Eligible Auction Purchases
The Corporation shall be obligated (through its appropriate agent bank in the case ofTreasury Department auctions) to accept delivery of and make payment for any Netting-Eligible
Auction Purchase that has been reported by the Corporation to a Netting Member, pursuant to Rule
6C, as if the Corporation had made the Auction Purchase. Notwithstanding this, if: (1) the Netting
Member has a Net Long Position comprised in whole or part of Eligible Netting Securities withthe same CUSIP Number as the Netting-Eligible Auction Purchase (hereinafter, the “ResidualLong Position”), (2) the Corporation has reasonable cause to believe, based on information it hasreceived, that the Netting Member cannot or will not take delivery from the Corporation of such
Residual Long Position and pay for it in accordance with these Rules, and (3) the Corporation has
determined, from its analysis and prevailing market conditions that there is reasonable cause tobelieve that it would incur a loss upon liquidation of a Residual Long Position after application of
the margin deposited by the Netting Member and the liquidation of the Netting Member’s otherpositions, then the Corporation shall have the right, prior to 8:30 a.m. (New York Time) on Issue
Date, or later if approved by the Treasury Department to notify the Federal Reserve Bank fromwhich such Auction Purchase was made that it will not accept delivery of, and make payment for,208

the Netting Member’s Auction Purchase up to the amount of the Netting Member’s Residual Long
Position. If the Corporation exercises its right to refuse delivery under this Section, it shallpromptly inform the affected Netting Member that it has done so.
The Corporation shall also not be required to accept delivery of and make payment for any
Netting-Eligible Auction Purchase that has been reported by the Corporation to a Netting Member,pursuant to Rule 6C, if the security auctioned in a Treasury Department auction that is the subjectof the Netting-Eligible Auction Purchase is not issued.
As between the Corporation and the Netting Member, the Corporation’s determinations
under this Section shall be final.
Section 5 – Priority of Allocation of Auction Purchase Deliveries
The first priority of allocation of deliveries by the Corporation of Netting-Eligible Auction
Purchases received from a Federal Reserve Bank, shall be, on a CUSIP Number-by-CUSIP
Number basis, to ensure that every Netting Member with a Net Long Position (including a Revised
Net Long Position) comprised in whole or part of Netting-Eligible Auction Purchases receives
from the Corporation an amount of Auction Purchases equal to the lesser of such Member’s Net
Long Position or the amount of its Auction Purchases.
The second priority of allocation of deliveries by the Corporation of Netting-Eligible
Auction Purchases received from a Federal Reserve Bank, shall be, on a CUSIP Number-byCUSIP Number basis, to deliver such Auction Purchases, on an equal basis in $50 million
increments, to each Member with a Net Long Position that remains unfilled.
Section 6 – Responsibility for Netting-Eligible Auction Purchases
A Netting Member shall be responsible pursuant to the Rules for a Locked-In Tradesubmitted with respect to it by a Federal Reserve Bank even if the data contains errors or omissions,and the Netting Member shall be liable as principal to the Corporation for all Locked-In Trades
reported to the Corporation by a Federal Reserve Bank.

209

RULE 18 – SPECIAL PROVISIONS FOR REPO TRANSACTIONS
Section 1 – General
The obligations of the Corporation and each Netting Member regarding Repo Transactions
are subject to the special provisions of this Rule, and such provisions supersede any conflicting
provisions of any other Rule, except Rules 19 and 20.
Section 2 – Obligation to Submit Repo Transactions
Each Netting Member that has requested to add the repo netting service operated by the
Corporation, must submit to the Corporation, or to either another Registered Clearing Agency ora Clearing Agency that has been exempted from registration as a Clearing Agency by the SEC, forcomparison and netting, data on all of its Repo Transactions, including Repo Transactions
executed by an Executing Firm on whose behalf it is acting, with any other Netting Member or
Executing Firm on whose behalf it or another Netting Member is acting, if such Repo Transactions
are eligible for netting pursuant to these Rules.
Each Netting Member must also submit to the Corporation for netting and settlement
pursuant to these Rules data on each Repo Transaction (hereinafter, an “Eligible Repo
Transaction”) executed by a Covered Affiliate that satisfies the following criteria: (i) the Repo
Transaction is eligible for netting pursuant to these Rules, and (ii) the Repo Transaction is executedwith another Netting Member or with a Covered Affiliate of another Netting Member. For
purposes of this Section, the term “executed” shall include Repo Transactions that are cleared andguaranteed as to their settlement by the Covered Affiliate.
The preceding paragraph shall not apply to: (i) a Repo Transaction that is executed
between a Member and its Affiliates or between Affiliates of the same Member (hereinafter, an“Affiliate Trade”), (ii) a trade of a Covered Affiliate that has executed less than an average of 30
Eligible Trades (as defined in Section 3 of Rule 11) plus Eligible Repo Transactions (excluding
Affiliate Trades) per business day per month within the prior twelve-month period meeting such
criteria, or (iii) a Repo Transaction the submission of which to the Corporation would cause theMember to be in violation of any applicable law, rule or regulation.
All trade data required to be submitted to the Corporation under this Section must be
submitted on a trade-by-trade basis with the original terms of the trades unaltered. A Member or
any of its Affiliates may not engage in the Pre-Netting of Trades prior to their submission to the
Corporation in contravention of this section. In addition, a Member or any of its Affiliates may
not engage in any practice designed to contravene the prohibition against the Pre-Netting ofTrades.
If the Corporation determines that a Netting Member has, without good cause, violated its
obligations pursuant to this section, such Netting Member may be reported to the appropriate
regulatory body and/or placed on the Watch List. In addition, the Corporation may discipline a
Netting Member for a violation of this section in accordance with Rule 48.

210Section 3 – Collateral Substitutions
All collateral substitutions pertaining to Repo Transactions must be performed through the
Corporation, and the requisite collateral substitution requests must be submitted to the Corporationin accordance with the requirements, procedures and timeframes established by the Corporationfrom time to time.
With regard to any Repo Transaction that comprises a Net Settlement Position and carries
with it a Right of Substitution, a substitution of the Eligible Netting Securities collateral that
underlies the Repo Transaction shall be processed by the Corporation pursuant to the following
procedures and requirements:(a)
A notification for a request for substitution that contains the required data items in
the Schedule of Required and Accepted Data Submission Items for a Substitution of Existing
Securities Collateral, has been submitted to the Corporation by either: (i) the Netting Member
who is the Repo Party that submitted the data on the Repo Transaction, or (ii) by a Demand Trade
Source or a Locked-In Trade Source approved by the Corporation to provide such data.
(b)
The notification, in the form and manner required by the Corporation, of the intent
to substitute, has been submitted to the Corporation through the use of its designated messaging
utility. The Corporation shall not accept notifications or amendments thereto in any other form
and manner unless the Corporation has approved in advance such other form and manner. This
notification or any amendments thereto may be submitted: (i) solely by a Repo Broker that was aparty to the Repo Transaction, (ii) if the Repo Transaction is not a brokered one, by the Repo Party,or (iii) by a Demand Trade Source or a Locked-In Trade Source approved by the Corporation toprovide such notification.
(c)
The Repo Broker, the Repo Party, the Demand Trade Source or the Locked-In
Trade Source referred to in subsection (b) above has submitted to the Corporation by the deadline
published by the Corporation unless the deadline is extended by the Corporation, either in the
notification described in subsection (b) of this Section 3 or otherwise as permitted by the
Corporation, data on the nature of the New Securities Collateral, as specified in the Schedule ofRequired and Accepted Data Submission Items for a Substitution for New Securities Collateral,and any other detail deemed necessary, in the sole determination of the Corporation, to allow the
Corporation to process the substitution.
(d)
The required substitution requests with all necessary details have been submitted to
the Corporation by the deadlines published by the Corporation unless the deadline is extended by
the Corporation.
(e)
All deliveries of Existing Securities Collateral or New Securities Collateralpursuant to this Rule shall be made in the same manner that Deliver and Receive Obligations of a
Netting Member are required to be satisfied pursuant to Rule 12.
(f)
Upon receipt of a request for such substitution where the information regarding the
New Securities Collateral has not been provided to the Corporation, a Generic CUSIP Number
will be applied to the substitution until the information regarding the New Securities Collateral has

211been provided. Until such time as the Corporation has been notified of a substitution of the New
Securities Collateral to be substituted, the Corporation shall base margining with respect to the
New Securities Collateral on the applicable Generic CUSIP Number using the methodology thatis used for securities whose volatility is less amenable to statistical analysis set forth in Section 1bof Rule 4.
The Corporation shall have no obligation to ensure the acceptability to the Reverse Repo
Party of any New Securities Collateral transferred pursuant to this Section, nor shall the
Corporation record, authenticate or monitor the number of collateral substitutions performed inaccordance with the Right of Substitution.
Section 4 – General Collateral Forward-Starting Repos
In order for a submitted General Collateral Repo Transaction that is also a Forward-Starting
Repo Transaction to be included in a Member’s Net Settlement Position of the Repo Start Date,such member must inform the Corporation, in the form and manner as specified by the Corporationfrom time to time, and by the Close of Business on the Business Day prior to the Repo Start Date,of the Specific CUSIP Number(s) and par value(s) of the securities allocated to such transaction.
If such Member does not so inform the Corporation of such information, the Corporation shallremove the General Collateral Repo Transaction from its books. This paragraph does not apply to
GCF Repo Transactions.
Section 5 – Repo Transactions with Maturing Collateral
If a Repo Party has transferred Existing Securities Collateral that matures prior to the
Scheduled Settlement Date for the End Leg of the Repo Transaction, such Member shall beobligated to substitute for such Existing Securities Collateral, by no later than the Close of
Business on the Business Day prior to such maturity date, New Securities Collateral, in accordancewith the terms of the transaction. Upon failure of such Member to timely make the required
substitution, the Corporation shall remove the Repo Transaction from its books.

212

RULE 19 – SPECIAL PROVISIONS FOR BROKEREDREPO TRANSACTIONS
Section 1 – General
The obligations of the Corporation and each Netting Member regarding Brokered Repo
Transactions are subject to the special provisions of this Rule, and such provisions supersede any
conflicting provisions of any other Rule.
Section 2 – Responsibilities of Repo Brokers
If a Repo Broker wishes to submit to the Corporation data on a Brokered Repo Transaction,
it must do so through a second Account, which the Corporation will assign to it. With respect to a
Non-IDB Repo Broker, this separate account shall be its Segregated Repo Account.
A Repo Broker shall submit to the Corporation data on a Brokered Repo Transaction only
upon written agreement, and compliance, with the following conditions: (a) the Repo Broker’s
establishment of a separate account, with a separate Fedwire address, at a clearing bank that will
be used exclusively for the settlement by the parties to the transaction of the Start Leg, and (b) the
Repo Broker’s granting of the necessary permissions to allow this account to be subject to review
by the Corporation. The requirements of subsections (a) and (b) above shall not apply to Repo
Brokers with Segregated Repo Accounts that elect to settle their Same-Day Settling Trades with
the Corporation.
A Repo Broker that submits to the Corporation data on Brokered Repo Transactions shallbe responsible for responding promptly and in good faith to notifications submitted by the
Corporation and/or Netting Member counterparties to it of errors with such data, by modifying orcanceling and replacing any incorrect data.
Section 3 – Responsibilities of Netting Members With Respect to Their Brokered Repo
Transactions
A Netting Member whose counterparty is a Repo Broker must submit, or have submitted
on its behalf, to the Corporation, or to either another Registered Clearing Agency or a Clearing
Agency that has been exempted from registration as a Clearing Agency by the SEC, in a timely
and accurate manner, data on all of its Brokered Repo Transactions. Notwithstanding anything to
the contrary elsewhere in these Rules, if the Netting Member fails, without good cause as
determined by the Corporation, to submit data on their Brokered Repo Transaction to the
Corporation on a timely or accurate basis, the Corporation may treat the Brokered Repo
Transaction as compared based on the data submission received from the Repo Broker’s
counterparty for purposes of assessing all Clearing Fund deposit and Funds-Only Settlement
Amount payment consequences of the Transaction, as well as the respective Receive
Obligations(s) and/or Deliver Obligations(s) of the parties to the Transaction.

213

Section 4 – Calculation of Funds-Only Settlement Amounts for Repo Brokers
Repo Brokers must satisfy, each business day, their Funds-Only Settlement Amountobligations including Forward Mark Adjustment Payments, according to the following parameters:(i)
Any Debit Forward Mark Adjustment Payment or Credit Forward Mark
Adjustment Payment up to a dollar amount cap (the “Cap”) that will be determined by the
Corporation from time to time, shall be automatically collected from, or paid to the Repo
Broker, as applicable.
(ii)
If the Repo Broker represents to the Corporation that it is unable to pay theamount of a Debit Forward Mark Adjustment Payment in excess of the Cap, theCorporation may, in its sole discretion, finance such amount. In such case, the Repo Broker
shall be responsible for: (i) any costs incurred by the Corporation in arranging the financing(i.e., an administrative fee set forth in the Fee Structure) and (ii) reimbursing the
Corporation for the financing costs incurred. The Repo Broker’s Clearing Fund deposit
shall secure such financing.
(iii) The Corporation may, in its sole discretion, retain any amount of a Credit
Forward Mark Adjustment Payment that is in excess of the Cap.
Repo Brokers maintaining more than one Segregated Repo Account must aggregate Debit
Forward Mark Adjustment Payments and Credit Forward Mark Adjustment Payments in thoseAccounts for purposes of the Cap. The Corporation will retain the right to assess any and all
Funds-Only Settlement amounts to the Netting Member counterparty of the Repo Broker inaccordance with Section 3 above.
Section 5 – Assumption of Blind Brokered Fails
With respect to a fail of the Start Leg of a Brokered Repo Transaction (notwithstanding
Section 2(v) of Rule 11) or End Leg of a Brokered Repo Transaction (notwithstanding Section
2(v) of Rule 11), the Corporation may, in its sole discretion in order to facilitate the settlement ofsuch Leg, assume responsibility for such fail from the Repo Broker whether or not the Transaction
has been compared. If the Corporation assumes responsibility for such Transaction, it shall become
part of the counterparty’s Fail Deliver Obligation or Fail Receive Obligation as the case may be.
This Section 5 will only apply to Repo Brokers with Segregated Repo Accounts that do not electto settle Same-Day Settling Trades with the Corporation.

214

RULE 20 – SPECIAL PROVISIONS FOR GCF REPO TRANSACTIONS
Section 1 – General
The netting and settlement obligations of the Corporation and each Netting Member
regarding GCF Repo Transactions are subject to the special provisions of this Rule, and suchprovisions supersede any conflicting provisions of any other Rule. Registered Investment
Company Netting Members shall not be permitted to participate in the Corporation’s GCF Repo
Service.
Section 2 – Netting
On each Business Day, the Corporation shall net all of a Netting Member’s GCF Repo
Transactions in a particular Generic CUSIP Number. GCF Repo Transactions shall be netted onlywith other GCF Repo Transactions. On each Business Day, for each separate Generic CUSIP
Number, the Corporation shall establish a GCF Net Settlement Position for the outstanding GCF
Repo Transactions of a Netting Member, by comparing the aggregate par value amount of each
GCF Repo Transaction in which the Netting Member is a lender of cash and a borrower of
securities or cash collateral (hereinafter, the “Cash Lender Total”) and each GCF Repo Transactionin which the Netting Member is a borrower of cash and a lender of securities or cash collateral(hereinafter, the “Cash Borrower Total”). If the Cash Lender Total exceeds the Cash Borrower
Total, the resulting difference will constitute a GCF Net Funds Lender Position. If the Cash
Borrower Total exceeds the Cash Lender Total, the resulting difference will constitute the GCF
Net Funds Borrower Position. All GCF Net Settlement Positions shall be reported, by Generic
CUSIP Number, by the Corporation promptly to each Netting Member.
Except as otherwise provided for in this Rule, GCF Net Settlement Positions shall betreated by the Corporation in the same manner as all other Net Settlement Positions for purposesof these Rules.
Section 3 – Collateral Allocation and Cash Obligations Associated with Collateral Allocation
Entitlements
On each Business Day, the Corporation shall establish collateral allocation requirements
for each of a Netting Member's GCF Net Funds Borrower Positions and GCF Net Funds Lender
Positions such that: (a) for every GCF Net Funds Borrower Position, the Netting Member shallhave a Collateral Allocation Obligation equal to such GCF Net Funds Borrower Position, and(b) for every GCF Net Funds Lender Position, the Netting Member shall have a Collateral
Allocation Entitlement equal to such GCF Net Funds Lender Position. Every Collateral Allocation
Entitlement and Collateral Allocation Obligation that is established by the Corporation on aparticular Business Day shall be netted on the next Business Day with such day’s Collateral
Allocation Entitlement and/or Collateral Allocation Obligation, within a timeframe for such
established by the Corporation (referred to as net-of-net settlement). Collateral Allocation
Obligations and cash obligations associated with Collateral Allocation Entitlements must be
satisfied by a Netting Member within the timeframes established for such by the Corporation in
the Schedule of GCF Repo Timeframes.

215

If a Netting Member does not satisfy its consequent Collateral Allocation Obligation by
the applicable deadline for such Collateral Allocation Obligation as set forth in the Schedule of
GCF Repo Timeframes, such Netting Member shall be subject to a late fee. In addition, theCorporation shall process Collateral Allocation Obligations that are submitted after the applicabledeadline on a good faith basis only. If the Netting Member does not satisfy its consequent
Collateral Allocation Obligation, such Netting Member shall be deemed to have failed on such
GCF Net Funds Borrower Position, the consequence of which shall be that the Member shall not
be entitled to receive the funds borrowed, but shall owe interest on such funds amount. If a Net
Funds Payor does not satisfy its cash obligations by the applicable deadline set forth in the
Schedule of GCF Repo Timeframes, such Net Funds Payor shall be subject to a late fee. If the Net
Funds Payor does not satisfy its cash obligation by the close of the Fedwire Funds Service, it shallbe subject to an additional late fee and shall be required to satisfy any outstanding cash obligation
promptly upon the opening of the Fedwire Funds Service the next Business Day. Failure to do so
may result in disciplinary action, including termination of membership.
A Netting Member that has, on a particular Business Day, a Collateral Allocation
Obligation, may satisfy such Collateral Allocation Obligation by posting with the Corporation,
pursuant to these Rules: (i) Comparable Securities, (ii) Other Acceptable Securities, (iii) U.S.
Treasury bills, notes, or bonds maturing in a time frame no greater than that of the securities thathave been traded (except where such traded securities are U.S. Treasury bills, such Collateral
Allocation Obligations must be satisfied with the posting of Comparable Securities and/or cashonly), and/or (iv) cash.
If on any Business Day, at the time set forth in the Schedule of GCF Repo Timeframes, aNetting Member’s Collateral Allocation Obligation from the previous Business Day is greater thanthe value of the securities and cash delivered by such Netting Member to satisfy such Collateral
Allocation Obligation, then such Netting Member shall deliver to the Corporation additional(i) Comparable Securities, (ii) Other Acceptable Securities, (iii) U.S. Treasury bills, notes or bonds
maturing in a time frame no greater than that of the securities that have been traded (except wheresuch traded securities are U.S. Treasury bills, such Collateral Allocation Obligations must be
satisfied with the posting of Comparable Securities and/or cash only) and/or (iv) cash such that the
total value of the securities and cash delivered by such Netting Member to satisfy such Collateral
Allocation Obligation is greater than or equal to such Collateral Allocation Obligation. Suchadditional securities and/or cash must be delivered to the Corporation within the timeframe set
forth in the Schedule of GCF Repo Timeframes.
If a Net Funds Payor who is otherwise in good standing with the Corporation does notsatisfy its cash obligation or only satisfies a portion of its cash obligation within the timeframe
established for such by the Corporation in the Schedule of GCF Repo Timeframes, the Corporation
shall proceed as follows:(i)
The Corporation shall first consider whether the GCF Clearing Agent Bankof the Net Funds Payor who failed to satisfy its cash obligation will provide overnight
financing and/or whether the Corporation shall use an end-of-day borrowing of Clearing
Fund cash in an amount up to the lesser of $1 billion or 20 percent (20%) of available
Clearing Fund Cash (hereinafter, the “EOD Clearing Fund Cash”). The Corporation shallnot set a priority between the use of EOD Clearing Fund Cash and uncommitted financing
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from the GCF Clearing Agent Bank. Any cash from these resources shall be applied to theunsettled cash entitlements of the Net Funds Receivers on a pro rata basis. The pro-ration
will be based upon the percentage of each Net Fund Receiver’s unsettled obligation versus
the total amount of all unsettled cash obligations.
(ii)
If an unsettled cash obligation still remains, Net Funds Receivers withunsettled positions at the GCF Clearing Agent Bank of the Net Funds Payor who did not
fulfill its cash obligation shall be required to enter into overnight reverse repurchaseagreements under the GCF Repo Allocation Waterfall MRA as described in Section 3b ofthis Rule. The amount of such reverse repurchase agreement shall be at the remaining
unsettled amount per Net Funds Receiver.
The associated overnight interest of the reverse repurchase agreements will bedebited from the Net Funds Payor and credited to the applicable Net Funds Receivers in
the Funds-Only Settlement process as a Miscellaneous Adjustment Amount.
Any resulting costs incurred by the Corporation and/or the Net Funds Receivers from theimplementation of any actions pursuant to clause (i) or (ii) above would be debited from the Net
Funds Payor whose shortfall caused the liquidity need. The Net Funds Receivers requesting
compensation in this regard would be required to provide proof of commercially reasonable
expenses and would need to submit a formal claim to the Corporation. Upon approval by the
Corporation, the Net Funds Receiver would receive a credit that would be processed in the FundsOnly Settlement process as a Miscellaneous Adjustment Amount. The debit for the Net Funds
Payor would be processed in the same way.
Unless the Corporation has restricted the Member’s access to services pursuant to Rule 21
or Rule 21A or has ceased to act for the Member pursuant to Rule 21 or Rule 21A, the Net Funds
Payor shall be permitted to continue to submit activity to the Corporation.
A Netting Member that had a Collateral Allocation Entitlement may not withdraw the
securities or cash collateral that it receives from its account at the GCF Clearing Agent Bank andshall have the obligation to settle the new net settlement amount on the next Business Day and theright to receive back from the Corporation the net funds amount that it paid on the previous
Business Day. The Corporation shall charge such Netting Member for any actual damages directly
suffered by the other Netting Member as a result of not receiving back the same securities, andshall remit any amounts received to the other Netting Member. Such damages must be sufficiently
demonstrated to the satisfaction of the Corporation and may not include special, consequential or
punitive damages. A Netting Member that had a Collateral Allocation Obligation shall have theobligation to settle the new settlement amount on the next Business Day and the right to receive
back from the Corporation the net securities or cash collateral that it posted on the previous
Business Day. Notwithstanding the foregoing, if the Netting Member is not able, due to reasons
beyond its control and despite exercising best efforts, to return any collateral due back to the
Corporation, the Netting Member may return: (i) Comparable Securities, (ii) Other Acceptable
Securities, (iii) U.S. Treasury bills, notes, or bonds maturing in a time frame no greater than thatof the securities that have been traded (except where such traded securities are U.S. Treasury bills,
such Obligations must be satisfied with the posting of Comparable Securities and/or cash only),
and/or (iv) cash.
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Notwithstanding the paragraphs immediately above in this Section 3 of Rule 20, Treasury
floating rate notes may not be used to satisfy Collateral Allocation Obligations or substitutions
with respect to Treasury Inflation-Protected Securities, Separate Trading of Registered Interest
and Principal Securities, or fixed-rate mortgage-backed securities issued by Fannie Mae, Freddie
Mac or Ginnie Mae.
Notwithstanding anything to the contrary in these Rules, on any particular Business Day,
the Corporation, in its sole discretion, may increase the amount of a Netting Member’s Collateral
Allocation Obligation by as much as ten percent of such Collateral Allocation Obligation.
For purposes of this Rule 20, the reference to “U.S. Treasury bills, notes or bonds” shallnot include Treasury floating rate notes, Treasury Inflation-Protected Securities or Separate
Trading of Registered Interest and Principal Securities.
Section 3a – [RESERVED]
Section 3b – Obligation of Net Funds Receivers to Enter into Overnight Reverse Repurchase
Agreements with the Corporation
If a Net Funds Payor satisfies only a portion of its cash obligation or does not satisfy anyof its cash obligation and/or the Corporation is only able to raise a portion of the unsettled cash
amount or is not able to raise any of the unsettled cash amount to cover such cash obligation, the
Net Funds Receivers at the GCF Clearing Agent Bank of the Net Funds Payor who did not fulfill
its obligation (hereinafter, the “Affected Netting/CCIT Members”) shall be required to enter intoovernight reverse repurchase agreements with the Corporation, as described herein, on the Generic
CUSIP Number for which such Net Funds Payor failed to fulfill its cash obligation. The amountof such reverse repurchase agreement shall be at the remaining unsettled amount per Affected
Netting/CCIT Member.
The September 1996 Securities Industry and Financial Markets Association Master
Repurchase Agreement (without the referenced annexes, other than in the case of any Netting
Member that is a Registered Investment Company, Annex VII) is hereby incorporated by referencein the Rules as a master repurchase agreement between the Corporation, as Seller, and eachAffected Netting/CCIT Member, as Buyer (hereinafter, the “GCF Repo Allocation Waterfall
MRA”); provided that, notwithstanding anything else in the GCF Repo Allocation Waterfall MRA:(i)
Transactions (for purposes of this Section 3b, as defined in the GCF Repo
Allocation Waterfall MRA) shall only be initiated by the Corporation in accordance withthis Rule,(ii)
all Transactions shall be terminable only by demand of the Corporation andin accordance with this Rule,(iii) all Securities (for purposes of this Section 3b, as defined in the GCF Repo
Allocation Waterfall MRA) shall be transferred in the Corporation’s sole discretion,

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(iv)
any and all notices, statements, demands or other communications under the
GCF Repo Allocation Waterfall MRA shall be given by a party to the other in accordancewith the notice provisions set forth in the Rules,(v)
so long as the Affected Netting/CCIT Member is a Netting Member or
CCIT Member, as applicable, of the Corporation, the GCF Repo Allocation Waterfall
MRA may only be terminated by the Corporation,(vi)
there shall be no Events of Default (as defined in the GCF Repo Allocation
Waterfall MRA) with respect to the Seller other than a Corporation Default,(vii) it shall be an “Event of Default” with respect to Buyer under a GCF Repo
Allocation Waterfall MRA if the Corporation ceases to act for the relevant Affected
Netting/CCIT Member,(viii) Section 19(a) of the GCF Repo Allocation Waterfall MRA shall be amended
by adding at the end thereof and before the period “, and this Agreement and eachTransaction is of a type set forth in Section 5390(c)(8)(D) of Title 12 of the United States
Code, as amended,”(ix)
Section 19(b) of the GCF Repo Allocation Waterfall MRA shall beamended by adding at the end thereof before the period “, and a right to terminate, liquidate
or accelerate as described in Section 5390(c)(8)(A) and (C) of Title 12 of the United States
Code, as amended.”Once the Corporation has determined that it will require financing in order to satisfy a cash
obligation to a Netting Member or CCIT Member in a Net Funds Receiver Position, it shall notify
each Affected Netting/CCIT Member of the principal amount of the relevant Generic CUSIP
Number subject to the applicable overnight reverse repurchase transaction (hereinafter, the“Financed Securities”) and the corresponding purchase price (hereinafter, the “Financing
Amount”). Upon notification by the Corporation, the Corporation shall initiate such overnight
reverse repurchase transactions with Affected Netting/CCIT Members under the terms andconditions of the GCF Repo Allocation Waterfall MRA.
All Collateral Allocation Obligations in respect of Financed Securities shall be deemedsatisfied by operation of this Rule and settlement of any original transaction between the
Corporation and the Affected Netting/CCIT Member shall be final notwithstanding that the
Financed Securities are not required to be allocated for the benefit of the Corporation in connection
with the original transaction by the Affected Netting/CCIT Member who is a buyer in a reverse
repurchase transaction (such Collateral Allocation Obligation being netted against delivery to thebuyer under the GCF Repo Allocation Waterfall MRA).
Section 4 – Right of Substitution
On any Business Day (within the timeframes established by the Corporation by notice toall Members), a Netting Member that posted with the Corporation securities in satisfaction of its
Collateral Allocation Obligation on the previous Business Day may substitute for any securities
so delivered on such day cash, or (i) Comparable Securities, (ii) Other Acceptable Securities, or219

(iii) U.S. Treasury bills, notes or bonds maturing in a time frame no greater than that of the
securities that have been traded (except where such traded securities are U.S. Treasury bills,
substitution may be with Comparable Securities and/or cash).
On any Business Day (within the timeframes established by the Corporation by notice toall Members), a Netting Member that posted with the Corporation cash in satisfaction of its
Collateral Allocation Obligation on the previous Business Day may substitute for any securities
so delivered on such day (i) U.S. Treasury bills, notes or bonds maturing in a time frame no greaterthan that of the securities that have been traded (except where such traded securities are U.S.
Treasury bills, substitution may be with Comparable Securities), (ii) Comparable Securities, or(iii) Other Acceptable Securities.
For the avoidance of doubt, Dealers will be able to substitute any previously delivered
collateral during the day and until such time as their new Collateral Allocation Obligations for thatday are fully satisfied and finalized with the GCF Clearing Agent Bank.
Section 5 – Novation
GCF Net Settlement Positions and resultant Collateral Allocation Entitlements andCollateral Allocation Obligations, either as originally established by the Corporation or as may be
adjusted by the Corporation as the result of a modification of data made pursuant to these Rules,
shall be fixed at the time the Report of such GCF Net Settlement Positions, Collateral Allocation
Entitlements, and Collateral Allocation Obligations is made available by the Corporation to a
Netting Member. At that time, all deliver, receive, and related payment and Collateral Allocation
Obligations between such Netting Member and the Corporation that were created by the GCF Repo
Transactions, Novated by the Corporation pursuant to Section 8 of Rule 5, and that comprise a
GCF Net Settlement Position or GCF Net Settlement Positions are terminated and replaced by the
Collateral Allocation Entitlements and Collateral Allocation Obligations and related payment
obligations for such Members that are listed in the Report.

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RULE 21 – RESTRICTIONS ON ACCESS TO SERVICES
Section 1 – Cause for Action by the Corporation
Based upon the judgment of the Board that adequate cause exists to do so, or as otherwise
provided for in Rule 3, the Corporation may, at any time, upon providing notice to the Member,suspend a Member from any service provided by the Corporation either with respect to a particulartransaction or transactions or with respect to transactions generally, or prohibit or limit such
Member with respect to access to services offered by the Corporation in the event that:(a)the Member or its Permitted Margin Affiliate has failed to perform any of its
obligations to the Corporation arising under these Rules or under the Procedures or has materiallyviolated any Rule or Procedure of, or any agreement with, the Corporation or those of an FCO
with which the Corporation has entered into a Cross-Margining Agreement;(b)
the Member has failed to make to the Corporation, or to an FCO with which the
Corporation has entered into a Cross-Margining Agreement, on a timely basis, any required
payment, or deposit or delivery provided for in these Rules or in the Procedures, or those of theapplicable FCO, including any fee, fine other charge, and a delivery of securities;(c)the Board has determined that the Member is no longer in compliance with any
provision of (i) the admission standards provided in Rule 2A that would be applicable to it if itwere an applicant for membership, including consideration of the disqualification criteria
contained in Rule 2A, or (ii) the continuance standards provided in Rule 3 applicable to it,
including any operational testing and related reporting requirements and including considerationof the disqualification criteria contained in Rule 2A;(d)the Board has reasonable grounds to believe that the Member, or its ControllingManagement has been responsible for fraudulent or dishonest conduct or breach of fiduciary dutyor has made a material misstatement or omitted to state a material fact in any statement to the
Corporation or to any officer or employee of the Corporation in connection with its application to
become a Member, or thereafter, in connection with any transaction processed or service furnishedby the Corporation;(e)the Board has reasonable grounds to believe that the Member is in or is approachingsignificant financial or operational difficulty or otherwise will be unable to meet its obligations to
the Corporation;(f)Member;a GCF Clearing Agent Bank has determined to cease to extend credit to the(g)the Board otherwise has reasonable grounds to believe that such suspension,prohibition or limitation is necessary either for the protection of the Corporation or any of the otherMembers or to facilitate the orderly and continuous performance of the Corporation’s services.
The Board may determine that adequate cause for suspension, prohibition or limitation
does not exist, either unconditionally or on an appropriate temporary or other conditional basis, if

221the Board determines that any standard specified in this Section, as applied to a Member or its
Controlling Management is unduly or disproportionately severe or that the conduct of such
Member or its Controlling Management has been such as not to make it against the interests of the
Corporation, other Members, or the public for the Corporation to continue to act for such Member.
Section 2 – Restriction on Access or Suspension
Before the Corporation suspends a Member with respect to a particular transaction ortransactions or prohibits or limits such Member’s access to services offered by the Corporation
pursuant to this Rule, the Corporation shall notify such Member as soon as practicable that it has
taken such action, and such notice shall set forth the specific grounds under consideration uponwhich any suspension, prohibition or limitation of access may be based and shall contain notice tothe Member of its right to request a hearing, pursuant to Rule 37. Any such hearing requested
pursuant to Rule 37 shall be held as promptly as possible after such statement is furnished. If the
Corporation takes any action pursuant to this Section, it shall notify the SEC as soon as practicable.
Section 3 – Summary Suspension
Notwithstanding Section 2 of this Rule, the Board may summarily suspend a Member withrespect to a particular transaction(s) or transactions generally or summarily prohibit or a limit a
Member’s access to services offered by the Corporation in the event that the Member meets one
or more of the criteria in Section 1 of this Rule and the Corporation determines, in its discretion,that such action is necessary for the protection of the Corporation or its members.
In the event that any Member has been summarily suspended, the Corporation may ceaseto act for such Member in accordance with Rule 22A, except as otherwise provided by these Rules.
Any summary action which may be taken by the Board pursuant to this Section may instead betaken by one or more designees of the Board in the event that a quorum of the Board is unable tomeet, provided that any summary action taken by one or more designees must be confirmed by the
Board within 3 business days.
Any Member that has been summarily suspended or whose access has been summarily
prohibited or limited pursuant to this Section shall be promptly furnished a written statement of
the grounds for the decision and shall be notified of its right to request a hearing pursuant to Rule37, except that the request for a hearing must be in writing and filed within 2 business days ofreceipt from the Corporation of such statement. Any such hearing requested pursuant to Rule 37
shall be held as promptly as possible after the Corporation has taken summary action against theMember pursuant to this Rule.
Section 4 – Action by the Corporation
Any action taken by the Corporation pursuant to this Rule may include, but shall not belimited to, any one or more of the following actions:(a)ceasing to act for the Member pursuant to Rule 22A;(b)
limiting or excluding the Member’s participation in one or more transactions orservices which are available to the Member.
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Section 5 – Rights and Remedies
After the Corporation has taken action pursuant to this Rule with respect to a Member withrespect to either a particular transaction or transactions generally, the Corporation shallnevertheless have the same rights and remedies in respect of any monies or securities due fromsuch Member, or any liability incurred as the result of such Member’s action, or on behalf of such
Member, as though the Corporation had not taken such action.
Section 6 – Report of Actions
A written report of any actions taken by the Corporation pursuant to this Rule, and thereasons therefore, shall be promptly made and filed with the SEC and with the Corporation’srecords.

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RULE 21A – WIND-DOWN OF A NETTING MEMBER
When a Netting Member notifies the Corporation that it intends to wind down its activities,
the Corporation may, in its sole discretion, in order to protect itself and its participants, determinethat such Member is a “Wind-Down Member”. In that event and, without limiting any other rightsof the Corporation under these Rules and Procedures, the Corporation may impose conditions on,or take actions with respect to, the Wind-Down Member as provided below.
As soon as practicable after the Corporation determines that a Member is a Wind-Down
Member, the Corporation shall notify the Wind-Down Member, all other Members and the SEC
of such determination.
The Corporation may, in its discretion, impose conditions on, or take actions with respect
to, the Wind-Down Member as appropriate to mitigate risk the Corporation perceives may bepresented by the Wind-Down Member, including but not limited to, the following:(i)
Permitting the Wind-Down Member to submit to the Corporation onlytransactions that serve to support the wind-down;(ii)
Permitting the Wind-Down Member to continue use of one or more of the
Corporation’s services, notwithstanding that it may not meet some or all of the financial or
operational requirements for continuance as a Netting Member;(iii) Restricting or modifying the Wind-Down Member’s use of any or all of the
Corporation’s services (whether generally, or with respect to certain transactions);(iv)
Requiring additional assurances of the financial responsibility or
operational capability of the Wind-Down Member through, for example, submission of aguaranty of the Wind-Down Member’s obligations to the Corporation by an entity
acceptable to the Corporation and/or additional reporting by the Wind-Down Member;(v)
Agreeing to complete one or more trades to which the Wind-Down Member
is a party prior to the time the Corporation otherwise would Novate such trade pursuant tothese Rules;(vi)
Requiring the Wind-Down Member to post increased Clearing Funddeposits and/or to post its Required Fund Deposit in proportions of cash, Eligible Netting
Securities and Eligible Letters of Credit different from those permitted under Rule 4;(vii) Prohibiting the Wind-Down Member from withdrawing Clearing Fund on
deposit in excess of its Required Fund Deposit; or(viii) Calculating the Required Fund Deposit of the Wind-Down Member in amanner different from that provided in Rule 4, in order to more appropriately reflect therisk presented by the Wind-Down Member to the Corporation, such as, for example, notapplying certain components of the Required Fund Deposit calculation; or

224

(ix)
Liquidating by buying-in or selling-out, as applicable, any open positionsof the Wind-Down Member, for the benefit of such Wind-Down Member with any profit
or loss resulting therefrom being debited or credited, as applicable, to the settlement
account of the Wind-Down Member
If the Corporation takes, or mandates, any action pursuant to this Rule, the Corporation
shall, as soon as practicable thereafter, notify the SEC and such other Members as it deems proper
due to the nature of such action, and shall inform Members as to whether the Corporation shallrelieve Members from the loss allocation obligations of Rule 4 with respect to transactions that
Members enter into with the Wind-Down Member.
Notwithstanding the foregoing, the Corporation shall not be restricted from exercising anyof its rights in these Rules or in any agreements between itself and the Member at any time,
including the Corporation’s right at any time to cease to act for the Wind-Down Member pursuant
to Rules 21, 22 or 22A.

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RULE 22 – INSOLVENCY OF A MEMBER
Section 1 – Obligation to Inform of Insolvency
A Member that (a) fails to perform any of its material contracts, obligations or agreements,(b) determines that it will be unable to perform any of its material contracts, obligations oragreements or (c) is insolvent, shall immediately notify the Corporation orally and in writing ofsuch. Until a Member has so notified the Corporation, the Member, by submitting to the
Corporation trade data with regard to transactions to which such Member is a party, shall bedeemed to represent and warrant that it (d) is able to perform, and has not failed to perform, its
material contracts and obligations, and (e) is not insolvent.
Section 2 – Determination of Insolvency(a)

A Member shall be treated by the Corporation in all respects as insolvent:(i)upon receipt of the notice specified in Section 1 of this Rule, provided,
however, that a Member shall not be treated as insolvent in the event such Member (without
being deemed to have admitted its liability thereunder) provides or posts a bond, indemnity,or guaranty from a third party that the Board, in its sole discretion, deems satisfactory toensure the performance of the Member’s obligations;(ii)
in the event that the Member is determined to be insolvent by the Board, orby any Designated Examining Authority, Appropriate Regulatory Agency, or otherexamining authority or regulator with jurisdiction over such Member or any SelfRegulatory Organization or other self-regulatory organization that such Member is amember of;(iii)
if the Member is a member of the Securities Investor Protection
Corporation, in the event that a court of competent jurisdiction finds that the Member meets
any one of the conditions set forth in clauses (A), (B), (C), or (D) of Section 5(b)(1) of the
Securities Investor Protection Act of 1970;(iv)
in the event of the entry or the making of a decree or order by a court,
regulator or other supervisory authority of competent jurisdiction (A) adjudging theMember as bankrupt or insolvent, (B) approving as properly filed a petition seeking
reorganization, arrangement, liquidation, dissolution, adjustment or composition of or in
respect of the Member under the Bankruptcy Code or any other applicable Federal, Stateor other U.S. or non-U.S. law, including any bankruptcy, insolvency, reorganization,liquidation, dissolution, or similar law, (C) appointing a receiver, custodian, liquidator,
provisional liquidator, administrator, provisional administrator, assignee, trustee,
sequestrator (or other similar official) for the Member or for any substantial part of its
property, (D) ordering the winding up or liquidation of its affairs, or (E) consenting to theinstitution by the Member of proceedings to be adjudicated as a bankrupt or insolvent; or(v)
the filing by the Member of a petition, or any case or proceeding, seeking
reorganization or relief under the Bankruptcy Code or any other applicable Federal, State226

or other U.S. or non-U.S. law, including any bankruptcy, insolvency, reorganization,liquidation, dissolution, or similar law, or the consent by the Member to the filing of any
such petition, case or proceeding or to the appointment of a receiver, custodian, liquidator,
assignee, trustee, sequestrator or other similar official for the Member or for any substantial
part of its property, or the making by the Member of an assignment for the benefit of its
creditors, or the admission by the Member in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action by the Member infurtherance of any such action.
(b)
The provisions of Section 2(a) of this Rule 22 shall be applicable to a Member thatis a Cross-Margining Participant and, in addition, a Cross-Margining Participant may also betreated as insolvent under any circumstances specified in Rule 43.
(c)
A Member may also be treated as insolvent by the Corporation, in its sole
discretion, if a GCF Clearing Agent Bank determines to cease to extend credit to such Member.
(d) A Member that has entered into a Cross-Margining Agreement with the Corporation
may be treated as insolvent by the Corporation, in its sole discretion, if it or a Cross-Margining
Affiliate defaults in its obligations to an FCO with which the Corporation has a Cross-Margining
Agreement.
(e) A Member may be treated as insolvent by the Corporation, in its sole discretion, if a
Permitted Margin Affiliate of the Member defaults in its obligations to the Corporation.
Section 3 – Ceasing to Act for the Member
Except as otherwise may be determined by the Board in any particular case, theCorporation shall cease to act for the insolvent Member, as detailed in Rule 22A.

227

RULE 22A – PROCEDURES FOR WHEN THE CORPORATIONCEASES TO ACT
Section 1 – Notification
When the Corporation has ceased to act for a Member, it shall provide Members and the
SEC with notice stating the Corporation’s decision to cease to act for the Member. The
Corporation may provide in such notice or a subsequent notice the steps to be taken as well as how
pending transactions shall be affected.
Section 2 – Action by the Corporation
Except as otherwise may be determined by the Board in any particular case, from and after
the time the Corporation ceases to act for a Member, the following shall apply:(a)Notwithstanding anything to the contrary in the Schedule for Deletion of Trade
Data Submitted to the Comparison System that is published from time to time by the Corporation,
trades to which the Member is a party the data on which have been submitted to the Corporationthat have not been deemed Compared Trades upon receipt by the Corporation pursuant to theseRules or that have not been reported by the Corporation to Members as Compared Trades shall bedeleted from the Comparison System, unless otherwise determined by the Board in order topromote an orderly settlement.
(b)
Except as otherwise provided in Rules 17 and 18, all long and short Net Settlement
Positions, and Forward Net Settlement Positions of the Member outstanding at the time the
Corporation ceases to act for the Member that have been reported by the Corporation to Members
pursuant to Rule 11 and Rule 14 shall be closed out by (i) for each Eligible Netting Security witha distinct CUSIP Number, establishing a final Net Settlement Position (hereinafter, the “Final Net
Settlement Position”) that shall be equal to the net of all outstanding Deliver Obligations andReceive Obligations of the Member in each Security, including Fail Deliver Obligations and Fail
Receive Obligations and those that are determined by the Corporation to arise from Forward Net
Settlement Positions, and (ii) buying, borrowing, or reversing in or selling, lending or repoing out
the Securities deliverable by or to such insolvent Member, and/or borrowing or lending monies, inorder to close out the Final Net Settlement Position established for each Security. If a Member also
has a Market Professional Cross-Margining Account, any resulting gains upon liquidation of theMember’s proprietary Account shall be used to offset any resulting liquidation loss in the Market
Professional Cross-Margining Account. This close-out procedure shall be completed as promptly
as practicable after the Corporation has given notice pursuant to Section 1 of this Rule
Corporation’s determination to cease to act, unless the Board determines that the immediate closeout of Final Net Settlement Positions in a Security may be disadvantageous to the Corporation or
may promote a disorderly market in that Security, in which case the Corporation may suspend theoperation of this close-out provision until such later time as is determined by the Board, exceptthat the Board may not suspend the operation of such close-out procedure for a period longer than
30 calendar days without the approval of such by the SEC. If, in the aggregate, the close-out of allof the Final Net Settlement Positions established for a Member results in the Corporation incurring
any loss or liability, such loss or liability shall be allocated as provided in Rule 4. If, in theaggregate, the close-out of all of the Final Net Settlement Positions established for a Member
228

results in a profit to the Corporation (after the Corporation has fulfilled its obligations under any
Cross-Margining Agreements and Limited Cross-Guarantee Agreements), such profit shall becredited to the Member, or to a duly-appointed legal representative of the Member.
Subsequent to the close-out of a Member’s Final Net Settlement Positions, the Corporation
shall, in accordance with these Rules, ensure the timely settlement of all Deliver Obligations,
Receive Obligations, and related payment obligations, that would have arisen had the Corporation
not ceased to act, in accordance with the terms of the transactions that comprise such obligations.
Notwithstanding the foregoing, if the Member was a GCF Net Funds Lender and had a Deliver
Obligation of GCF-eligible mortgage-backed securities in connection with a GCF Repo
Transaction, the Corporation shall be authorized to satisfy the Deliver Obligation with:(i) Comparable Securities, and/or (ii) U.S. Treasury bills, notes or bonds. In the alternative, theCorporation may, in its sole discretion, permit a GCF Net Funds Borrower to purchase Comparable
Securities and/or U.S. Treasury bills, notes, or bonds in return for a cash payment by the
Corporation equal to the price paid by the GCF Net Funds Borrower for the Comparable Securities
and/or the U.S. Treasury bills, notes, or bonds; provided, however, that if the Corporation in its
sole discretion determines that the price paid by the GCF Net Funds Borrower was unreasonably
high, the Corporation shall be entitled to pay the GCF Net Funds Borrower a reasonable price (asdetermined by an independent third party pricing source) for the Comparable Securities and/or the
U.S. Treasury bills, notes or bonds.
If the Corporation takes any action pursuant to this Section, it shall notify the SEC of suchby the Close of Business on the Business Day on which such action is taken.
Section 2a – Liquidity Requirements of Netting Members(a)Master Repurchase Agreements

In order to finance the Corporation’s obligations related to Netting Members’ Deliver
Obligations in accordance with paragraphs (b) and (c) below, the SIFMA MRA (without thereferenced annexes, other than in the case of any Netting Member that is a registered investmentcompany, Annex VII) is hereby incorporated by reference in the Rules as a master repurchaseagreement between the Corporation, as Seller, and each Netting Member, as Buyer (the “CCLF
MRA”); provided that, notwithstanding anything else set forth in the CCLF MRA:(A)CCLF Transactions (for purposes of this Section 2a, as defined in
the CCLF MRA) shall only be initiated by the Corporation inaccordance with this Rule 22A,(B)

all CCLF Transactions shall be terminable only by demand of the
Corporation and in accordance with this Rule 22A except as
specified in paragraph (L) below,(C)

all Securities (for purposes of this Section 2a, as defined in the
CCLF MRA) shall be transferred by the Corporation in its sole
discretion,

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(D)

any and all notices, statements, demands or other communications
under the CCLF MRA shall be given by a party to the other inaccordance with the notice provisions set forth in the Rules,(E)

so long as the Netting Member is a Member of the Corporation, the
CCLF MRA may only be terminated by the Corporation,(F)

there shall be no Events of Default (for purposes of this Section 2a,
as defined in the CCLF MRA) with respect to the Seller other thana Corporation Default,(G)

on any Business Day prior to the CCLF MRA Termination Date as
defined in paragraph (L) below, the Corporation may, by notice toBuyer, terminate any CCLF Transaction, in whole or in part, byspecifying such Business Day as the Repurchase Date (for purposesof this Section 2a, as defined in the CCLF MRA) for some or all of
the Purchased Securities (for purposes of this Section 2a, as definedin the CCLF MRA),(H)

if the Corporation terminates a portion of a CCLF Transaction
pursuant to clause (G) of this paragraph:(1)
the Repurchase Price (for purposes of this Section 2a, as
defined in the CCLF MRA) for the Purchased Securities to be
repurchased on such date (the “Relevant Securities”) shall be an
amount equal to the sum of the Purchase Price (for purposes of thisSection 2a, as defined in the CCLF MRA) for the Relevant
Securities and the unpaid Price Differential (for purposes of thisSection 2a, as defined in the CCLF MRA) accrued on the Purchase
Price for the Relevant Securities through such Business Day;(2)
upon transfer of the Repurchase Price for the Relevant
Securities, the Relevant Securities shall no longer constitute
Purchased Securities; and(3)upon transfer of the Repurchase Price for the Relevant
Securities, the Purchase Price for the CCLF Transaction shall be
reduced by the Purchase Price for the Relevant Securities,(I)

It shall be an “Event of Default” with respect to Buyer under a CCLF
MRA if the Corporation ceases to act for the relevant Affected
Member,(J)

Section 19(a) of the CCLF MRA shall be amended by adding at theend thereof before the period “, and this Agreement and each CCLF
Transaction is of a type set forth in Section 5390(c)(8)(D) of Title
12 of the United States Code, as amended”,

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(b)

(K)

Section 19(b) of the CCLF MRA shall be amended by adding at theend thereof before the period “, and a right to terminate, liquidate or
accelerate as described in Section 5390(c)(8)(A) and (C) of Title 12of the United States Code, as amended”, and(L)

If (x) a Corporation Default has occurred during the term of a CCLF
Transaction or (y) the Corporation has not repurchased all Purchased
Securities (for purposes of this Section 2a, as defined in the CCLF
MRA) under the applicable CCLF Transaction by (A) the end of the
30th calendar day after the Purchase Date (for purposes of thisSection 2a, as defined in the CCLF MRA) in the case of a CCLF
Transaction where the underlying security is a U.S. government
agency debenture or U.S. Treasury bill, note or bond or (B) the endof the 60th calendar day after the Purchase Date in the case of a CCLF
Transaction where the underlying security is a mortgage-backed
security (the “CCLF MRA Termination Date”), the Affected
Member may exercise the rights of a “nondefaulting party” under
Section 11 of the CCLF MRA as if an “Event of Default” with respect
to the Seller had occurred and such Affected Member had exercised
the option referred to in Section 11(a) of the CCLF MRA.

Capped Contingency Liquidity Facility (“CCLF”)(i)
In the event that the Corporation ceases to act for a Netting Member
pursuant to this Rule 22A and determines, in its sole discretion, that it does not have theability to obtain sufficient liquidity from other resources in order to satisfy the obligationsof a Defaulting Member, the Corporation may declare a CCLF Event. Upon suchdeclaration, the following shall occur:(A)

The Corporation shall issue an Important Notice to all Netting
Members informing them of the CCLF Event with respect to theDefaulting Member and advising such Netting Members to review
their most recent liquidity funding reports to determine theirrespective Individual Total Amount;(B)

The Corporation shall determine (x) which Netting Members had
Deliver Obligations to the Corporation, the securities in respect ofwhich were destined for the Defaulting Member (each such Netting
Member, a “Direct Affected Member”) and (y) the cash obligationsof the Corporation to such Direct Affected Member in respect ofwhich the Corporation needs financing (such Direct Affected
Member’s “Financing Amount”);(C)

The Corporation shall notify each Direct Affected Member of theamount and description of the Eligible Netting Securities to which
the Direct Affected Member’s Financing Amount relates (suchDirect Affected Member’s “Financed Securities”) and whether such

231

Affected Member is to deliver any such Financed Securities to the
Corporation;(D)

The Corporation shall initiate CCLF Transactions with each Direct
Affected Member having an aggregate purchase price up to such
Affected Member’s Financing Amount, but in no event in excess ofsuch Direct Affected Member’s Individual Total Amount;(E)

In the event that a Direct Affected Member’s Financing Amountexceeds its Individual Total Amount (the “Remaining Financing
Amount”), the Corporation shall advise (x) each other Direct
Affected Member whose Financing Amount is less than its
Individual Total Amount, and (y) each Netting Member that has nototherwise entered into CCLF Transactions with the Corporation (the“Indirect Affected Members,” and together with the Direct Affected
Members, “Affected Members”) that the Corporation intends toinitiate CCLF Transactions with such Affected Members based onsuch Affected Members’ funding availability within their Individual
Total Amounts. Each such CCLF Transaction shall have an
aggregate purchase price equal to all or a portion of the Remaining
Financing Amount, but in no event in excess of the Affected
Member’s Individual Total Amount (after taking into account all
CCLF Transactions in connection with the subject CCLF Event);(F)

At any time and from time to time, if a Remaining Financing
Amount exists, the Corporation may, in its sole discretion, enter into
CCLF Transactions with Affected Members based on such Affected
Members’ funding availability within their Individual Total Amount(but in no event shall such CCLF Transactions in respect of anindividual Affected Member exceed such Affected Member’s
Individual Total Amount (after taking all CCLF Transactions inconnection with any and all existing CCLF Events into account));(G)

Each CCLF Transaction shall remain open until the earlier of (x)such time that the Corporation has executed a transaction liquidating
the Financed Securities (a “Liquidating Trade”), (y) such time that
the Corporation has obtained liquidity through its available liquid
resources or (z) the CCLF MRA Termination Date; and(H)

Upon the Corporation’s execution of the Liquidating Trade, theCorporation shall notify each Netting Member party to a related
CCLF Transaction of the Corporation’s termination of such CCLF
Transaction and shall instruct each such Netting Member to deliver
the related securities to the Corporation in order to complete
settlement on the contractual settlement date of the Liquidating
Trade. The Corporation shall endeavor to terminate the CCLF
Transactions based on the order that the Corporation enters into232

Liquidating Trades for the Financed Securities, subject to the
Corporation’s risk management objective to minimize liquidation
losses on the Financed Securities and minimize disruption to the
fixed income markets.
All Delivery Obligations in respect of Financed Securities shall be deemed satisfied
by operation of this Rule, and settlement of any original transaction between the
Corporation and any Direct Affected Member shall be final notwithstanding that the
Financed Securities are not required to be delivered to the Corporation in connection withsuch original transaction by the Direct Affected Member who was a buyer in the originaltransaction (such delivery being netted against delivery to the buyer under the CCLF
MRA).
(ii)
The Corporation shall conduct a study every six months, or at such intervals
as the Corporation deems appropriate, to determine the following parameters:(A)

Historical Cover 1 Liquidity Requirement,(B)

the Liquidity Buffer,(C)

the Receive Scaling Factor,(D)

the Deliver Scaling Factor,(E)

the Aggregate Total Amount,(F)

the Aggregate Regular Amount, and(G)

the Aggregate Supplemental Amount.

(iii) Based on the determinations referred to in (ii) above, the Corporation shallcalculate the Individual Regular Amount for each Netting Member as the sum ofsubsections (A) and (B) below.
(A)

The Corporation shall (x) divide the absolute value of a Netting
Member’s Receive Obligations by the absolute value of theaggregate Receive Obligations of all Netting Members, then(y) multiply such resulting value by the Aggregate Regular Amount,then (z) multiply the resulting product by the Receive Scaling
Factor.

(B)

The Corporation shall (x) divide the absolute value of a Netting
Member’s Deliver Obligations by the absolute value of theaggregate Deliver Obligations of all Netting Members, then(y) multiply such resulting value by the Aggregate Regular Amount,then (z) multiply the resulting product by the Deliver Scaling Factor.

233

(iv)
Based on the determinations referred to in (ii) above, the Corporation shallcalculate the Individual Supplemental Amount for each Netting Member by:(A)

apportioning an amount of the Aggregate Supplemental Amount toeach Liquidity Tier based on the Relative Inter-Tier Frequency of
Liquidity Needs,(B)apportioning each Netting Member’s portion of the Aggregate
Supplemental Amount assigned to each of that Netting Member’s
Liquidity Tiers based on the Relative Intra-Tier Frequency in whichthat Netting Member’s Liquidity Needs have reached the respective
Liquidity Tier, and(C)

summing each Netting Member’s apportionment across Liquidity
Tiers.

(v)
Each Netting Member’s Individual Total Amount is the sum of its
Individual Regular Amount and its Individual Supplemental Amount. FICC shall provide
each Netting Member with its Individual Total Amount every six months (the “Reset
Period”).
(vi)
Every three months, or at such times as the Corporation deems appropriate,
the Corporation shall assess the parameters set forth in (ii) above and may change any suchparameter to ensure that the Corporation is able to satisfy its liquidity needs or to achieve
the purposes of this Section 2a. If any Netting Member’s Individual Total Amount isincreased as a result of this paragraph (vi), such increase shall be effective as of the next
Reset Period.
(vii) On a daily basis, or at such times as the Corporation deems appropriate, theCorporation may increase the Aggregate Total Amount to ensure that such amount issufficient to satisfy its liquidity needs. If any Netting Member’s Individual Total Amountis increased as a result of this paragraph (vii), such increase shall not be effective until ten(10) Business Days after the Corporation has made an Important Notice available to such
Netting Member regarding such increase.
(c)

Information to Netting Members

On each Business Day, the Corporation shall make a liquidity funding report available toeach Netting Member. Each Netting Member’s report shall include the following:(i)the Netting Member’s Individual Regular Amount and Individual
Supplemental Amount;(ii)
the Corporation’s Aggregate Total Amount, Aggregate Regular Amountand Aggregate Supplemental Amount; and234

(iii) the daily liquidity coverage necessary to meet the Corporation’s liquidity
requirements.
This liquidity funding report shall be provided for informational purposes only. In theevent that the Corporation declares a CCLF Event, Netting Members shall be required to enter into
CCLF Transactions up to their Individual Total Amount as calculated by the Corporation.
(d)Required Attestation

On at least an annual basis, or upon demand by the Corporation, each Netting Member
shall attest that its Individual Total Amount has been incorporated into its liquidity plans (suchattestation, the “Required Attestation”). The Required Attestation must be signed by two
authorized officers of the Netting Member (or otherwise be satisfactory in form and substance to
the Corporation) and contain the following certifications: (1) such officers have read andunderstand the Rules, (2) the Netting Member’s Individual Total Amount has been incorporated
into the Netting Member’s liquidity planning, (3) the Netting Member acknowledges and agrees
that its Individual Total Amount may be changed pursuant to Section 2a(b)(ii) through (v) of thisRule or otherwise upon ten (10) Business Days’ Notice, (4) the Netting Member will incorporate
any changes to its Individual Total Amount into its liquidity planning, and (5) the Netting Member
shall, through periodic discussions with its financing sources and other methods, continually
reassess its liquidity plans and related operational plans, including in the event of any changes tosuch Netting Member’s Individual Total Amount, to ensure such Netting Member’s ability to meetits Individual Total Amount.
(e)Required Acknowledgements

The Corporation may require Netting Members to provide certain acknowledgements to
the Corporation, in such form and at such times as the Corporation may determine from time totime, concerning the Netting Member’s understanding of and ability to meet its Capped
Contingency Liquidity Facility obligations. Such written acknowledgements include, but are notlimited to, an acknowledgement from each Netting Member whose Capped Contingency Liquidity
Facility obligations increase by an amount exceeding certain thresholds established by the
Corporation following any ad hoc resizing of the Capped Contingency Liquidity Facility
confirming such Netting Member’s ability to meet the increased obligation. The Corporation will
inform Netting Members of any such required acknowledgements, including specific thresholds
for any required acknowledgement, by Important Notice.
Section 3 – Report of Actions
A written report of the actions taken by the Corporation pursuant to this Rule, and thereasons therefore, shall be promptly made and filed with the SEC and with the Corporation’srecords.

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RULE 22B – CORPORATION DEFAULT
Corporation Default(a)
If a “Corporation Default” occurs pursuant to subsection (b) below, all Transactions
which have been subject to Novation pursuant to these Rules but have not yet settled and any rights
and obligations of the parties thereto shall be immediately terminated. Each relevant Member shallthereupon promptly take such market action as is commercially reasonable under thecircumstances to effect a close out of any outstanding positions. Each Member will report theresults of its market action to the Board and the Board shall determine a single net amount owed
by or to each Member with respect to such positions by applying the close-out procedures ofSection 2(b)(i) of Rule 22A (interpreted in all such cases as if each Member were a Defaulting
Member) and taking into account the loss allocation provisions in Rule 4, to the extent suchprovisions are otherwise applicable to such Member. The Board shall notify each Member of the
net amount so determined and Members who have been notified that they owe an amount to the
Corporation shall pay that amount on or prior to the date specified by the Board, subject to any
applicable setoff rights. Members who have a net claim against the Corporation shall be entitledto payment thereof along with other Members’ and any other creditors’ claims pursuant to theunderlying contracts with respect thereto, these Rules and applicable law. For the avoidance of
doubt, nothing herein shall limit the rights of the Corporation upon a Member default (including
following a Corporation Default) including under any Cross-Guaranty Agreement with the
Mortgage-Backed Securities Division or any other Cross-Guaranty Counterparty.
(b)
Notwithstanding anything to the contrary in the Rules, the following events shallconstitute a Corporation Default:(i)
Failure by the Corporation to make, when due, any undisputed payment ordelivery to a Member required to be made by it under these Rules and such failure is not
remedied within 7 days after notice of such failure is given to the Corporation by theaffected Member; provided that this clause (i) shall not apply to (A) obligations of the
Corporation to Wind-Down Members, Defaulting Members or Members for whom the
Corporation has otherwise ceased to act pursuant to Rule 22A; (B) any payment or delivery
which the Corporation satisfies by alternate means as provided in these Rules; or (C) any
obligation of the Corporation that is not a payment or delivery obligation of theGovernment Securities Division to a Member under these Rules; or(ii)
The Corporation (A) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (B) institutes a proceeding seeking a judgment of insolvency orbankruptcy or any other relief under any bankruptcy or insolvency law or other similar law
affecting creditors’ rights, or presents a petition for its winding-up or liquidation or makesa general assignment for the benefit of creditors; (C) has instituted against it a proceeding
seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy
or insolvency law or other similar law affecting creditors’ rights, or a petition is presented
for its winding-up or liquidation and, in each case, such proceeding or petition results in a
judgment of insolvency or bankruptcy or the entry of an order for relief or the making ofan order for its winding-up or liquidation; or (D) seeks or becomes subject to theappointment of a receiver, trustee or other similar official pursuant to the federal securities236

laws or Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act for it
or for all or substantially all its assets.

237

RULE 22C – INTERPRETATION IN RELATION TO THE
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENTACT OF 1991
The Corporation and the Members intend that these Rules be interpreted in relation tocertain terms (identified below) that are defined or used in the Federal Deposit Insurance
Corporation Act of 1991, as amended, as follows:
The Corporation is a “clearing organization”;
Any obligation of a Member or the Corporation to make any payments or delivery to theother is a “covered clearing obligation” and a “covered contractual payment obligation”;
An entitlement of a Member or the Corporation to receive a payment or delivery from theother is a “covered contractual payment entitlement”;
The Corporation and each Member is a “member” of the “clearing organization”;
The amount by which the covered contractual payment entitlements of a Member or the
Corporation exceed the covered contractual payment obligations of such Member or the
Corporation after netting pursuant to Rule 22A or Rule 22B is its “net entitlement”;
The amount by which the covered contractual payment obligations of a Member or the
Corporation exceed the covered contractual payment entitlements of such Member or the
Corporation after netting pursuant to Rule 22A or Rule 22B is its “net obligation”; andThese Rules, together with all other agreements between the Corporation and a Member;are a “netting contract”, the margin, Clearing Fund and other provisions of these Rules granting
an interest in any funds or property of a Member to the Corporation and each Cross-Margining
Arrangement and associated agreement and guaranty constitute a “security agreement or
arrangement or other credit enhancement” related to such netting contract. The close-out andnetting process described in Rule 22A or Rule 22B constitutes the “terminat[ion], liquidat[ion],accelerat[ion], and nett[ing]” of obligations, and the taking of any action by the Corporation under
Section 11(e) of Rule 3B shall constitute an exercise of remedies under a “security agreement or
arrangement or other credit enhancement” related to a netting contract.

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RULE 22D – WIND-DOWN OF THE CORPORATION
Section 1. Defined Terms(a)

For purposes of this Rule 22D:

“Bridge Entity” has the meaning given to such term in the definition of “Transferee” in thisSection 1(a).
“Business” means the Critical Services and any Non-Critical Services of the Corporation
included in a Transfer.
“Comparability Period” means a period of time following the Transfer, to be agreed
between the Corporation and a Transferee, during which the Business transferred from the
Corporation to the Transferee shall be operated by the Transferee in a manner comparable to themanner in which the Business was previously operated by the Corporation, as more specificallyset forth in Section 9 of this Rule 22D.
“Corporation Default Rule” means Rule 22B of the Rules of the Government Securities
Division of the Corporation.
“Critical Services” means the services of the Corporation described in the Rules andProcedures of the Government Securities Division of the Corporation and the rules, procedures
and other regulations of the Mortgage-Backed Securities Division of the Corporation that havebeen identified as critical services in the Recovery and Wind-down Plan.
“Delinquent Limited Member” means a Limited Member that is delinquent in theperformance of any of its obligations to the Corporation (as determined by the Corporation).
“Delinquent Member” means a Member that is delinquent in the performance of any of its
obligations to the Corporation (as determined by the Corporation).
“Eligible Limited Member” means a Limited Member other than a Non-Eligible Limited
Member.
“Eligible Member” means a Member other than a Non-Eligible Member.
“Failover Entity” has the meaning given to such term in the definition of “Transferee” inthis Section 1(a).
“Guaranteed Transaction” means a transaction that is processed through the facilities of
the Government Securities Division of the Corporation that has been subject to Novation.
“Last Settlement Date” has the meaning given to such term in Section 2(c)(3) of thisRule 22D.
Last Transaction Acceptance Date” has the meaning given to such term in Section 2(c)(2)of this Rule 22D.
239

“Limited Member” means a Comparison-Only Member, Sponsored Member or CCIT
Member of the Government Securities Division of the Corporation or a Comparison-Only
Member, Sponsored Member or CCIT Member of the Government Securities Division of theTransferee, as the context requires.
“Limited Member Agreement” means the form of agreement between a Limited Member
and the Corporation or between a Limited Member and the Transferee, as the context requires,providing, inter alia, for the Limited Member to be bound by the Rules and Procedures of theGovernment Securities Division of the Corporation or the Rules and Procedures of the Government
Securities Division of the Transferee, as applicable to such Limited Member.
“Member” means a Netting Member or Sponsoring Member of the Government Securities
Division of the Corporation or a Netting Member or Sponsoring Member of the Government
Securities Division of the Transferee, as the context requires.
“Member Agreement” means the form of agreement between a Member and the
Corporation or between a Member and the Transferee, as the context requires, providing, inter alia,
for the Member to be bound by the Rules and Procedures of the Government Securities Divisionof the Corporation or the Rules and Procedures of the Government Securities Division of theTransferee, as applicable to such Member.
“Non-Critical Services” means the services of the Corporation described in the Rules andProcedures of the Government Securities Division of the Corporation and the rules, procedures
and other regulations of the Mortgage-Backed Securities Division of the Corporation other thanthe Critical Services.
“Non-Eligible Limited Member” means a Limited Member that is a Delinquent Limited
Member or Withdrawing Limited Member.
“Non-Eligible Member” means a Member that is a Delinquent Member or Withdrawing
Member.
“Recovery and Wind-down Plan” means the plan for the recovery and orderly wind-downof the Corporation necessitated by credit losses, liquidity shortfalls, losses from general businessrisk or any other losses, adopted by the Corporation pursuant to Rule 17Ad-22(e)(3)(ii) under the
Exchange Act.
“Recovery Plan” means the portion of the Recovery and Wind-down Plan addressing
recovery.
“Risk Reducing Transaction” means a Guaranteed Transaction that offsets one or moreother Guaranteed Transactions, and thereby reduces the potential exposure of the Corporation withrespect to such Guaranteed Transactions.
“Rules and Procedures” means the Rules and Procedures of the Government Securities
Division of the Corporation or the Rules and Procedures of the Government Securities Division of
the Transferee, as the context requires.

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“Settling Bank” means a Funds-Only Settling Bank or Funds-Only Settling Bank Member
for Members and Limited Members of the Government Securities Division of the Corporation ora Funds-Only Settling Bank or Funds-Only Settling Bank Member for Members and Limited
Members of the Government Securities Division of the Transferee, as the context requires.
“Settling Bank Agreement” means the form of agreement between a Settling Bank and the
Corporation or between a Settling Bank and the Transferee, as the context requires, providing,inter alia, for the Settling Bank to be bound by the Rules and Procedures of the Government
Securities Division of the Corporation or the Rules and Procedures of the Government Securities
Division of the Transferee, as applicable to such Settling Bank.
“Third Party Entity” has the meaning given to such term in the definition of “Transferee”
in this Section 1(a).
Plan.

“Transfer” means a transfer of the Business of the Corporation pursuant to the Wind-down“Transferee” means an entity to which the Business of the Corporation is transferredpursuant to the Wind-down Plan, and may include (i) a failover entity established by DTCC (a“Failover Entity”), (ii) a then-existing or newly-established third party entity (a “Third Party
Entity”) or (iii) a bridge entity formed to operate the Business on an interim basis (a “Bridge
Entity”). The Transferee shall be an entity that is legally, financially and operationally qualified
to continue to operate the Business that is to be transferred from the Corporation to the Transferee.
“Transferee Documents” means the Rules and Procedures, Member Agreement, Limited
Member Agreement and Settling Bank Agreement of the Government Securities Division of theTransferee.
“Transfer Notice” has the meaning given to such term in Section 3 of this Rule 22D.
“Transfer Time” has the meaning given to such term in Section 2(c)(1) of this Rule 22D.
“Wind-down Plan” means the portion of the Recovery and Wind-down Plan addressing
wind-down.
“Withdrawing Limited Member” means a Limited Member of the Government Securities
Division of the Corporation that has given notice to the Corporation of its election to withdraw as
a Limited Member but that, at the Transfer Time, has not yet ceased to be a Limited Member (asdetermined by the Corporation).
“Withdrawing Member” means a Member of the Government Securities Division of the
Corporation that has given notice to the Corporation of its election to withdraw as a Member but
that, at the Transfer Time, has not yet ceased to be a Member (as determined by the Corporation).
(b)
Capitalized terms that are used in this Rule 22D but not defined in Section 1(a)above shall have the meanings given to such terms in other Rules and Procedures of theGovernment Securities Division of the Corporation.

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Section 2. Initiation of Wind-down Plan(a)
The Board of Directors may authorize the initiation of the Wind-down Plan and atransfer of the Business from the Corporation to a Transferee if the Board of Directors determines,
in the exercise of its business judgment and subject to its fiduciary duties:
(1)

(2)

(b)

that the application of some or all of the recovery tools set forth in the
Recovery Plan, necessitated by credit losses, liquidity shortfalls, losses fromgeneral business risk or any other losses:A.

has not restored the Corporation to viability as a going concern, able
to continue to provide its Critical Services to Members and Limited
Members of the Government Securities Division of the Corporationand Mortgage-Backed Securities Division Participants in a safe andefficient manner; orB.

will not likely restore the Corporation to viability as a going
concern, able to continue to provide its Critical Services to Members
and Limited Members of the Government Securities Division of the
Corporation and Mortgage-Backed Securities Division Participantsin a safe and efficient manner; andthat the implementation of the Wind-down Plan and a Transfer of theBusiness from the Corporation to a Transferee is in the best interests of the
Corporation, its shareholders and creditors, Members and Limited Membersof the Government Securities Division of the Corporation, MortgageBacked Securities Division Participants and the US financial markets.

The Board of Directors shall identify:(1)

the Critical Services and any Non-Critical Services that shall be transferredfrom the Corporation to the Transferee at the Transfer Time; and(2)

any Non-Critical Services that shall not be transferred from the Corporation
to the Transferee.

The Critical Services and any Non-Critical Services that are transferred from the
Corporation to the Transferee at the Transfer Time shall be provided by the Transferee following
the Transfer Time. Any Non-Critical Services that are not transferred from the Corporation to theTransferee shall be terminated at the Transfer Time.
(c)

The Board of Directors shall establish:(1)

the date and time (the “Transfer Time”) of the Transfer;(2)

the last day that transactions may be submitted to the Government Securities
Division of the Corporation for processing (the “Last Transaction
Acceptance Date”); and
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(3)

the last day that transactions submitted to the Government Securities
Division of the Corporation for processing will be settled (the “Last
Settlement Date”).

The Government Securities Division of the Corporation shall not accept any transactions(i) for processing after the Last Transaction Acceptance Date or (ii) which have a Scheduled
Settlement Date that occurs after the Last Settlement Date. All transactions to be processed and/or
settled after the Transfer Time shall be submitted to the Government Securities Division of theTransferee in accordance with the Rules and Procedures of the Government Securities Division of
the Transferee, and the Corporation shall have no responsibility for such transactions.
(d)To the extent that the Board of Directors deems it to be practicable based on theavailable resources of the Corporation, the Board of Directors may provide for pendingtransactions to be run off and settled prior to the Transfer Time, with the objective of facilitating
the settlement of transactions in the ordinary course. In furtherance of this objective, so long as a
Corporation Default has not occurred, the Board of Directors may provide for how suchtransactions accepted by the Government Securities Division of the Corporation on or prior to theLast Transaction Acceptance Date shall be processed and settled, including:(1)

whether such transactions must be Risk Reducing Transactions; and(2)whether such transactions will be processed (i) in the ordinary course or (ii)in accordance with any special or exception processing procedures that will
apply through the close of business on the Last Settlement Date.

Section 3. Notice of Transfer of the Business
If the Board of Directors determines to implement a Transfer of the Business from the
Corporation to a Transferee in accordance with this Rule 22D and the terms and conditions of theWind-down Plan, the Corporation shall, in such manner as may be provided by the Rules andProcedures of the Government Securities Division of the Corporation and subject to any required
regulatory or judicial approval or consent:(a)provide Members, Limited Members and Settling Banks with a notice (a “Transfer
Notice”) setting forth:(1)

the decision taken by the Board of Directors to Transfer the Business fromthe Corporation to the Transferee and a brief statement of the reasons
therefor;(2)

the name of the Transferee and basic information about the Transferee;(3)

a description of the material financial and operational terms of the Transfer;(4)

the (i) Transfer Time, (ii) Last Transaction Acceptance Date and (iii) Last
Settlement Date;

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(5)

a summary of the matters described in Sections 4 through 8 of this Rule
22D;

(6)

a list setting forth (i) which Members and Limited Members are Eligible
Members and Limited Members and (ii) which Members and Limited
Members are Non-Eligible Members and Limited Members; and(7)a list setting forth (i) the Critical Services and any Non-Critical Services
that will be transferred from the Corporation to the Transferee at theTransfer Time and (ii) any Non-Critical Services that will not be transferredfrom the Corporation to the Transferee; and(b)make available to Members, Limited Members and Settling Banks a copy of theTransferee Documents.
No delay or failure on the part of the Corporation to provide a Transfer Notice or makeavailable a copy of the Transferee Documents to any Member, Limited Member or Settling Bank
shall alter the timing or effectiveness of the Transfer. The Corporation shall also furnish theTransfer Notice and a copy of the Transferee Documents to its regulators.
Section 4. Transfer of Members, Limited Members and Settling Banks
Prior to the Transfer Time, the Corporation shall enter into arrangements with a Transfereethat is a Failover Entity, or shall use commercially reasonable efforts to enter into arrangementswith a Transferee that is a Third Party Entity or Bridge Entity, providing in either case that, at theTransfer Time, by operation of this Rule 22D and with no further action required by any party:(a)each Eligible Member of the Government Securities Division of the Corporation
shall become (i) a Member of the Government Securities Division of the Transferee and (ii) a party
to a Member Agreement with the Transferee;(b)each Eligible Limited Member of the Government Securities Division of the
Corporation shall become (i) a Limited Member of the Government Securities Division of theTransferee and (ii) a party to a Limited Member Agreement with the Transferee; and(c)each Settling Bank for Members and Limited Members of the Government
Securities Division of the Corporation shall become (i) a Settling Bank for Members and Limited
Members of the Government Securities Division of the Transferee and (ii) a party to a Settling
Bank Agreement with the Transferee.
Section 5. Status of Members, Limited Members and Settling Banks
Prior to the Transfer Time, the Corporation shall enter into arrangements with a Transfereethat is a Failover Entity, or shall use commercially reasonable efforts to enter into arrangementswith a Transferee that is a Third Party Entity or Bridge Entity, providing in either case that, fromand after the Transfer Time:

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(a)
An Eligible Member of the Government Securities Division of the Corporation thathas become a Member of the Government Securities Division of the Transferee shall have all of
the rights and be subject to all of the obligations of a Member set forth in the Rules and Proceduresof the Government Securities Division of the Transferee, including the legal, financial, operationaland collateral requirements of the Government Securities Division of the Transferee applicable tosuch Member.
(b)
An Eligible Limited Member of the Government Securities Division of the
Corporation that has become a Limited Member of the Government Securities Division of theTransferee shall have all of the rights and be subject to all of the obligations of a Limited Member
set forth in the Rules and Procedures of the Government Securities Division of the Transferee,
including the legal, financial and operational requirements of the Government Securities Divisionof the Transferee applicable to such Limited Member.
(c)
A Settling Bank for Members and Limited Members of the Government Securities
Division of the Corporation that has become a Settling Bank for Members and Limited Membersof the Government Securities Division of the Transferee shall have all of the rights and be subject
to all of the obligations of a Settling Bank set forth in the Rules and Procedures of the Government
Securities Division of the Transferee, including the operational requirements of the Government
Securities Division of the Transferee applicable to such Settling Bank.
Section 6. Right of Non-Eligible Members and Limited Members to Apply to the Transferee
Nothing contained in this Rule 22D shall:(a)preclude a Non-Eligible Member of the Government Securities Division of the
Corporation from applying after the Transfer Time to become a Member of the Government
Securities Division of the Transferee in accordance with such eligibility requirements andprocedures as may be prescribed by the Transferee, but such Non-Eligible Member shall not havethe benefit of the automatic admission arrangements provided in Section 4(a) of this Rule 22D; or(b)preclude a Non-Eligible Limited Member of the Government Securities Divisionof the Corporation from applying after the Transfer Time to become a Limited Member of theGovernment Securities Division of the Transferee in accordance with such eligibility requirements
and procedures as may be prescribed by the Transferee, but such Non-Eligible Limited Member
shall not have the benefit of the automatic admission arrangements provided in Section 4(b) of thisRule 22D.
Section 7. Right to Withdraw from the Transferee
Nothing contained in this Rule 22D shall:(a)preclude an Eligible Member of the Government Securities Division of the
Corporation that has become a Member of the Government Securities Division of the Transferee
pursuant to Section 4(a) of this Rule 22D from electing to withdraw as a Member from theGovernment Securities Division of the Transferee at any time after the Transfer Time, subject to
the Rules and Procedures of the Government Securities Division of the Transferee;

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(b)
preclude an Eligible Limited Member of the Government Securities Division of the
Corporation that has become a Limited Member of the Government Securities Division of theTransferee pursuant to Section 4(b) of this Rule 22D from electing to withdraw as a Limited
Member from the Government Securities Division of the Transferee at any time after the Transfer
Time, subject to the Rules and Procedures of the Government Securities Division of theTransferee; or(c)preclude a Settling Bank for Members and Limited Members of the Government
Securities Division of the Corporation that has become a Settling Bank for Members and Limited
Members of the Government Securities Division of the Transferee pursuant to Section 4(c) of thisRule 22D from electing to withdraw as a Settling Bank from the Government Securities Divisionof the Transferee at any time after the Transfer Time, subject to the Rules and Procedures of theGovernment Securities Division of the Transferee.
Section 8. Disposition of Pending Transactions
At the Transfer Time, any pending transactions shall be treated as provided in the
Corporation Default Rule.
Section 9. Certain Ex Ante Matters
Prior to the Transfer Time, the Corporation shall enter into arrangements with a Transfereethat is a Failover Entity, or shall use commercially reasonable efforts to enter into arrangementswith a Transferee that is a Third Party Entity or Bridge Entity, providing in either case that, withrespect to the Critical Services and any Non-Critical Services that are transferred from the
Corporation to the Transferee, for at least the duration of the Comparability Period, in order tofacilitate a smooth Transfer of the Business from the Corporation to the Transferee:(a)the Rules and Procedures, Member Agreement, Limited Member Agreement andSettling Bank Agreement of the Government Securities Division of the Transferee shall becomparable in substance and effect to the Rules and Procedures, Member Agreement, Limited
Member Agreement and Settling Bank Agreement of the Government Securities Division of the
Corporation;(b)
the rights and obligations of Members, Limited Members and Settling Banks under
the Rules and Procedures of the Government Securities Division of the Transferee shall becomparable in substance and effect to the rights and obligations of Members, Limited Members
and Settling Banks under the Rules and Procedures of the Government Securities Division of the
Corporation; and(c)the Critical Services and any Non-Critical Services provided by the Transferee shallbe provided in a manner that is comparable in substance and effect to the manner in which such
Critical Services and Non-Critical Services were provided by the Corporation.
Section 10. Subordination of Claims
In the event of any insolvency of the Corporation following the commencement of any
Event Period (as defined in Rule 4 of the Rules of the Government Securities Division of the246Corporation), the unsecured claims (if any) of Members and Limited Members of the Government
Securities Division of the Corporation that failed to pay or perform any obligation to the
Corporation or elected to withdraw as Members or Limited Members from and after such timeshall (i) rank pari passu with each other and (ii) be subordinate to the claims of other unsecured
creditors of the Corporation.
Section 11. Further Assurances; Additional Powers; Miscellaneous Matters(a)Members, Limited Members and Settling Banks of the Government Securities
Division of the Corporation shall assist and cooperate with the Corporation to effectuate any
Transfer of the Business from the Corporation to a Transferee, including without limitation (i) bycomplying with the terms and conditions of this Rule 22D and their obligations hereunder and (ii)by providing the Corporation and the Transferee with such financial and operational information
as they may request. The Corporation may provide to a Transferee any financial and operational
information it has with respect to Members, Limited Members and Settling Banks of theGovernment Securities Division of the Corporation as may be necessary and appropriate toeffectuate an orderly Transfer of the Business from the Corporation to the Transferee.
(b)
The Corporation may take such other actions and enter into such otherarrangements (on behalf of itself and Members, Limited Members and Settling Banks of theGovernment Securities Division of the Corporation) as may be necessary and appropriate toeffectuate an orderly Transfer of the Business from the Corporation to a Transferee, and otherwise
accomplish the purposes of the Wind-down Plan.
(c)
As a condition to receiving, and by virtue of accepting, the continuing benefits ofbeing Members, Limited Members and Settling Banks of the Government Securities Division of
the Corporation, such Members, Limited Members and Settling Banks (i) hereby expressly agree
to the arrangements set forth in this Rule 22D relating to their becoming Members, Limited
Members and Settling Banks, as the case may be, of the Government Securities Division of theTransferee in the circumstances described herein and (ii) hereby expressly grant to the Corporation
an irrevocable power of attorney to execute and deliver on their behalf such documents andinstruments as the Transferee may request for this purpose. As Members, Limited Members andSettling Banks of the Government Securities Division of the Corporation, such Members, Limited
Members and Settling Banks are subject to the Rules and Procedures.
(d)
No actions taken or omitted to be taken by the Corporation pursuant to this Rule
22D shall be deemed to constitute a default by the Corporation in the performance of any of its
other obligations to Members, Limited Members and Settling Banks pursuant to any other Rules
and Procedures.
(e)
The Corporation shall have no liability to any Members, Limited Members or
Settling Banks for any actions taken or omitted to be taken by the Corporation pursuant to thisRule 22D.
(f)
The Corporation shall have no liability to any third parties, including any customers
or clients of any Members, Limited Members or Settling Banks, for any actions taken or omitted
to be taken by the Corporation pursuant to this Rule 22D.

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(g)
In connection with the Transfer of the Business from the Corporation to theTransferee, (i) the Corporation shall assign all of its Member Agreements, Limited Member
Agreements and Settling Bank Agreements to the Transferee and (ii) the Transferee shall assume
such Member Agreements, Limited Member Agreements and Settling Bank Agreements.
(h)
All rights of the Corporation that are not assigned to the Transferee in connection
with the Transfer of the Business from the Corporation to the Transferee, including any claims of
the Corporation against Members, Limited Members and Settling Banks arising at any time prior
to the Transfer Time, shall remain rights of the Corporation, enforceable by the Corporation inaccordance with their terms and subject to applicable law (including insolvency law).
(i)
All obligations and liabilities of the Corporation that are not assigned to andassumed by the Transferee in connection with the Transfer of the Business from the Corporation
to the Transferee shall remain obligations and liabilities of the Corporation, enforceable against
the Corporation in accordance with their terms and subject to applicable law (including insolvency
law).
(j)
In the event of any conflict between the provisions of this Rule 22D and any otherRules and Procedures, the provisions of this Rule 22D shall prevail.

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RULE 23 – FINE PAYMENTS
The Corporation may impose a fine on a Member or Limited Member pursuant to theseRules. Fines shall be payable in the manner and at such time as determined by the Corporationfrom time to time.

249

RULE 24 – CHARGES FOR SERVICES RENDERED
Section 1
Members shall pay such fees and charges to the Corporation as shall be specified by the
Corporation or in the Procedures and approved by the Board of Directors on a reasonable and nondiscriminatory basis.
Sponsoring Members shall be responsible for all fees pertaining to their Sponsoring
Member activity as set forth in the Corporation’s Fee Structure.
CCIT Members shall be responsible for all fees pertaining to their CCIT Member activity
as set forth in the Corporation’s Fee Structure. Such fees will be applied at the Joint Account level
where applicable.
Section 2
A Member or a Sponsoring Member may be charged for any unusual expenses caused
directly or indirectly by such Member, or in the case of a Sponsoring Member, caused directly or
indirectly by itself or one or more of its Sponsored Members, including but without limitation, thecost of producing records pursuant to a court order or other legal process in any litigation or otherlegal proceeding to which such Member, Sponsoring Member or Sponsored Member is a party orin which such records relating to such Member, Sponsoring Member or Sponsored Member are so
required to be produced, whether such production is required at the instance of such Member,Sponsoring Member or Sponsored Member or of any other party other than the Corporation.

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RULE 25 – BILLS RENDERED
On or before the fifth Business Day of each month, the Corporation will render bills to
Members and to Sponsoring Members regarding their aggregate Sponsoring Member activity,
which may reflect adjustments to prior bills, for charges on account of the actual business of aprior month, and for fines imposed during any month. Unless otherwise permitted by the
Corporation, for each Comparison-Only Member, payment of such bill is due upon its receipt, andfor each Netting Member or Sponsoring Member, such Member shall be obligated to pay theamount of the bill on the tenth Business Day of such month as a part of satisfying its Funds-OnlySettlement Amount obligation.
Sponsoring Members shall receive bills for their aggregate Sponsoring Member activity as
set forth in the Fee Structure.

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RULE 26 – RESERVEDThis rule is reserved for future use

252

RULE 27 – ADMISSION TO PREMISES OF THE CORPORATION,
POWERS OF ATTORNEY, ETC.
No person will be permitted to enter the premises of the Corporation as the representativeof any Member unless he has first been approved by the Corporation and has been issued such
credentials as the Corporation may from time to time prescribe and such credentials have not beencanceled or revoked. Such credentials must be shown on demand and to gain entry to the
Corporation’s premises, must be prominently displayed while on said premises, and may limit the
portions of the premises to which access is permitted thereunder. Any credentials issued pursuant
to this Rule may be revoked at any time by the Corporation in its discretion, and prompt notice ofsuch revocation shall be given to the employer of the person whose credentials have been so
revoked.
Any Member shall, if any person in its employ to whom any credentials have been issued
pursuant to this Rule or to whom a power of attorney or other authorization has been given to act
for it in connection with the work of the Corporation shall for any reason cease to be so employed,
give to the Corporation immediate notice in writing of such termination of employment and if any
such power of attorney or other authorization is otherwise revoked or canceled, shall likewise giveto the Corporation immediate notice in writing of such revocation or cancellation. All credentials
issued pursuant to this Rule shall be immediately surrendered to the Corporation upon theirrevocation by the Corporation or by the employer or upon the termination of the employment of
the holder thereof.
Unless revoked by the Corporation, all credentials, authorizations, and powers of attorneyissued pursuant to this Rule or in connection with the work of the Corporation shall remain in fullforce and effect until the Corporation shall have received written notice of the revocation thereof
or of the termination of the holder’s employment.

253

RULE 28 – FORMS
In connection with any transactions or matters handled through, with or by the Corporation
under or pursuant to the Rules, such forms of lists, notices and other documents shall be used as
the Corporation may from time to time prescribe, and additions to, changes in and elimination of
any such forms may be made by the Corporation at any time in its discretion. In addition, any
information required to be delivered to the Corporation by use of any such forms may be deliveredby the use of any media as shall be prescribed in the Procedures or by the Corporation from time
to time.

254

RULE 29 – RELEASE OF CLEARING DATA(a)
Absent valid legal process or as provided elsewhere in this Rule, the Corporation
will only release Clearing Data relating to transactions of a particular Member to: (i) such Member
and its Permitted Margin Affiliate or Cross-Margining Affiliate, as applicable, (ii) such Member’s
Sponsoring Member, if such Member is a Sponsored Member, (iii) the Securities and Exchange
Commission, (iv) the Federal Reserve Bank of New York for market surveillance purposes, or toan FCO and its regulators pursuant to a Cross-Margining Arrangement. Data released to an FCO
and its regulators pursuant to a Cross-Margining Arrangement will include information and data
pertaining to the Member’s Market Professional customers if applicable under the Arrangement.
(b)
The Corporation, in its sole discretion, may release Clearing Data relating totransactions of Members to regulatory organizations and self-regulatory organizations, as definedin the Securities Exchange Act of 1934, as amended, or other comparable Federal or State statutes,
as well as to clearing organizations affiliated with or designated by contract markets trading
specific futures products under the oversight of the Commodity Futures Trading Commission.
Provided, however, that nothing in this Rule shall prevent the Corporation from releasing Clearing
Data to others, provided that such data shall be in a form as to prevent the disclosure, whether
patently or in easily discernible format, of proprietary and/or confidential financial, operational or
trading data of a particular Member or inappropriately arranged groups of Members.
(c)With respect to the foregoing, the release of any Clearing Data shall be conditioned
upon either (i) a written request, or (ii) the execution of a written agreement with the Corporation,
whichever is appropriate in the Corporation’s discretion and the Corporation, in its discretion, shallestablish the conditions under which such data shall be released and the fees, if any, to be paid forsuch data.
(d)
The term “Clearing Data” shall mean, for the purposes of this Rule, transaction data
which is received by the Corporation in the clearance and/or settlement processes of the
Corporation, or such data, reports or summaries thereof, which may be produced as a result ofprocessing such transaction data.
(e)
The foregoing notwithstanding, this Rule is not intended to, nor shall it be deemed
to be in contravention, or a limitation, of the Corporation’s obligations, as a self-regulatoryorganization, to cooperate and share data with other regulatory and self-regulatory organizations
for regulatory purposes.
(f)Notwithstanding anything to the contrary in this Rule, the Corporation may release
Clearing Data to SIFMA in connection with the Corporation’s collection of fees on behalf of
SIFMA, provided that the Corporation: (1) provides Clearing Data only to the extent necessary tofacilitate the collection of fees on behalf of SIFMA, and (2) obtains, in a form and manner requiredby the Corporation, the agreement of SIFMA to maintain the confidentiality of any Clearing Data
provided by the Corporation to SIFMA.

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RULE 30 – LISTS TO BE MAINTAINED
Section 1
The Corporation shall maintain and make available to a Member upon request a master filelisting each Eligible Security, and a master file listing each Eligible Netting Security, and mayfrom time to time add securities to such lists or remove securities therefrom. The Corporation
shall list a security as an Eligible Security or an Eligible Netting Security only upon adetermination by the Corporation that it has the existing operational capability to do so and tocontinue successfully to provide its services to Members.
Section 2
The Corporation shall maintain lists, by category of Membership, of each ComparisonOnly Member, Netting Member, CCIT Member (and its Joint Account Submitter as applicable)
and Sponsored Member, which lists shall be made available to a Member upon request.

256

RULE 31 – RESERVEDThis Rule is reserved for future use.

257

RULE 32 – SIGNATURES
With respect to any and all agreements and other documents entered into between a
Member, Sponsoring Member, Sponsored Member, CCIT Member or Funds-Only Settling Bank
Member and the Corporation, or otherwise delivered to or by the Corporation pursuant to theseRules, the use of an electronic signature shall have the same validity and effect as the use of asignature affixed by hand.

258

RULE 33 – PROCEDURES
The Board of Directors shall, pursuant to these Rules, prescribe from time to time
Procedures and other regulations in respect of the business of the Corporation. The Board of
Directors may, by resolution, delegate to an Officer of the Corporation the power to prescribe
Procedures and regulations. Each Member will be bound by such Procedures and regulations andany amendment thereto in the same manner as it is bound by the provisions of these Rules.
Members shall be given 10 Business Days’ notice of any proposed amendment to the Procedures.

259

RULE 34 – INSURANCEThe Corporation shall use its best efforts to maintain, or arrange for the maintenance by
the Corporation of such insurance, including fidelity bonds, in such amounts and having suchcoverage regarding the business of the Corporation, as the Board shall deem appropriate. The
insurance policies or contracts pursuant to which such insurance is provided shall be open to theinspection of the Members at the offices of the Corporation during regular business hours on
Business Days. If the Corporation shall materially reduce the amount or coverage of any suchinsurance or the persons providing such insurance shall notify the Corporation of a material
reduction in the amount of coverage thereof, the Corporation shall promptly notify each Member
and the Securities and Exchange Commission thereof stating the effective date of such reduction.

260

RULE 35 – FINANCIAL REPORTS
As soon as practicable after the end of each calendar year, the Corporation shall provide toMembers financial statements of the Corporation audited and covered by a report prepared byindependent public accountants for such calendar year. The Corporation shall undertake to provide
such financial statements and report to Members within 60 days following the close of the
Corporation’s fiscal year.
The Corporation shall also provide to Members unaudited financial statements of the
Corporation within 30 days following the close of the Corporation’s fiscal quarter for each of thefirst three calendar quarters of each calendar year.
A study and evaluation of the Corporation’s system of internal accounting controls withrespect to the safeguarding of participants’ assets, prompt and accurate clearance and settlementof securities transactions, and the reliability of related records shall be conducted annually byindependent public accountants. Such study and evaluation shall be conducted in accordance withthe standards established by the American Institute of Certified Public Accountants and shall bemade available to all Members within a reasonable time upon receipt from the Corporation’s
independent accountants.

261

RULE 36 – RULE CHANGESThe Corporation shall promptly notify all Members and Registered Clearing Agencies ofany proposal it has made to change, revise, add or repeal any Rule, and of the text or a brief
description of the proposed Rule and its purpose and effect, by posting such proposal on its
website. Members and Registered Clearing Agencies may submit to the Corporation for its
consideration their comments with respect to any such proposal, and such comments shall be filedwith the Corporation’s records and copies thereof delivered to the SEC.

262

RULE 37 – HEARING PROCEDURES
Section 1 – General
An Interested Person may, when permitted by these Rules, request a hearing pursuant to
Section 2 or Section 3 of this rule, as applicable, by filing with the Secretary of the Corporation,
within five Business Days from the date on which the Corporation informed it of an action or
proposed action of the Corporation with respect to the Interested Person a written request for ahearing setting forth (a) the action or proposed action of the Corporation with respect to which thehearing is requested and (b) the name of the representative of the Interested Person who may becontacted with respect to the hearing. Within seven Business Days after the Interested Person files
such written request with the Corporation, or two Business Days in the case of action taken against
the Interested Person pursuant to Rule 21 or Rule 22, the Interested Person shall submit to the
Corporation a clear and concise written statement setting forth with particularity the action or
proposed action of the Corporation with respect to which the hearing is requested, the basis forobjection to such action, whether the Interested Person intends to attend the hearing and whether
the Interested Person chooses to be represented by counsel at the hearing. If the written statement
contests the Corporation’s determination that the Interested Person has violated a Rule orprocedure, the statement must specifically admit or deny each violation alleged and detail thereasons why the Rules or procedures alleged to have been violated are being contested. Any
alleged violation not specifically denied shall constitute an admission to that violation. The
Corporation may deny the statement if it fails to set forth a prima facie basis for contesting theviolation. The failure of the Interested Person to file the written request referred to above within
the time period required by these Rules and/or the failure of the Interested Person to submit thewritten statement within the time period specified above will be deemed to be an election to waive
the right to a hearing. The Corporation shall notify the Interested Person in writing of the date,place and hour of the hearing at least five Business Days prior to the hearing (unless the parties
agree to waive the five Business Day requirement).
If the Corporation has assessed a fine against a Member, and an Interested Person desires
to dispute the fine and complies with the requirements described above regarding filing a written
request for a hearing and a written statement, the Corporation shall automatically conduct a reviewof the disputed fine. The Corporation may examine the written statement submitted by theInterested Person and/or arrange a meeting with the Interested Person to discuss the disputed fine.
If the Corporation determines to waive the fine, it shall inform the Board of its determination andits reasons thereof. The Board may, in its discretion, determine to reinstate any fine waived by the
Corporation. If the Corporation determines not to waive the fine as a result of the review process,the Interested Person shall be entitled to a hearing before a panel pursuant to Section 2 or Section
3 of this Rule 37. The Corporation shall advise the Interested Person of the result of the review
process.
Section 2 – Minor Rule Violations
A hearing requested in connection with a violation of the Rules of the Corporation forwhich a fine may be assessed against the Interested Person in an amount not to exceed $5,000(hereinafter, a “Minor Rule Violation”), shall be held before a panel of three officers of the
Corporation (hereinafter, a “Minor Violation Panel”). The members of the Minor Violation Panel
263

shall select one of their numbers to be the chairman, and the chairman shall be the person in chargeof the conduct of the hearing. At the hearing, an officer of the Corporation shall present the caseagainst the Interested Person. The Interested Person shall have an opportunity to be heard and may
be represented by counsel. A record shall be kept of the hearing and the costs associated with thehearing may, in the discretion of the Corporation, be charged in whole or in part to the Interested
Person if the decision is adverse to the Interested Person. The Minor Violation Panel shall provide
the Interested Person with a written statement of its decision no later than 10 business days after
the conclusion of the hearing. If the decision of the Minor Violation Panel is adverse to theInterested Person, the Interested Person may request a further hearing under Section 3 of this Ruleby filing a written request with the Secretary of the Corporation within five Business Days ofreceipt of such written statement. The Corporation shall notify the Interested Person of the date,time and place of the hearing at least five business days prior to the hearing. The failure of theInterested Person to submit the written request within the required time period shall be deemed anelection to waive the right to any further hearing.
A Minor Rule Violation as defined in this Rule shall be deemed a minor rule violation
within the meaning of Rule 19d-1(c)(2) under the Securities Exchange Act of 1934, as amended(the “Act”), and this Rule shall be deemed a “plan” within the meaning thereof. The action
imposed by the Corporation shall not be considered “final” for purposes of paragraph (c)(1) of
Rule 19d-1 of the Act in any instance in which the fine is in an amount that does not exceed $2,500,
imposed against an Interested Person that is not a Netting Member, and with respect to which theInterested Person does not seek an adjudication pursuant to Section 3 of this Rule 37.
Section 3 – Hearings
A hearing on any matter not covered by Section 2 of this rule, or a further hearing requested
pursuant to Section 2 shall be before a panel (hereinafter, the “Panel”) of three individuals drawn
from members of the Board of Directors or their designees. The members of the Panel shall beselected by the Chairman of the Board.
Notwithstanding the above, the Panel shall not include any individual representing theInterested Person against which the proposed action is to be taken, nor any person who had
responsibility for the action or proposed action of the Corporation as to which the hearing relates.
At the hearing, the Interested Person shall be afforded an opportunity to be heard and may
be represented by counsel if the Interested Person has so elected pursuant to Section 1 of this Rule.
A record shall be kept of the hearing, and the cost associated with the hearing may, in the discretionof the Panel, be charged in whole or in part to the Interested Person in the event that the decisionat the hearing is adverse to the Interested Person.
Section 4 – Hearing Procedure
The Panel shall advise the Interested Person of its decision and the specific grounds uponwhich the decision is based, within ten Business Days after the conclusion of the hearing. If thedecision of the Panel shall have been to impose a disciplinary sanction on the Interested Person inaccordance with Rule 48 or to affirm any action previously taken against the Interested Person
pursuant to Rule 21 or Rule 22, a notice of decision setting forth (a) any act or practice in which264the Interested Person has been found to have engaged, or which the Interested Person has beenfound to have omitted, (b) the specific provision(s) of the Rules of the Corporation or of theMember’s agreements with the Corporation which any such act or practice or omission to act has
been deemed to violate, and (c) the sanction imposed and the reasons thereof shall be furnished to
the Interested Person. A copy of the Panel’s notice of decision shall also be furnished to the
Chairman of the Board.
Section 5 – Reversal or Modification of Panel Decisions
Decisions of the Panel are final, but the Board of Directors may in its discretion modify
any sanction or reverse any decision of the Panel that is adverse to the Interested Person.
The reversal or modification by the Board of Directors of any action previously taken
against the Interested Person pursuant to these Rules shall not invalidate the acts of the Corporation
or its officers or directors taken prior to such reversal or modification.
Section 6 – Finality of Corporation Action
Any action or proposed action of the Corporation as to which an Interested Person has theright to request a hearing shall be deemed final and effective (a) when the Interested Person
stipulates to the taking of such action by the Corporation, (b) upon the expiration of the applicabletime period provided in these Rules for the filing of a written request for a hearing or a written
statement pursuant to Section 1 of this Rule, or (c) if a hearing has been held pursuant to Section
3 of this Rule, when the Corporation gives notice to the Interested Person of the Panel’s decision.
Section 7 – Alternative Procedures
The Corporation may at any time establish procedures for a hearing not otherwise provided
for by these Rules with respect to any action or proposed action of the Corporation.

265

RULE 38 – GOVERNING LAW AND CAPTIONS
Section 1 – Governing Law
These Rules, and all agreements and other documents entered into between a Member,Sponsoring Member, Sponsored Member, CCIT Member or Funds-Only Settling Bank Member
and the Corporation, or otherwise delivered to or by the Corporation pursuant to these Rules, andthe rights and obligations thereunder, shall be governed by, and construed in accordance with, thelaws of the State of New York applicable to contracts executed and performed therein, unlessotherwise expressly provided.
Section 2 – Captions
Captions to any Rules are for information and guidance only, are not part of any Rule andare to be given no consideration in applying or construing any Rules.

266

RULE 39 – LIMITATIONS OF LIABILITY
Section 1 – Reliance of the Corporation upon Instructions Containing Errors
The Corporation may accept or rely upon any information or instruction given to the
Corporation by a Member including wire transmission, physical delivery or delivery by othermeans of information or instructions recorded on magnetic tape or other media or of facsimile
copies of information or instructions, in a form acceptable to the Corporation and in accordancewith the Rules, which reasonably is understood by the Corporation to have been delivered to the
Corporation by the Member.
The Corporation may accept and rely upon any information or instruction given to the
Corporation by a Member, a Demand Trade Source, a Locked-In-Trade Source or a Designee on
behalf of another Member (each hereinafter referred to as the “Agent”), including wiretransmission, physical delivery or delivery by other means of information or instructions, in a form
acceptable to the Corporation and in accordance with the Rules, which reasonably is understoodby the Corporation to have been delivered to the Corporation by the Agent, and the Corporation
shall be entitled to act pursuant to any such information or instruction as though such information
or instruction had been received from the Member for which the Agent is acting.
Any Member delivering information or instructions as provided above, or on whose behalf
an Agent shall deliver information or instructions as provided above, even though they may beinaccurate or not authentic, shall indemnify the Corporation, and any of its employees, officers,
directors, shareholders, agents, Members, who may sustain any loss, liability or expense as a resultof (a) any act done in reliance upon the authenticity of any information or instruction received by
the Corporation, (b) the inaccuracy of the information contained therein or (c) effecting
transactions in reliance upon such information or instruction, against any such loss, liability or
expense.
Notwithstanding the foregoing, the Corporation will not act upon any such information or
instruction purporting to have been given by a Member or an Agent commencing no later than one
Business Day after the Corporation receives written notice from the Member that the Corporation
shall not accept such information or instructions until no later than one Business Day after theMember shall withdraw such notice.
Section 2 – Limitation on Liability of the Corporation for the Obligations of Affiliated Entities(a)Notwithstanding any affiliation between the Corporation and any other entity,
including another clearing agency, except as otherwise expressly provided by written agreement
between the Corporation and such other entity:(i)the Corporation shall not be liable for any obligations of such other entity
nor shall any fund or any other assets of the Corporation be available to such other entity(or any person claiming through such other entity) for any purpose, and no Member shallassert against the Corporation any claim based upon any obligations of any other entity tosuch Member; and

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(ii)
such other entity shall not be liable for any obligations of the Corporation
nor shall any fund or any other assets of such other entity be available to the Corporation(or any person claiming through the Corporation) for any purpose, and no Member shallassert against such other entity any claim based upon any obligations of the Corporation tosuch Member.
(b)
Notwithstanding the Corporation being the owner of both the Government
Securities Division and the Mortgage-Backed Securities Division:(i)the Government Securities Division shall not be liable for any obligationsof the Mortgage-Backed Securities Division nor shall the Clearing Fund or other assets of
the Government Securities Division be available to the Mortgage-Backed Securities
Division or any Mortgage-Backed Securities Division Participant for any purpose, and noMortgage-Backed Securities Division Participant shall assert against the Government
Securities Division any claim based upon any obligations of the Mortgage-Backed
Securities Division to such Mortgage-Backed Securities Division Participant; and(ii)
the Mortgage-Backed Securities Division shall not be liable for any
obligations of the Government Securities Division nor shall any participants fund, user
fund or other assets of the Mortgage-Backed Securities Division be available to theGovernment Securities Division or any Member for any purpose, and no Member shallassert against the Mortgage-Backed Securities Division any claim based upon the
obligations of the Government Securities Division to such Member(c)the Corporation may discipline a Member for a violation of this Section 2 of Rule
39 in accordance with Rule 48.
Section 3 – Limitation on Liability of the Corporation
Notwithstanding any other provision in the Rules:(a)
The Corporation will not be liable for any action taken, or any delay or failure to
take any action, hereunder or otherwise to fulfill the Corporation’s obligations to its Members,
other than for losses caused directly by the Corporation’s gross negligence, willful misconduct, or
violation of Federal securities laws for which there is a private right of action. Under nocircumstances will the Corporation be liable for the acts, delays, omissions, bankruptcy, or
insolvency, of any third party, including, without limitation, any depository, custodian, subcustodian, clearing or settlement system, transfer agent, registrar, data communication service ordelivery service (“Third Party”), unless the Corporation was grossly negligent, engaged in willful
misconduct, or in violation of Federal securities laws for which there is a private right of action in
selecting such Third Party; and(b)
Under no circumstances will the Corporation be liable for any indirect,
consequential, incidental, special, punitive or exemplary loss or damage (including, but not limited
to, loss of business, loss of profits, trading losses, loss of opportunity and loss of use) howsoever
suffered or incurred, regardless of whether the Corporation has been advised of the possibility ofsuch damages or whether such damages otherwise could have been foreseen or prevented.

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RULE 40 – GENERAL PROVISIONS
Section 1
Every Member shall appoint a representative of the Member that is duly authorized in thename of and on behalf of the Member to sign all instruments, to correct errors and to perform suchother duties as may be required under these Rules and to transact all business requisite inconnection with the operations of the Corporation which representative shall be capable of taking
such action in a manner consistent with the daily time schedules and other requirements establishedby or pursuant to these Rules.
Each Member shall be allotted a number which must appear on the face of all forms usedby it in connection with the operations of the Corporation.
Section 2
A Member may appoint one or more persons as its agent(s) with respect to all contracts ortransactions compared through or by the Corporation and all matters relating thereto, provided thatsuch appointment has been consented to by the Corporation and is evidenced by suchappointments, authorizations, certifications and other agreements in such form as may be requiredby the Corporation.
Section 3
The Corporation may, in its discretion, require Members to provide appropriate staff intheir offices during specified hours on non-Business Days when such is deemed necessary by the
Corporation to ensure the integrity of its systems and/or for the protection of the Corporation.

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RULE 41 – CROSS GUARANTY AGREEMENTS
Section 1 – Authority
The Corporation may, from time to time, enter into one or more Limited Cross-Guaranty
Agreements.
In determining its available net resources pursuant to a Limited Cross-Guaranty
Agreement, the Corporation shall first offset the available net resources of the Government
Securities Division the Mortgage-Backed Securities Division.
Section 2 – Cross-Guaranty Defaulting Member Obligations
In addition to a Member’s other obligations to the Corporation under these Rules, a CrossGuaranty Defaulting Member on account of which the Corporation has made a Cross-Guaranty
Payment shall be obligated to the Corporation for the amount of such Cross-Guaranty Payment
less the amount of any Cross-Guaranty Repayment received by the Corporation in respect thereof.
Section 3 – Application of Cross-Guaranty Payments
The Corporation shall, in its sole discretion, either:(a)apply any Cross-Guaranty Payment received by the Corporation on account of a
Cross-Guaranty Defaulting Member: (1) to the unpaid obligations of such Cross-Guaranty
Defaulting Member to the Corporation and (2) to reduce the assessments made or that otherwise
would be made against other Netting Members (each, a “Cross-Guaranty Beneficiary Member”)
pursuant to Section 7 of Rule 4; or(b)retain any Cross-Guaranty Payment received by the Corporation and not apply such
Cross-Guaranty Payment to reduce any assessments against other Netting Members pursuant to
Section 7 of Rule 4 until the Corporation determines that the Corporation is no longer liable for
any Cross-Guaranty Repayment, at which point the Cross-Guaranty Payment shall be treated as
an amount that has been recovered pursuant to Section 7 of Rule 4.
Section 4 – Cross-Guaranty Repayment Deposits
Unless and to the extent the Corporation otherwise determines, (a) in addition to the otherdeposits to the Clearing Fund, a Cross-Guaranty Beneficiary Member shall be required to make adeposit to the Clearing Fund (a “Cross-Guaranty Repayment Deposit”) in an amount equal to theamount of the reduction in the assessment made or that otherwise would have been made against
such Cross-Guaranty Beneficiary Member if the Corporation had not received a Cross-Guaranty
Payment on account of a Cross-Guaranty Defaulting Member and (b) such Cross-Guaranty
Repayment Deposit shall be maintained by such Cross-Guaranty Beneficiary Member for so longas the Corporation determines that the Corporation may be liable for a Cross-Guaranty Repayment
and that such Cross-Guaranty Beneficiary Member may therefore be liable to the Corporation
pursuant to Section 5 of this Rule.

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In the event that the Corporation is required to make a Cross-Guaranty Repayment and it
does not have a sufficient amount of Cross-Guaranty Repayment Deposits to cover the liability,
the Corporation shall treat the shortfall as a loss incurred as a result of a Defaulting Member Eventto be allocated pursuant to Section 7 of Rule 4.
Section 5 – Cross-Guaranty Beneficiary Member Obligations
Unless and to the extent the Corporation otherwise determines, (a) if the Corporation makesa Cross-Guaranty Repayment in respect of any Cross-Guaranty Payment, the appropriate CrossGuaranty Beneficiary Members shall be obligated to reimburse the Corporation for such CrossGuaranty Repayment pro rata their Cross-Guaranty Repayment Deposits up to the full amount ofsuch Cross-Guaranty Repayment Deposits, and (b) the Corporation shall be entitled to apply thedeposits of such Cross-Guaranty Beneficiary Members to the Clearing Fund in satisfaction of suchobligation to reimburse the Corporation.

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RULE 42 – SUSPENSION OF RULES
The time fixed by these Rules, the Procedures or any regulations issued by the Corporation
for the doing of any act or acts may be extended or the doing of any act or acts required by theseRules, the Procedures or any regulations issued by the Corporation may be waived or any provisionof these Rules, the Procedures or any regulations issued by the Corporation may be suspended by
the Board of Directors or by any Officer of the Corporation having a rank of Managing Director
or higher whenever, in its or his judgment, such extension, waiver or suspension is necessary or
expedient.
A written report of any such extension, waiver or suspension (other than an extension oftime of less than eight hours), stating the pertinent facts, the identity of the person or persons who
authorized such extension, waiver or suspension and the reason such extension, waiver orsuspension was deemed necessary or expedient, shall be promptly made and filed with the
Corporation’s records and shall be available for inspection by any Member during regular businesshours on business days. Any such extension or waiver may continue in effect after the event or
events giving rise thereto but shall not continue in effect for more than 60 calendar days after thedate thereof unless it shall be approved by the Board of Directors within such period of 60 calendar
days.

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RULE 43 – CROSS-MARGINING ARRANGEMENTS
Section 1 – General
The Corporation may establish Cross-Margining Arrangements with one or more FCOs
pursuant to which a Cross-Margining Participant may, at the discretion of the Corporation and inaccordance with the provisions of the Rules, elect to have its Required Fund Deposit in respect ofEligible Positions at the Corporation and its (or its Cross-Margining Affiliate’s, if applicable)
margin requirement in respect of Eligible Positions at such FCO(s) calculated by taking into
consideration the net risk of such Eligible Positions at each such clearing organization.
The following provisions of this Rule shall be applicable to any such Cross-Margining
Participant, and such Cross-Margining Participant shall also be bound by the provisions of theapplicable Cross-Margining Agreement(s), which shall be deemed to be Rules.
Section 2 – Agreement to Become a Cross-Margining Participant(a)
A Netting Member that is a member of one or more FCOs may become a CrossMargining Participant in a Cross-Margining Arrangement between the Corporation and one ormore FCOs with the consent of the Corporation and each such FCO. A Netting Member shallbecome a Cross-Margining Participant upon acceptance by the Corporation and each applicable
FCO of an agreement executed by such Cross-Margining Participant in the form specified in theapplicable Cross-Margining Agreement(s) and shall be permitted to establish a Market
Professional Cross-Margining Account upon acceptance by the Corporation and each applicable
FCO of an agreement executed by such Cross-Margining Participant in the form specified in theapplicable Cross-Margining Agreement.
(b)
A Netting Member having an affiliate that is a member of one or more FCOs may
become a Cross-Margining Participant, and its affiliate may become a Cross-Margining Affiliate
in a Cross-Margining Arrangement between the Corporation and one or more such FCOs with theconsent of the Corporation and each such FCO. A Netting Member shall become a CrossMargining Participant and its affiliate shall become a Cross-Margining Affiliate, upon acceptanceby the Corporation and each applicable FCO of an agreement executed by such Cross-Margining
Participant and its Cross-Margining Affiliate in the form specified in the applicable CrossMargining Agreement and shall be permitted to establish a Market Professional Cross-Margining
Account upon acceptance by the Corporation and each applicable FCO of an agreement executedby such Cross-Margining Participant and its Cross-Margining Affiliate in the form specified in theapplicable Cross-Margining Agreement.
Section 3 – Cross-Margining Guaranty and Reimbursement Obligation
In the event that the Corporation becomes obligated to make a payment to an FCO under
the Corporation’s Cross-Margining Guaranty of the obligations of a Cross-Margining Participant
or its Cross-Margining Affiliate, the Cross-Margining Participant shall thereupon immediately beobligated, whether or not the Corporation has then made payment to FCO, to pay to the
Corporation the amount of the “Reimbursement Obligation” as specified in the applicable CrossMargining Agreement.
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Section 4 – Insolvency - Allocation of Loss
A Cross-Margining Participant may be treated as insolvent at the discretion of the
Corporation in the event that: (i) such Cross-Margining Participant is determined to be insolvent
by an FCO, or (ii) the Cross-Margining Affiliate of a Cross-Margining Participant is deemed to be
insolvent by an FCO and such Cross-Margining Participant does not immediately upon demandby the Corporation deposit with the Corporation an amount in cash or Eligible Netting Securities
equal to the then current Cross-Margining Guaranty of the Corporation to such FCO in respect ofsuch Cross-Margining Affiliate’s obligations to the FCO.
Section 5 – Application of Cross-Margining Payments
The Corporation shall, in its sole discretion either:(a)apply any Cross-Margining Payments received by the Corporation on account of a
Cross-Margining Participant (1) to the unpaid obligations of such Cross-Margining Participant to
the Corporation and (2) to reduce the assessments made or that otherwise would be made against
other Netting Members (each a “Cross-Margining Beneficiary Participant”) pursuant to Section 7of Rule 4; or(b)retain any Cross-Margining Payment and not apply such payment to reduce any
assessments against other Netting Members pursuant to Rule 4 for so long as the Corporation
determines that the Corporation is no longer liable for any Cross-Margining Repayment, at which
point the Cross-Margining Payment shall be treated as an amount that has been recovered pursuant
to Rule 4.
Section 6 – Cross-Margining Repayment Deposits
Unless and to the extent the Corporation otherwise determines, (a) in addition to the otherdeposits to the Clearing Fund, a Cross-Margining Beneficiary Participant shall be required to makea deposit to the Clearing Fund (a “Cross-Margining Repayment Deposit”) in an amount equal tothe amount of the reduction in the assessment made or that otherwise would have been madeagainst such Cross-Margining Beneficiary Participant if the Corporation had not received a CrossMargining Payment on account of a Cross-Margining Participant and (b) such Cross-Margining
Repayment Deposit shall be maintained by such Cross-Margining Beneficiary Participant for solong as the Corporation determines that the Corporation may be liable for a Cross-Margining
Repayment and that such Cross-Margining Beneficiary Participant may therefore be liable to the
Corporation pursuant to Section 7 of this Rule.
In the event that the Corporation is required to make a Cross-Margining Repayment and it
does not have a sufficient amount of Cross-Margining Repayment Deposits to cover the liability,
the Corporation shall treat the shortfall as a loss incurred as a result of a Defaulting Member Eventto be allocated pursuant to Section 7 of Rule 4.

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Section 7 – Cross-Margining Beneficiary Participant Obligations
Unless and to the extent the Corporation otherwise determines, (a) if the Corporation makesa Cross-Margining Repayment in respect of any Cross-Margining Payment, the appropriate CrossMargining Beneficiary Participants shall be obligated to reimburse the Corporation for such CrossMargining Repayment pro rata their Cross-Margining Repayment Deposits up to the full amountof such Cross-Margining Repayment Deposits, and (b) the Corporation shall be entitled to apply
the deposits of such Cross-Margining Beneficiary Participants to the Clearing Fund in satisfactionof such obligation to reimburse the Corporation.

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RULE 44 – ACTION BY THE CORPORATION
Where action by the Board of Directors is required by these Rules, the Corporation may
act, to the full extent permitted by law, by the Chairman of the Board, the President or any ofManaging Director or Executive Director or by such other Person or Persons, whether or not
employed by the Corporation as may be designated by the Board of Directors from time to time.

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RULE 45 – NOTICES
Section 1 – Notice to an Interested Person
Any notice pursuant to these Rules from the Corporation to an Interested Person shall be
sufficiently served on such Interested Person if the notice is in writing, and is mailed to theInterested Person’s office address, is sent via electronic mail to the Interested Person’s electronic
mail address or is transmitted by facsimile machine to a facsimile machine located either in theInterested Person’s office or elsewhere as designated by such Interested Person. Any notice to an
Interested Person, if mailed, shall be deemed to have been given when deposited in the UnitedStates Postal Service, with postage thereon prepaid, directed to the Interested Person at its officeaddress, and if sent via electronic mail, shall be deemed given when routed to the electronic mailaddress of the Interested Person. Any notice to an Interested Person, if transmitted by facsimile
machine as provided above, shall be deemed to have been given when such transmission is verified
on the facsimile machine of the Corporation as having been transmitted.
Notwithstanding anything in these Rules to the contrary, the Corporation may distributenotices to all Interested Persons by posting such notices on the Corporation’s website. The
Corporation shall deem a notice sufficiently served once such notice is successfully posted to thewebsite, and it is the responsibility of the Interested Persons to retrieve notices daily from the
Corporation’s website.
Section 2 – Notice to the Corporation
Any notice from an Interested Person to the Corporation shall be sufficiently served on the
Corporation if the notice is in writing and is delivered or mailed to the Corporation at its principal
place of business, Attention: Secretary, or such other place as it designates, with a copy of thenotice sent by electronic mail to the General Counsel’s Office of the Corporation at
gcocontractnotices@dtcc.com. Any such notice to the Corporation shall be deemed to have been
given when received.
Section 3 – Notice by the Corporation of Certain Actions
Any notice required to be given by the Corporation pursuant to Rule 21, Rule 22 or Rule
48 shall set forth the specific grounds under consideration upon which any action taken by the
Corporation pursuant to such Rule or Rules may be based and shall contain notice to the Member
of its right to request a hearing, such request to be filed by such Member with the Corporation
pursuant to Rule 37.

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RULE 46 – INTERPRETATION OF TERMS
Notwithstanding the use of words such as “borrow”, “collateral”, “lend”, “purchase”,“secure”, and “sell”, and other words derived from those words, which reflect terminology
commonly used in the market for transactions of the kind processed by the Corporation under theseRules, the use of such words in these Rules, or in agreements entered into by the Corporation withMembers pursuant to these Rules, shall not be deemed to affect the intent of the Members as totheir characterization of such transactions in agreements entered into by the Members with one
another or with third parties in respect of such transactions.

278

RULE 47 – INTERPRETATION OF RULES
The Board of Directors of the Corporation or their designee(s) shall have the authority tointerpret the Rules of the Corporation. Interpretations of the Board of Directors or their designee(s)shall be final and conclusive.

279

RULE 48 – DISCIPLINARY PROCEEDINGS
Section 1 – General
The Corporation may discipline any Member for a violation of any provision of the Rulesof the Corporation or such Member’s agreements with the Corporation, for any error, delay orother conduct that constitutes an abuse or misuse of the Corporation’s processes or otherwise isdetrimental to the operations of the Corporation, or for not providing adequate facilities for such
Member’s business with the Corporation, by termination of membership in either or both of theComparison System or the Netting System, ceasing to act for the Member, other limitation of or
restriction on activities, functions and operations, fine, censure or any other fitting sanction.
Section 2 – Role of the Board
The Board of Directors shall be responsible for overseeing the process of addressing rules
violations and other detrimental conduct. Management of the Corporation shall be responsible forpresenting to the Board actions of a Member or Members that, in their opinion, constitute a rules
violation or detrimental conduct, for that Committee’s determination as to what, if any,
disciplinary action is appropriate. Any such presentation shall be made as is practicable after theaction deemed by management to constitute a rules violation or detrimental conduct has occurred.
The imposition of any disciplinary action involving ceasing to act or termination ofmembership in either or both of the Comparison System or Netting System, shall require Board
approval.
Section 3 – Major and Minor Offenses
If the Board determines that a Member has committed a rules violation or an act of
detrimental conduct, it shall classify the act as either major or minor in nature. Major offenses
generally shall require a finding of either misconduct involving the funds or securities settlement
obligations of a Member pursuant to these Rules or a deliberate act of fraud or misconduct of a
Member. In addition, repeated offenses by a Member of a minor nature may cause the Member tobe deemed to have committed a major offense.
A Member committing a major offense may be subject to disciplinary action up to andincluding termination of its membership in the Comparison System or in both the Comparison
System and the Netting System. At a minimum, after a determination has been made by the Board
that a major offense has been committed by a Member, a letter shall be sent by the Corporation to
the Member informing it of its commission of offense and requiring that a written explanation beprovided to the Corporation as to why the offense occurred and the actions taken and/or to be takenby the Member to ensure that the offense will not reoccur. Representatives of the Member may
be required to appear before the Board to provide such explanation.
A Member committing a minor offense shall be subject to a fine or other disciplinary
action, except for ceasing to act or termination of membership. Moreover, after a determination
has been made by the Board that a minor offense has been committed by a Member, a letter shallbe sent to the Member informing it of its commission of the offense.

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Section 4 – Notification to a Member
Before imposing any disciplinary sanction on a Member pursuant to this Rule, theCorporation shall notify such Member pursuant to Rule 45 of the type of disciplinary sanction
being imposed, the reasons for the imposition of the disciplinary sanction (which shall include a
description of the action of the Member deemed to constitute a rules violation or detrimental
conduct), the effective date of such action, and its right to a hearing to contest the imposition of
the action. The Corporation may, in its discretion, take any disciplinary action authorized by theseRules against a Member immediately upon providing the notification to the Member required inthis Section.

281

RULE 49 – DTCC SHAREHOLDERS AGREEMENT
Section 1 – Certain Definitions
For purposes of this Rule 49:“DTCC” means The Depository Trust & Clearing Corporation, the holder of all of thecapital stock of the Corporation.
“Shareholders Agreement” means the Shareholders Agreement of DTCC, dated as ofNovember 4, 1999, as heretofore or hereafter amended and restated.
“Common Shares” has the meaning given to such term in the Shareholders Agreement.
“Mandatory Purchaser Participant” has the meaning given to such term in the Shareholders
Agreement.
“Voluntary Purchaser Participant” has the meaning given to such term in the Shareholders
Agreement.
Section 2 – Netting Members
As a condition to its use of the services and facilities of the Government Securities Divisionof the Corporation, a Netting Member (other than any central securities depository, Federal
Reserve bank, central counterparty, or Registered Investment Company) shall be required topurchase and own Common Shares in accordance with the terms of the Shareholders Agreement
and be a party to the Shareholders Agreement. For purposes of the Shareholders Agreement, aNetting Member (other than any central securities depository, Federal Reserve bank, central
counterparty, or Registered Investment Company) shall be a Mandatory Purchaser Participant.
Section 3 – Comparison-Only Members and Tier Two Members
A Comparison-Only Member (other than any central securities depository, Federal Reservebank, or central counterparty) and any Tier Two Member shall be permitted (but not required) topurchase and own Common Shares in accordance with the terms of the Shareholders Agreement
and be a party to the Shareholders Agreement. For purposes of the Shareholders Agreement, aComparison-Only Member (other than any central securities depository, Federal Reserve bank, or
central counterparty) and any Tier Two Member shall be a Voluntary Purchaser Participant. ∗∗Note that, if a Comparison-Only Member is also a member or participant of any other clearing agency subsidiaryof DTCC, such Comparison-Only Member may be a Mandatory Purchaser Participant pursuant to the terms of
the Shareholders Agreement and the rules or procedures of such other subsidiary. If a Sponsored Member is alsoa member or participant of any other clearing agency subsidiary of DTCC, such Sponsored Member may be a
Mandatory Purchaser Participant or a Voluntary Purchaser Participant pursuant to the terms of the Shareholders
Agreement and the rules and procedures of such other subsidiary.

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Section 4 – Sponsored Members
This Rule 49 shall have no application to a Sponsored Member.
Section 5 – Certain Other Matters
The Corporation shall execute and deliver the Shareholders Agreement as attorney in fact
for a Member that purchases Common Shares pursuant to Section 2 or Section 3 of this Rule 49 if
such Member is not already a party to the Shareholders Agreement. In addition, the Corporation
may on behalf of DTCC pursuant to the Shareholders Agreement, without duplication of payment,(A) debit a Member for any amount payable by the Member to DTCC for Common Sharespurchased by the Member and (B) credit a Member for any amount payable by DTCC to theMember for Common Shares sold by the Member.

283

RULE 50 – MARKET DISRUPTION AND FORCE MAJEURE
Section 1. Market Disruption Events
On the happening of any one or more of the events or circumstances set out below (each a“Market Disruption Event”) which, in any case, is likely to materially affect or has materiallyaffected the business, operations, safeguarding of securities or funds, or physical functions of the
Corporation, including performance by the Corporation of any obligations under the Rules andProcedures, the Corporation shall be entitled to take such action as is set out in this Rule 50:(a)a general suspension or limitation of trading on the New York Stock Exchange,
NASDAQ, or any other exchange or market relevant to the pricing or trading of securities cleared
and settled through the Corporation;(b)
York State;

the declaration of a trading or banking moratorium in the United States or New(c)any international organization, the government of any nation, state, or territory, or
any institution or agency thereof, or any self-regulatory organization taking action of a nature
likely to affect the normal course of business, including performance by the Corporation of
obligations under the Rules and Procedures;(d)the unavailability, failure, malfunction, overload, or restriction (whether partial or
total) of any payment, bank transfer or wire, or securities settlement system;(e)the unavailability, failure, malfunction, overload, or restriction (whether partial or
total) of any cash or securities depository, custodian or clearing bank, or any material variation ofsuch depository’s, custodian’s or clearing bank’s processing or turnaround times, whether or notoccasioned by action of such depository, custodian or clearing bank; or(f)any Force Majeure, which shall include (without limitation) any terrorist or othercriminal action, war or hostilities between any nations, national emergency, riot, civil unrest, actsof God or the public enemy, fire or other casualty, flood, accident, disaster (including any nuclear,atomic, environmental, or natural disaster), sabotage, bomb threat, labor dispute, embargo, theunavailability, failure, malfunction, or restriction of communication, computer, or data processing
systems or facilities, or of software or technology, cyber attack, lack of transportation facilities,
interruption (whether partial or total) of power supplies or other utility or service, or any event,situation, or circumstance beyond the reasonable control of the parties (whether or not similar toany of the foregoing), including those imminent or threatened.
Section 2. Powers of the Corporation
If the Board of Directors or any officer of the Corporation listed below determines, in its,
his, or her judgment that there is a Market Disruption Event, the Corporation shall be entitled toact (or refrain from acting) as prescribed in Section 3 of this Rule 50. To the extent practicable,
the determination of the existence of a Market Disruption Event, and the actions to be taken in284

response thereto, shall be made by the Board of Directors at a meeting where a quorum is present
and acting. However, if the Corporation is unable to convene a Board meeting promptly and timely
in such event, then such determination may be made by either the Chief Executive Officer, theChief Financial Officer, the Group Chief Risk Officer, the Chief Information Officer, the Head ofClearing Agency Services, or the General Counsel, or by any management committee on which
all of the foregoing officers serves (an “Officer Market Disruption Event Action”), provided that
the Corporation shall convene a Board meeting as soon as practicable thereafter (and in any event
within 5 Business Days following such determination) to ratify, modify or rescind such Officer
Market Disruption Event Action.
Section 3. Authority to take Actions
Upon the determination that there is a Market Disruption Event, the Corporation shall beentitled, during the pendency of such Market Disruption Event, to:(a)suspend the provision of any or all services of the Corporation; and(b)take, or refrain from taking, or require Members (whether or not they are affectedby the Market Disruption Event) to take or refrain from taking, any and all action which the
Corporation considers appropriate to prevent, address, correct, mitigate or alleviate the event andfacilitate the continuation of services as may be practicable, and, in that context, issue instructions
to Members.
Section 4. Notifications
4.1

Each Member shall notify the Corporation immediately upon becoming aware of
any Market Disruption Event.

4.2

The Corporation shall promptly notify Members of any action the Corporation takes
or intends to take pursuant to Section 3 of this Rule 50.

4.3

The Corporation shall attempt to consult with officials of the SEC prior to the
Corporation taking any action pursuant to Section 3 of this Rule 50; provided,
however, that the authority contained herein shall not be conditioned by suchconsultation.

The Corporation shall advise the SEC as soon as practicable by telephone, and confirmedin writing, of any action taken by the Corporation pursuant to Section 3 of this Rule 50, and arecord of such writing shall be promptly made and filed with the Corporation’s records and shallbe available for inspection by any Member during regular business hours on Business Days.
The Corporation shall also advise the SEC as soon as practicable by telephone, andconfirmed in writing, at such time it determines that there is no longer a Market Disruption Eventand the Corporation terminates the actions taken by the Corporation pursuant to Section 3 of thisRule 50. A record of such writing shall be promptly made and filed with the Corporation’s records

285

and shall be available for inspection by any Member during regular business hours on Business
Days.
Section 5. Certain Miscellaneous Matters(a)Without limiting any other provisions in the Rules and Procedures concerning
limitations on liability, none of the Corporation, its directors, officers, employees, agents, orcontractors shall be liable to a Member or any other person (including any customer or client
thereof) for:(i)

any failure, hindrance, interruption or delay in performance in whole or inpart of the obligations of the Corporation under the Rules or Procedures, if
that failure, hindrance, interruption or delay arises out of or relates to aMarket Disruption Event; or(ii)

any loss, liability, damage, cost or expense arising from or relating in any
way to any actions taken, or omitted to be taken, pursuant to this Rule 50.

(b)
The power of the Corporation to take any action pursuant to this Rule 50 also
includes the power to repeal, rescind, revoke, amend, or vary any such action.
(c)
The powers of the Corporation pursuant to this Rule 50 shall be in addition to, andnot in derogation of, authority granted elsewhere in the Rules and Procedures to take action as
specified therein.
(d)
In the event of any conflict between the provisions of this Rule 50 and any otherRules or Procedures, the provisions of this Rule 50 shall prevail.

286

RULE 50A – SYSTEMS DISCONNECT: THREAT OFSIGNIFICANT IMPACT TO THE CORPORATION’S SYSTEMS
Section 1 – Major Event
For purposes of this Rule, the following terms shall have the following meanings:“DTCC Systems” means the systems, equipment and technology networks of DTCC, theCorporation and/or their Affiliates, whether owned, leased, or licensed, software, devices, IP
addresses or other addresses or accounts used in connection with providing the services set forthin the Rules or used to transact business or to manage the connection with the Corporation.
“DTCC Systems Participant” shall mean a Member, or third party service provider, orservice bureau that is connecting with the DTCC Systems.
“Major Event” shall mean the happening of one or more Systems Disruption(s) that isreasonably likely to have a significant impact on the Corporation’s operations, including the DTCC
Systems, that affect the business, operations, safeguarding of securities or funds, or physicalfunctions of the Corporation, Members and/or other market participants.
“Systems Disruption” shall mean the unavailability, failure, malfunction, overload, or
restriction (whether partial or total) of a DTCC Systems Participant’s systems that disrupts ordegrades the normal operation of such DTCC Systems Participant’s systems; or anything that
impacts or alters the normal communication, or the files that are received, or informationtransmitted, to or from the DTCC Systems.
Section 2 – Powers of the Corporation
The determination that the Corporation has a reasonable basis to conclude that there has
been a Major Event and shall be entitled to act (or refrain from acting) as prescribed in Section 3of this Rule 50A may be made by either the Chief Executive Officer, the Chief Financial Officer,
the Group Chief Risk Officer, the Chief Information Officer, the Head of Clearing Agency
Services or the General Counsel (an “Officer Major Event Action”). As soon as practical following
such a decision, any management committee on which all of the foregoing officers serve shallconvene, and the Corporation shall convene a Board of Directors meeting as soon as practicable
thereafter (and in any event within 5 Business Days following such determination), in each case,to ratify, modify or rescind such Officer Major Event Action.
Section 3 – Authority to take Actions
Upon the determination that there is a Major Event, the Corporation shall be entitled,during the pendency of such Major Event, to:(a)disconnect the DTCC Systems Participant’s system from the DTCC Systems;(b)suspend the receipt and/or transmission of files or communications to/from the
DTCC Systems Participant to the DTCC Systems; or

287

(c)
take, or refrain from taking, or require the DTCC Systems Participant to take or
refrain from taking, any and all action that the Corporation considers appropriate to prevent,address, correct, mitigate or alleviate the Major Event and facilitate the continuation of services as
may be practicable, and, in that context, issue instructions to the DTCC Systems Participant.
Section 4 – Notifications(a)Each Member shall notify the Corporation immediately upon becoming aware of
any Major Event and cooperate with the Corporation to identify the root cause and resolution.
(b)
The Corporation shall promptly notify the DTCC Systems Participant(s) of any
action the Corporation takes or intends to take with respect to such DTCC Systems Participant(s)pursuant to Section 3 of this Rule 50A.
Section 5 – Certain Miscellaneous Matters(a)Without limiting any other provisions in these Rules concerning limitations on
liability, none of the Corporation or its Affiliates, its or their directors, officers, employees, agents,
or contractors shall be liable to a Member or any other person (including any third party provider
or service bureau acting on behalf of the Member or any customer or client thereof) for:(i)

any failure, hindrance, interruption or delay in performance in whole or inpart of the obligations of the Corporation under the Rules or Procedures, if
that failure, hindrance, interruption or delay arises out of or relates to a
Major Event; or(ii)

any loss, liability, damage, cost or expense arising from or relating in any
way to any actions taken, or omitted to be taken, pursuant to this Rule 50A.

(b)
The power of the Corporation to take any action pursuant to this Rule 50A also
includes the power to repeal, rescind, revoke, amend, or vary any such action.
(c)
The powers of the Corporation pursuant to this Rule 50A shall be in addition to,and not in derogation of, authority granted elsewhere in these Rules to take action as specified
therein.
(d)
The Members(s) shall, in accordance with the Rules, maintain the confidentialityof any DTCC Confidential Information provided to them by the Corporation and/or DTCC inconnection with a Major Event.
(e)
In the event of any conflict between the provisions of this Rule 50A and any otherRules or Procedures, the provisions of this Rule 50A shall prevail.

288

SCHEDULE OF TIMEFRAMES*(all times are New York City times)

8:00 p.m.

Deadline for final input by Members to FICC of trade data.

2:00 a.m.

Time by which FICC’s comparison, netting, and settlement output is madeavailable to Members.

7:00 a.m.

The Corporation begins processing trade data for the current Business Day.

7:05 a.m.

Time by which the Corporation’s margining output is made available to Netting
Members.

9:15 a.m.

Netting-eligible auction purchases are received by FICC from the Federal Reserve
Banks and are immediately redelivered to Netting Members in a Net Long Position.

9:30 a.m.

Deadline for satisfaction of a Clearing Fund deficiency call.

10:00 a.m.

Funds-only settlement debits and credits are executed via the Federal Reserve’s
National Settlement Service

11:00 a.m.

Deadline for submission of repo collateral substitution notifications, after which alate fee will be imposed. Such notification is not deemed to be submitted until it isreceived by FICC.

12:00 p.m.

Netting Member deadline to either (1) initiate request to receive back excess cash
or collateral from the A.M. Clearing Fund call, or (2) initiate request to substitutecurrently held Clearing Fund securities.

12:00 p.m.

All open positions and obligations will be recorded at this time and used in thecomputation of intraday Clearing Fund requirements, and intraday funds-only
settlement.

12:00 p.m.

First deadline for submission of information regarding New Securities Collateral,
after which a late fee will be imposed. Such information is not deemed to besubmitted until it is received by FICC.

12:30 p.m.

Second deadline for submission of information regarding New Securities
Collateral, after which such submissions will be processed by FICC on a good faithbasis only and a late fee imposed. Such information is not deemed to be submitted
until it is received by FICC.

*

All times may be extended as needed by the Corporation to (i) address operational or other delays that would
reasonably prevent members or the Corporation from meeting the deadline or timeframe, as applicable, or(ii) allow the Corporation time to operationally exercise its existing rights under these Rules. In addition, times
applicable to the Corporation are standards and not deadlines; actual processing times may vary slightly, as
necessary.

289

1:00 p.m.

Final deadline for submission of information regarding New Securities Collateral,
after which the Netting Member must resubmit its information for processing by
FICC during the following business day. Such information is not deemed to besubmitted until it is received by FICC.

2:00 p.m.

Time during which reports will be made available with respect to the intraday
Clearing Fund requirements, and intraday funds-only settlement.

2:15 p.m.

Netting Member deadline to initiate request in the Clearing Fund Management
system (CFM) to receive back excess Clearing Fund cash or collateral fromintraday call.

2:45 p.m.

Deadline for satisfaction of a Clearing Fund deficiency call (P.M. Clearing Fundcall).

4:00 p.m.

Brokered Repo Transactions submitted prior to 4:00 p.m. will be processed as
Demand Trades. After 4:00 p.m. such trades will be processed for BilateralComparison.

4:30 p.m.

Intraday funds-only settlement debits and credits are executed via the FRB’s
National Settlement Service.

4:30 p.m.

Deadline for submission of DK Notices by Repo Parties to Brokered Repo
Transactions submitted on a Demand basis prior to 4:00 p.m.

290

SCHEDULE OF GCF REPO TIMEFRAMES*(all times are New York City times)

7:00 a.m.

Netting Members must begin affirming or cancelling GCF Repo Transactions uponreceipt of data on such GCF Repo Transactions from the Corporation.

9:00 a.m.

Deadline for Netting Members to deliver additional securities or cash such thatvalue of such securities and cash equals or exceeds Collateral Allocation
Obligations from previous Business Day.

3:00 p.m.

Cutoff for GCF Repo Transaction data submission from GCF-Authorized InterDealer Brokers to FICC including dealer trade affirmation or cancellation – allunaffirmed trades automatically affirmed by FICC.

3:30 p.m.

Every Collateral Allocation Entitlement and Collateral Allocation Obligation thatwas established by the Corporation on the previous Business Day shall be nettedwith the current Business Day’s Collateral Allocation Obligation and/or Collateral
Allocation Entitlement; Netting Members shall have the obligation to settle suchnew net settlement amounts. Collateral allocations begin.

4:30 p.m.

Deadline for Netting Member allocation of collateral to satisfy obligations, after
which a late fee will be imposed and after which FICC shall process Collateral
Allocation Obligations on a good faith basis only. Deadline for Net Funds Payors
to satisfy their cash obligations, after which a late fee will be imposed.

*

All times may be extended as needed by the Corporation to (i) address operational or other delays that would
reasonably prevent members or the Corporation from meeting the deadline or timeframe, as applicable, or(ii) allow the Corporation time to operationally exercise its existing rights under these Rules. In addition, times
applicable to the Corporation are standards and not deadlines; actual processing times may vary slightly, as
necessary.

291

SCHEDULE OF SPONSORED GC TRADE TIMEFRAMES * ** ***(all times are New York City times)

10:30 p.m.
to 2:00 a.m.

Time during which reports will be made available with respect to the end of day
Clearing Fund requirements and funds-only settlement requirements.

9:00 a.m.

Deadline for the GC Funds Borrower to satisfy the obligation described in Section
8(b)(ii) of Rule 3A in accordance with the provisions of Section 8(b)(vi) of Rule
3A. The Corporation reserves the right to also require a GC Funds Borrower tosatisfy the obligation described in Section 8(b)(ii) on an intraday basis based on themarket value of the applicable GC Repo Securities as determined by the GC
Clearing Agent Bank in accordance with Section 8(b)(vii) of Rule 3A.

10:00 a.m.

Funds-only settlement debits and credits are executed via the Federal Reserve’s
National Settlement Service.

12:00 p.m.

Deadline for the GC Funds Borrower (or if the repo rate for the relevant SponsoredGC Trade is negative, the GC Funds Lender) to pay to the Corporation the accrued
GC Daily Repo Interest as described in Section 8(b)(iv) in accordance with theprovisions of Section 8(b)(vi) of Rule 3A (unless the End Leg of the related
Sponsored GC Trade is due to settle on the same day).

2:00 p.m.

Time during which reports will be made available with respect to the intraday
Clearing Fund requirements, and intraday funds-only settlement requirements.

4:30 p.m.

Intraday funds-only settlement debits and credits are executed via the Federal
Reserve’s National Settlement Service.

5:00 p.m.

Deadline for final input by Sponsoring Members to the Corporation of SponsoredGC Trade data.

5:30 p.m.

Deadline for (i) full settlement of the Start Leg of the Sponsored GC Trade inaccordance with Section 7(b)(ii)(C) of Rule 3A, (ii) substitutions of Purchased GC
Repo Securities in accordance with Section 8(b)(v) of Rule 3A, and (iii) satisfactionof GC Collateral Return Obligations and cash payment obligations associated withGC Collateral Return Entitlements by GC Funds Lenders and GC Funds Borrowers,
respectively, in accordance with Section 8(b)(i) of Rule 3A.

*

The time by which a GC Funds Lender is required to deliver any securities to a GC Funds Borrower in connection
with Section 8(b)(iii) of Rule 3A shall be determined by the relevant Sponsored GC Clearing Agent Bank.

**All times may be extended as needed by the Corporation to (i) address operational or other delays that would
reasonably prevent members or the Corporation from meeting the deadline or timeframe, as applicable, or(ii) allow the Corporation time to operationally exercise its existing rights under these Rules. In addition, times
applicable to the Corporation are standards and not deadlines; actual processing times may vary slightly, as
necessary.

***

Any accrued GC Daily Repo Interest that is due on the settlement day of the End Leg of the related SponsoredGC Trade shall be paid in connection with the settlement of the End Leg.

292

SCHEDULE FOR THE DELETION OF TRADE DATA
Trade data on transactions other than Repo Transactions that remain uncompared shallpend in the Comparison System until the later of: (a) for trades in new issues and re-issues, theissue date or re-issue date for such trades, or (b) the processing cycle after the second BusinessDay after the date of submission of such data. Trade Data on Repo Transactions other thanSponsored GC Trades that remain uncompared shall pend in the Comparison System until the laterof: (a) the processing cycle after the second Business Day after the Repo Start Date, or (b) theprocessing cycle after the second Business Day after the date of submission of such data. Data on
trades (including Yield Comparison Trades) that are not eligible for netting that compare (prior tobeing deleted) are deleted during the same processing cycle during which such comparison isreported to Members. Data on trades eligible for netting that compare shall pend until (and shallbe deleted during) the processing cycle prior to the Scheduled Settlement Date for such trades.
Trade data on Sponsored GC Trades that remain uncompared on a given Business Day shall pendin the Comparison System until the Corporation’s deadline for final input by Sponsoring Membersof Sponsored GC Trade data (as provided in the Schedule of Sponsored GC Trade Timeframes)on such Business Day. Trade data on Sponsored GC Trades, which have been compared in the
Comparison System pursuant to Rule 6A but the Start Legs of which have not fully settled at aSponsored GC Clearing Agent Bank by the deadline set forth in the Corporation’s Schedule ofSponsored GC Trade Timeframes, shall be deleted from the Comparison System during the sameprocessing cycle as the Repo Start Date for such Sponsored GC Trades.
The timeframes for deletion of trade data that are set forth in this schedule may be changedby the Corporation upon the provision by it of 15 Business Days’ prior notice of such to all
Members.

293

SCHEDULE OF REQUIRED MATCH DATA
These Required Match Data items are applicable to all Transactions, including Repo
Transactions, except as otherwise noted below:(1)

Contra Member identifying number(2)

CUSIP Number(3)

Member’s identifying number(4)

Par amount (this is not applicable to General Collateral Repo Transactions)(5)

Settlement amount (final money) - if this field is left blank, the Corporation willcalculate the settlement amount using: (a) for Repo Transactions, the start
amount, the Contract Repo Rate, and the number of days from start date tosettlement date, and (b) for buy/sell transactions, the par value, price, and accrued
interest(6)

Settlement date - must contain a valid, settlement date

(7)

Transaction type - an indication of the type of transaction (i.e., buy, sell, repo, or
reverse)In addition, these Required Match Data items are applicable only to Repo Transactions:(8)

Start amount - the Contract Value for the start leg of the Repo Transaction(9)

Start date - the settlement date for the start leg of a Repo Transaction

This schedule does not apply to Netting-Eligible Auction Purchases, CCIT Transactionsand GCF Repo Transactions. Also, notwithstanding the above, the requirements of this scheduleare superseded by the provisions of Rule 10 to the extent that they are inconsistent with that Rule.

294

SCHEDULE OF REQUIRED DATA SUBMISSION ITEMSIn addition to the data items listed in the Schedule of Required Match Data, the following
data items are required, as indicated below, to be submitted by Members when they submit trade
data to the Corporation:(1)

Broker reference number - the reference number used by a Repo Broker submitting
data to uniquely identify the matching short and long sides of a Brokered
Transaction(2)

Contra Submitting Member’s executing firm - if this field is left blank, theCorporation will fill this field with the contra Submitting Member’s identifying
number(3)

Executing Firm - if this field is left blank, the Corporation will fill this field withthe submitting Member’s identifying number(4)External reference number - the reference number used by a Member submitting
data to uniquely identify the transaction(5)

Price (rate) - as regards Repo Transaction, the repo rate must be submitted in this
field

(6)

Pricing method - for buy/sell transactions, this field must be submitted with either
a “D” (discount), “P” (price), or “Y” (yield), while for Repo Transactions, thisfield must be submitted with an “R” (rate)(7)

Trade date – the date on which the trade was executed must be submitted in thisfieldThis schedule does not apply to Netting Eligible Auction Purchases and GCF Repo
Transactions, and items (1) and (2) above are not required for Sponsored Member Trades.

295

SCHEDULE OF REQUIRED AND ACCEPTEDDATA SUBMISSION ITEMS FOR A SUBSTITUTION
OF EXISTING SECURITIES COLLATERALIn addition to the data items required in the Schedules of Required Match Data andRequired Data Submission Items, the following data items are required to be received by the
Corporation as regards a Repo Transaction in order for the Corporation to process a substitution:(1)

the Specific CUSIP Number or Generic CUSIP Number for the Existing Securities
Collateral;(2)

the par amount;(3)

the principal value;(4)

Scheduled Settlement Date for the Start Leg of the Repo Transaction and Contract
Repo Rate;(5)

for Brokered Repo Transactions, the reverse repo rate; and(6)

counterparty to the Repo Transaction.

This schedule does not apply to Netting-Eligible Auction Purchases, GCF Repo
Transactions, CCIT Transactions and Sponsored GC Trades.

296

SCHEDULE OF REQUIRED AND ACCEPTED DATA SUBMISSIONITEMS FOR A SUBSTITUTION FOR NEW SECURITIES COLLATERALIn addition to the data items required in the Schedules of Required Match Data andRequired Data Submission Items, the following data items are required to be received by the
Corporation as regards a Repo Transaction in order for the Corporation to process a substitution:(1)

the Specific CUSIP Number or Generic CUSIP Number for the New Securities
Collateral;(2)

the par amount;(3)

the principal value;(4)

Scheduled Settlement Date for the Start Leg of the Repo Transaction and Contract
Repo Rate;(5)

for Brokered Repo Transactions, the reverse repo rate; and(6)

counterparty to the Repo Transaction.

This schedule does not apply to Netting-Eligible Auction Purchases, GCF Repo
Transactions, CCIT Transactions and Sponsored GC Trades.

297

SCHEDULE OF REQUIRED AND OTHER DATA SUBMISSION ITEMSFOR GCF REPO TRANSACTIONS
The following data items are required to be received by the Corporation from a GCFAuthorized Inter-Dealer Broker as regards a GCF Repo Transaction in order for such GCF Repo
Transaction to be compared by the Corporation:
Broker Reference Number – The GCF-Authorized Inter-Dealer Broker’s unique reference
number for the GCF Repo Transaction.
End Date - The settlement date for the End Leg.
Start Money – The Start Leg settlement amount.
Repo Rate – The underlying interest rate.
Broker’s Reverse Member ID – Member identifying number of the GCF Counterparty fromwhom the Broker is reversing in securities.
Broker’s Repo Member ID – Member identifying number of the GCF Counterparty towhom the Broker is repoing out securities.
CUSIP – The nine-digit Generic CUSIP Number.

The following fields will be automatically populated by the Corporation with default data,
which may be overridden by the GCF-Authorized Inter-Dealer Broker as required:
Trade Date – The current date will automatically populate this field.
Start Date – The current date will automatically populate this field.

The following fields will be automatically calculated and/or populated by the Corporation,and cannot be overridden by the GCF-Authorized Inter-Dealer Broker:
GSD TID – The Corporation’s unique transaction identifier, automatically assigned to a
new GCF Repo Transaction by the Corporation.
Final Money – The Corporation will automatically calculate the End Leg settlement money
for the GCF Repo Transaction using start money, rate and term (based on start date andend date).
Security Description – Automatically displayed by the Corporation based upon Generic
CUSIP Number submitted.

298

Broker’s Reverse Member Name – Automatically displayed by the Corporation based upon
the identification number entered in the “Broker’s Reverse Member ID” field.
Broker’s Repo Member Name – Automatically displayed by the Corporation based upon
the ID entered in the “Broker’s Repo Member ID” field.
Term – Total number of days that the GCF Repo Transaction is scheduled to beoutstanding, automatically calculated and displayed by the Corporation.
Interest – The total repo interest (i.e., the difference between the repo start and end money)
automatically calculated and displayed by the Corporation.
Accrued to Date – The repo interest accrued to date automatically calculated and displayedby the Corporation.

299

SCHEDULE OF MONEY TOLERANCES
The following Money Tolerances have been established by the Corporation:(1)

Settlement amount – $0.10 per $1 million for Repo Transactions (applicable in Real
Time) Notwithstanding this tolerance, any money difference of $1.00 or less inthe settlement amount of a trade will not prevent the trade from being matched.
Settlement amount – $2 per $1 million for buy/sell transactions (applicable in Real
Time)

(2)

Settlement amount – $40 per $1 million for buy-sell transactions (in connection
with the Corporation’s presumption of a match of data pursuant to Rule 10)(3)Start amount (applies only to Repo Transactions) – $1 per Repo Transaction

300

SCHEDULE OF GC COMPARABLE SECURITIES4567
Generic
Security
Type

TU10

TU30

GC RepoSecurity
Number84910LAB2

84910LAA4

Description

GC Comparable Securities

U.S. TREASURIES< 10 YR MATURITY

U.S. Treasury bills, notes andbonds 8 (including U.S. Treasury
floating rate notes) maturing in atime frame no greater than that of
the securities that have been traded

U.S. TREASURIES< 30 YR MATURITY

U.S. Treasury bills, notes andbonds (including U.S. Treasury
floating rate notes) maturing in atime frame no greater than that of
the securities that have been traded
Non-Mortgage Backed Securities
issued by:

AGCY

84910LAC0NON-MORTGAGE
BACKED U.S. AGENCYSECURITIES•Federal Farm Credit Banks•

Federal Home Loan Bank•

Federal Home Loan Mortgage
Corporation•

Federal National Mortgage
Association•

U.S. Treasury bills, notes andbonds (excluding U.S.
Treasury floating rate notes)

4

Please refer to the Sponsored GC Clearing Bank for details regarding the Fed “tickers” applicable to GC
Comparable Securities.

5

Government National Mortgage Association (“Ginnie Mae”) serial notes are not eligible as GC Comparable
Securities.

6

U.S. Agency Real Estate Mortgage Investment Conduits (“REMICs”) and U.S. Agency Collateralized Mortgage
Obligations (“CMOs”) are not eligible as GC Comparable Securities.

7

Eligible Securities with a maturity date of the next Business Day are not eligible as GC Comparable Securities.

8

For purposes of this Schedule, the references to U.S. Treasury bills, notes or bonds shall not include U.S. Treasury
inflation-protected securities (“TIPS”) or U.S. Treasury Separate Trading of Registered Interest and Principal
Securities (“STRIPS”).

301

Generic
SecurityType

GC RepoSecurity
NumberDescription
FEDERAL NATIONAL
MORTGAGEASSOCIATION(“FANNIE MAE”)

FFFIX

84910LAD8& FEDERAL HOME
LOAN MORTGAGE
CORPORATION(“FREDDIE MAC”)
FIXED RATE
MORTGAGE- BACKED
SECURITIESFANNIE MAE &FREDDIE MAC
FFARM

GNMA

GNARM

84910LAE6

84910LAF3

84910LAG1

ADJUSTABLE RATE
MORTGAGE-BACKED
SECURITIESGOVERNMENTNATIONAL MORTGAGE
ASSOCIATION(“GINNIE MAE”) FIXEDRATE MORTGAGEBACKED SECURITIESGINNIE MAE
ADJUSTABLE RATE
MORTGAGE-BACKED
SECURITIES302

GC Comparable Securities

Fannie Mae and Freddie Mac
Fixed Rate Mortgage-Backed
Securities
U.S. Treasury bills, notes andbonds (excluding U.S. Treasury
floating rate notes)

Fannie Mae and Freddie Mac
Fixed Rate and Adjustable Rate
Mortgage- Backed Securities
Ginnie Mae Fixed Rate andAdjustable Rate MortgageBacked Securities
U.S. Treasury bills, notes andbonds (excluding U.S. Treasury
floating rate notes)
Ginnie Mae Fixed Rate MortgageBacked Securities
U.S. Treasury bills, notes andbonds (excluding U.S. Treasury
floating rate notes)
Ginnie Mae Adjustable Rate andGinnie Mae Fixed Rate MortgageBacked Securities
U.S. Treasury bills, notes andbonds (excluding U.S. Treasury
floating rate notes)

Generic
Security
Type

TIPS

STRP

GC RepoSecurity
NumberDescription

84910LAH9

U.S. TREASURY
INFLATIONPROTECTEDSECURITIES (“TIPS”)

84910LAJ5

U.S. TREASURYSEPARATE TRADINGOF REGISTEREDINTEREST AND
PRINCIPAL OF
SECURITIES (“STRIPS”)

303

GC Comparable Securities
U.S. Treasury inflation- protected
notes and bonds
U.S. Treasury bills, notes, andbonds (excluding U.S. Treasury
floating rate notes)
U.S. Treasury STRIPS
U.S. Treasury bills, notes andbonds (excluding U.S. Treasury
floating rate notes)

FEE STRUCTURE*
I.

TRANSACTION FEES
A.

Transaction Processing

Upon submission of a side of a buy/sell transaction or a Repo Transaction, other than a
GCF Repo Transaction or a CCIT Transaction, Dealer Accounts will be charged a fee of $0.04 per
million par value for transaction processing, and Broker Accounts will be charged a fee of $0.02
per million par value for transaction processing.
A submission that is rejected by the Corporation because it failed to pass the necessary edit
checks other than valid contra side will not be charged the processing fee, but will be charged afee of $0.50 for the rejection.
The Corporation will charge an additional fee for modifications and cancellations as set
forth below in subsection C.
B.

Yield-to-Price Conversion

The charge for the conversion by the Corporation of a side of a buy/sell transaction from ayield basis to a price basis is $0.15 per such side.
C.

Modifications and Cancellations

The charge to a Member for the entry of a request to modify or cancel either a side of abuy/sell transaction or a Repo Transaction, other than a GCF Repo Transaction or a CCIT
Transaction, is $0.25 per such request.
D.

Coupon Pass-Through Fee

For each pass-through of a coupon payment, pursuant to these Rules, from a Member witha Net Short Settlement Position to a Member with a Net Long Settlement Position, a fee of $0.25
per such coupon movement per each member.
E.

Repo Collateral Substitution Fees

For Repo Transactions other than GCF Repo Transactions or CCIT Transactions, thecharge for the processing of a repo collateral substitution request is $0.75.

*

Fees stated to apply to CCIT Members shall be applied at the Joint Account level for CCIT Members participating
through a Joint Account.

304

F.

Auction Takedown Process

The fees for buy/sell transactions associated with the Auction Takedown Service will becharged in accordance with the “Transaction Processing” fees in Section I.A. and the “Position
Management Fees” in Section II.
G.

Locked-In Trade Data

Data received by the Corporation on a locked-in basis from a Locked-In Trade Source
related to a side of a buy/sell transaction entered into by a Member, or entered into by a NonMember that the Member is clearing for, shall result in the charges established by the “Transaction
Processing” fees in Section I.A. above. These fees are for the processing and reporting of LockedIn Trade data by the Corporation to the Member. This charge shall not apply to GCF Repo
Transactions or CCIT Transactions.
The charge to the GCF Counterparty to the GCF-Authorized Inter-Dealer Broker for theprocessing and reporting by the Corporation of a GCF Repo Transaction or a CCIT Transaction
entered into by the Member, or entered into by a Non-Member that the Member is clearing for, isa one-time recording fee of $0.07 per million gross dollar amount of such GCF Repo Transaction
or CCIT Transaction (with a minimum charge of $2.50). The charge to the GCF-Authorized InterDealer Broker for the processing and reporting by the Corporation of a GCF Repo Transaction isa one-time recording fee of $0.025 per million gross dollar amount of such GCF Repo Transaction(with a minimum charge of $1.25).
H.

CCIT Transactions Submitted for Bilateral Comparison

The charge to Netting Members and CCIT Members submitting CCIT Transactions on abilateral basis (and not on a Locked-In Trade basis) for the processing and reporting by the
Corporation of a CCIT Transaction is a one-time recording fee of $0.07 per million gross dollar
amount of such CCIT Transaction (with a minimum charge of $2.50).
II.

POSITION MANAGEMENT FEES
A.

Intraday Position Fee

An intraday position fee of $0.04 per million par value will be charged to a Member eachBusiness Day based on the largest gross position of the Member (including positions of any NonMember that the Member is clearing for) that Business Day. The gross position of a Member on
a Business Day is determined in 15-minute intervals between 9 a.m. and 4 p.m. on that BusinessDay by netting par value of all compared buy/sell transactions, Repo Transactions, and unsettled
obligations of the Member (and any Non-Members that the Member is clearing for) by CUSIP
Number and taking the sum of the absolute par value of each such CUSIP Number. This fee shallnot apply to GCF Repo Transactions or CCIT Transactions.
B.

End of Day Position Fee

An end of day position fee of $0.105 per million par value will be charged to a Member
each Business Day based on the end of day gross position of the Member (including positions of305

any Non-Member that the Member is clearing for) that Business Day. The end of day grossposition of a Member on a Business Day is determined by netting par value of all comparedbuy/sell transactions, Repo Transactions, and unsettled obligations of the Member (and any NonMember that the Member is clearing for) at the end of the Business Day by CUSIP Number andtaking the sum of the absolute par value of each such CUSIP Number. This fee shall not apply to
GCF Repo Transactions or CCIT Transactions.
III.

[RESERVED]IV.

OTHER CHARGES (in addition to the transaction fee)A.

Financing Charges **1.

No charges for Repo Brokers acting in a Broker capacity.

2.
For each other Netting Member, a pass-through charge calculated on apercentage of the total of all such costs incurred by the Corporation, (including any
reimbursements made pursuant to subsection (4) below), allocated by product, whichpercentage is calculated as follows:
Total dollar value of deliver and receive obligationsof such Netting Member in such product____________________________________________________________
Total dollar value of deliver and receive obligations of all Netting Members(other than Inter-Dealer Broker Netting Members acting in a Broker capacity)in such product3.
Notwithstanding the above, if, after providing to a Netting Member
appropriate notice and opportunity to be heard, the Corporation determines that such
Netting Member has, on a recurring basis and without good cause, caused the Corporation
to incur financing costs, such Member will be obligated to pay for the entire amount of any
financing costs incurred by the Corporation as the result of deliveries by such Member tothe Corporation.
4.
As stated in Rule 12, if the Corporation, as the result of a violation of theRules by a Netting Member, incurs financing costs, the Netting Member shall be obligatedto pay for, or reimburse the Corporation for, the entire amount of any such costs.
5.
Notwithstanding anything to the contrary above, the Corporation may pay
for directly, or reimburse, a Repo Broker for overnight financing costs that the Repo Broker
has incurred related to the settlement of a Start Leg outside of the Netting System, up to adollar amount deemed reasonable by the Corporation, if the Corporation determines, in its
sole discretion, that such financing costs were incurred by the Repo Broker unavoidably**

Financing costs include the costs of both carrying positions overnight and borrowing to cover Repo Brokers(acting in a Broker capacity) mark and TAP payments.

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and not through its own fault. This Section IV.A.5 will only apply to Repo Brokers that
do not elect to settle Same-Day Settling Trades with the Corporation.
6.
Notwithstanding anything to the contrary above, the Corporation may pay
for directly, or reimburse, a Repo Broker that incurs financing costs for a Net Settlement
Position, up to a dollar amount deemed reasonable by the Corporation, if the Corporation
determines, in its sole discretion, that such financing costs were incurred by the Repo
Broker: (i) unavoidably and not through its own fault and (ii) if the Repo Broker is an InterDealer Broker Netting Member, through overnight repurchase transactions with Netting
Members or a Clearing Agent Bank. This Section IV.A.6 will only apply to Repo Brokers
that do not elect to settle Same-Day Settling Trades with the Corporation.
B.

Clearance Charges
1.

No charges for Repo Brokers acting in a Broker capacity.

2.
For each other Netting Member, a standard charge of $0.25 per deliver andreceive obligation on Scheduled Settlement Date.
3.
Notwithstanding anything to the contrary above, the Corporation may pay
for directly, or reimburse, the clearance costs incurred by a Repo Broker for Repo
Transactions related to the settlement of a Start Leg outside of the Netting System, up to adollar amount deemed reasonable by the Corporation. This Section IV.B.3 will only apply
to Repo Brokers that do not elect to settle Same-Day Settling Trades with the Corporation.
4.
The Corporation will pass-through to Netting Members the following
clearing banks’ fees and charges that are incurred by the Corporation for the services that
the Corporation performs in connection with such Members’ activity.
(a)

Actual fees charged by the Corporation’s Clearing Agent Bank forthe settlement of each Deliver Obligation and each Receive
Obligation.

(b)

Actual fees charged by the Fedwire Securities Service fees for thesettlement of treasury securities and agency securities, as applicable.

(c)

The Corporation’s GCF Clearing Agent Bank fee on each GCF
Repo Service Deliver Obligation that FICC creates from
Corporation’s GCF Clearing Agent Bank account.
When this fee is assessed on FICC’s GCF Repo Service Deliver
Obligations that are created versus Netting Members, this fee willbe allocated to Dealer Accounts at the Corporation’s GCF Clearing
Agent Bank as follows:

307

(i)

A pass-through fee is calculated as 1bp per annum on a dollar
amount of such Netting Member’s GCF Repo Service
Receive Obligation from FICC in each Generic CUSIP
Number.

When this fee is assessed on FICC’s GCF Repo Service Deliver
Obligations at the Corporation’s GCF Clearing Agent Bank that are
created versus a CCIT Member at the Corporation’s GCF Clearing
Agent Bank, the fee is calculated as 1bp per annum on a dollar
amount of the underlying CCIT Transactions and the fee will bepassed through to the Dealer Account at the Corporation’s GCF
Clearing Agent Bank of the Netting Member that is the Repo Party
to such CCIT Transactions.
(d)

The Corporation’s Clearing Agent Bank fees for daylight overdrafts
on Securities Settlement Obligations.
This pass-through fee will be charged to Dealer Accounts at the
Corporation’s Clearing Agent Bank and will be calculated on apercentage of the total of all such costs incurred by FICC. This
percentage is calculated on a monthly basis as follows:(Total dollar value of Deliver and Receive Obligations of each
Netting Member at the Corporation’s Clearing Agent Bank)___________________________________________________(Total dollar value of Deliver and Receive Obligations in all
Dealer Accounts at the Corporation’s Clearing Agent Bank)All fees and charges will be reflected on each Member’s billing statement.
C.

GCF Repo Transaction and CCIT Transaction Processing Fee

For a GCF Repo Transaction or a CCIT Transaction that has been compared and netted,
but which has not yet settled, a fee calculated as follows:
(1)

(a)

for Repo Brokers acting as GCF-Authorized-Inter-Dealer Brokers,
a .0175 basis point charge (i.e., one and three quarter hundredths ofa basis point) applied to the gross dollar amount of such GCF Repo
Transaction; and(b)

for all other Netting Members and CCIT Members, a .04 basis point
charge (i.e., four hundredth of a basis point) applied to the grossdollar amount of such GCF Repo Transaction or CCIT Transaction;

and

308

(2)

.08 basis point charge (i.e., 8 hundredths of a basis point) applied to the net
dollar amount of a Netting Member’s or CCIT Member’s Collateral
Allocation Entitlements and Collateral Allocation Obligations.

This fee will be applied each calendar day, but calculated on an annualized basis.
V.

MINIMUM MONTHLY FEE

Each Comparison-Only Member and each Netting Member shall, regardless of the level of
its activity, pay a minimum monthly fee of $2,500 on each of its Accounts, which shall not apply
to CCIT Members. The minimum monthly fee for an Account will not apply if the total monthly
fees incurred by the Account pursuant to Sections I, II, and IV of this Fee Structure exceed $2,500.
VI.

SUBMITTING MEMBERS

A Submitting Member shall be liable for fees and charges arising from buy/sell transactions
and Repo Transactions the data on which it has submitted to the Corporation on behalf of an
Executing Firm to the same extent as if such Member had executed the buy/sell transactions andRepo Transactions.
VII.

SPONSORING MEMBERS

A Sponsoring Member shall be liable for fees and charges arising from Sponsored Member
Trades the data on which it, or its Sponsored Member(s), has submitted to the Corporation. A
Sponsoring Member shall also be subject to the minimum monthly fee set forth in Section V ofthis Fee Structure; provided, that a Sponsoring Member Omnibus Account shall be considered asingle Account for purposes of calculating such fee, regardless of the number of SponsoredMembers whose trading activity is conducted through such Account. A Sponsoring Member shallalso be liable to the Corporation for the Sponsored GC Pre-Payment Assessment to the extent it
participates in the Sponsored GC Service. The Corporation’s books and records shall reflect theSponsored GC Pre-Payment Assessment as a credit to such Sponsoring Member until expiration.
In addition, any Sponsoring Member that elects to be charged the Sponsored GC PrePayment Assessment between November 2020 and February 2021 shall receive an additional$25,000 credit toward its use of the Sponsored GC Service (hereinafter, the “Additional SponsoredGC Credit”), which shall be credited by the Corporation against the Sponsoring Member’s fees foruse of the Sponsored GC Service until the earlier of (i) the Additional Sponsored GC Credit being
completely depleted and (ii) thirty-six (36) months after the Sponsoring Member onboards into theSponsored GC Service. The Corporation’s books and records shall reflect the Additional
Sponsored GC Credit as a credit to such Sponsoring Member until expiration.
In addition, to the extent a Sponsoring Member elects to withdraw from the Sponsored GC
Service prior to the expiration of its Sponsored GC Pre-Payment Assessment, it shall be entitledto a return of any unused portion of such Sponsored GC Pre-Payment Assessment from the
Corporation; provided that, for the avoidance of doubt, such Sponsoring Member shall be liable
for the Sponsored GC Pre-Payment Assessment to the extent that it ever elects to participate in theSponsored GC Service in the future.

309

VIII.

DEFINITION

For purposes of this Fee Structure, a “side” of a buy/sell transaction, and a Start Leg or an
End Leg of a Repo Transaction other than a GCF Repo Transaction or a CCIT Transaction, shallbe limited to $50 million increments. Thus, if the aggregate amount of a side of a buy/selltransaction, or of a Start Leg or End Leg of a Repo Transaction other than a GCF Repo Transaction
or a CCIT Transaction, is greater than $50 million, each $50 million portion of that aggregate
amount (including the final, residual portion if that is less than $50 million) shall be considered asa separate “side” or Leg for purposes of this Fee Structure. A Term GCF Repo Transaction and a
CCIT Transaction shall each be considered to have only one Start Leg and one End Leg during its
term.
IX.

LATE FEES
Late Submission of Collateral Substitution Notifications

On any particular Business Day, a Repo Party shall be assessed a late fee of $100 for each
repo collateral substitution notification that is received by the Corporation after the deadline forsuch as stated in the Schedule of Timeframes.
Late Submission of Information Regarding New Securities Collateral
On any particular Business Day, a Repo Party shall be assessed a late fee of (i) $100 foreach submission of information regarding New Securities Collateral that is received by the
Corporation after the first deadline, but before the second deadline, for such as stated in the
Schedule of Timeframes, and (ii) $250 for each submission of information regarding New
Securities Collateral that is received and processed by the Corporation after the second deadline
for such as stated in the Schedule of Timeframes. Such fees will be assessed with respect to eachtransaction for which a notification of a repo collateral substitution has been received by FICC,
but for which FICC has not received information regarding New Securities Collateral.
Late Fee Related to GCF Repo Transactions
On any particular business day, if a Netting Member does not make the required collateral
allocation by the later of 4:30 p.m. (New York time) or 1 hour after the actual close of Fedwire
Securities Service reversals, the Netting Member shall be subject to a late fee of $500.00, unlessthe Corporation determines, in its sole discretion, that the failure to meet this timeframe is notprimarily the fault of the Netting Member. This determination would be made by the Corporation
based on input from the GCF Clearing Agent Bank and the Netting Member.
On any particular business day, if a Net Funds Payor does not make the required paymentof cash by the later of 4:30 p.m. (New York time) or 1 hour after the actual close of Fedwire
Securities Service reversals, the Net Funds Payor shall be subject to a late fee as shown on thetable below, unless the Corporation determines that the failure to meet this timeframe is notprimarily the fault of the Net Funds Payor.

310

Late Fee for
Net Funds
Payors

1st Occurrence(within 30
calendar days)

2nd Occurrence(within 30
calendar days)

3rd Occurrence(within 30
calendar days)

4th Occurrence(within 30
calendar days)or additional
occurrences(within the 30
calendar days)

After 4:30 p.m.

$500

$1,000$2,000$3,000On any particular business day, if a Net Funds Payor does not make the required paymentof cash by the close of the Fedwire Funds Service, the Net Funds Payor shall be subject to a late
fee as shown on the table below, unless the Corporation determines that the failure to meet thistimeframe is not primarily the fault of the Net Funds Payor. This determination would be madeby the Corporation based on input from the GCF Clearing Agent Bank and the Net Funds Payor.

Late Fee for
Net Funds
Payors

1st Occurrence(within 90
calendar days)

2nd Occurrence(within 90
calendar days)

3rd Occurrence(within 90
calendar days)

4th Occurrence(within 90
calendar days)or additional
occurrences(within the 90
calendar days)

After Close ofFedwire Funds
Service

100 basis points
on theunsatisfied cash
obligation
amount200 basis points
on theunsatisfied cash
obligation
amount

300 basis points
on theunsatisfied cash
obligation
amount

400 basis points
on theunsatisfied cash
obligation
amountX.

ADMINISTRATIVE FEESThe Corporation will charge network fees related to SMART connectivity.

XI.

THIRD PARTY FEES AND CHARGESThe Corporation may also bill Members for, and include on the Members’ billingstatements, fees and charges which may be imposed on such Members by third parties such as:(a) other subsidiaries of The Depository Trust & Clearing Corporation; (b) self-regulatoryorganizations and other securities industry organizations or entities of which such Member is amember, where such third party has represented to the Corporation that it has an agreement with
the Member allowing the Member’s payment of such fees and charges; and (c) other organizations
and entities which provide services or equipment to Members which are integral to services
provided by the Corporation. Any amounts so collected will be remitted to the entity imposing
such fee or charge.
311

Such fees and charges may include those of companies that identify themselves as being
an affiliate of the Member. Members should check their billing statements, which shall reflect all
such charges, and report any problems to the Corporation immediately.
XII.

REBATE POLICYThe Corporation may, in its discretion, provide Members with a rebate of its excess net
income, where “excess net income” shall mean income of either the Corporation or related to one
business line of the Corporation after application of expenses, capitalization costs, and applicableregulatory requirements.
All rebates shall be approved by the Board of Directors of the Corporation. In determining
whether a rebate is appropriate, the Board would consider one or more of the following, as
appropriate: the Corporation’s regulatory capital requirements, anticipated expenses, investment
needs, anticipated future expenses with respect to improvement or maintenance of FICC’soperations, cash balances, financial projections, and appropriate level of shareholders’ equity.
In the event the Board determines a rebate is appropriate, it shall determine a rebate period
and a rebate payment date. Members maintaining membership during all or a portion of theapplicable rebate period and on the rebate payment date shall be eligible for the rebate.
Rebates shall be applied to all eligible Members on a pro-rata basis based on such
Members’ gross fees paid to the Corporation within the applicable rebate period, excluding passthrough fees and interest earned on cash deposits to the Clearing Fund. Rebates shall be applied
to eligible Members’ invoices on the rebate payment date as either a reduction in fees owed or, if
fees owed are lower than the allocated rebate amount, a payment of such difference. Rebate
amounts may be adjusted for miscellaneous charges and discounts.
XIII.

CLEARING FUND MAINTENANCE FEE

On a monthly basis, the Netting Member shall be charged a fee, in arrears, calculated as
the product of (A) 0.25% and (B) the average of each Netting Member’s cash deposit balance in
the Clearing Fund, as of the end of each day, for the month, multiplied by the number of days forthat month and divided by 360.
XIV. NON-U.S. MEMBERSHIP APPLICANT FOREIGN LEGAL OPINION FEE(a)For the initial applicant (hereinafter, the “Initial Applicant”) organized in a given
non-U.S. jurisdiction (hereinafter, the “Jurisdiction of Organization”) to apply for membership, if
the applicant does not otherwise terminate its application in accordance with (c) below: The lesserof (i) a maximum estimated charge (hereinafter, the “Maximum Estimated Charge”) and (ii) the
actual costs charged to the Corporation by outside counsel providing a legal opinion in form andsubstance satisfactory to the Corporation regarding the laws of the Jurisdiction of Organization.
(b)
For each subsequent applicant organized in the applicable Jurisdiction ofOrganization (hereinafter, the “Subsequent Non-U.S. Applicant”), if the Subsequent Non-U.S.
Applicant does not otherwise terminate its application in accordance with (c) below: an amount312

equal to the fee charged to the Initial Applicant from the Jurisdiction of Organization, as
determined in accordance with (a) above.
(c)
The Non-U.S. Membership Applicant Foreign Legal Opinion Fee is non-refundable
regardless of the outcome of the application process (i.e., approval, disapproval or expiration);
however, an applicant will not be charged a Non-U.S. Membership Applicant Foreign Legal
Opinion Fee if it terminates its application in writing within five (5) Business Days of being
notified in writing by the Corporation of the Maximum Estimated Charge (for an Initial Applicant)or fee amount (for a Subsequent Non-U.S. Applicant), as applicable.
(d)
If the applicant does not terminate its application in accordance with (c) above, thenthe applicant will be billed the applicable fee amount as determined by the Corporation inaccordance with the above, with full payment due within ten (10) Business Days of receipt of an
invoice from the Corporation, including payment instructions.

313

FINE SCHEDULES
Late Satisfaction of Clearing Fund Deficiency Call
AMOUNTFIRSTOCCASIONSECONDOCCASION

THIRDOCCASION

FOURTHOCCASION

Up to $100M

**

$100

$200

$ 500

Greater than $100M to $900M

**

300

600

1,500

Greater than $900M to $1.7MM

**

600

1,200

3,000

Greater than $1.7MM to $2.5MM

**

900

1,800

4,500

Greater than $2.5MM

**

1,000

2,000

5,000

Notes:
M = one thousand
MM = one million** First occasions result in a warning letter issued to the Member.
The number of occasions is determined over a moving three-month period beginning withthe first occasion.
If the number of occasions within the rolling period exceeds four, the Corporation shallobtain the concurrence of the Board of Directors as to the amount of the fine.
A lateness of more than one hour will result in a fine equal to the amount applicable to thenext highest occasion for the specific deficiency amount. If a member is late for more than one
hour and it is the member’s fourth occasion, the Corporation shall obtain the concurrence of theBoard of Directors as to the amount of the fine.

314

Late Payment of Funds Settlement Debit
AmountFirst
Occasion

SecondOccasion

Third
Occasion

FourthOccasion$1 to $100M

$100

$200

$ 500

$1,000Greater than $100M to $900M

300

600

1,500

3,000

Greater than $900M to $1.7MM

600

1,200

3,000

6,000

Greater than $1.7MM to $2.5MM

900

1,800

4,500

9,000

Greater than $2.5MM

1,000

2,000

5,000

10,000M = one thousand
MM = one million(1)

Each instance of late payment of a late payment of a Funds Settlement Debit is deemed to
be a separate occasion. Such latenesses are combined, regardless of type, to determine thenumber of occasions.

(2)

The number of occasions is determined over a moving three-month period beginning withthe 1st occasion.

(3)

If the number of occasions within the rolling period exceeds four, the Corporation shallobtain the concurrence of the Board of Directors as to the fine amount.

(4)

A lateness of more than one hour will result in a fine equal to the amount applicable to thenext highest occasion for the specific deficiency amount. If a member is late for more than
one hour and it is the member’s fourth occasion, the Corporation shall obtain the
concurrence of the Board of Directors as to the fine amount.

315

FINE SCHEDULE
Failure to Timely Provide Financial and Related Information
Request for Information*

First
Occasion

SecondOccasion

Third
Occasion

FourthOccasion

Financial Reports**

$300

$600

$1,500****Fines to be levied for offenses within a moving twelve-month period beginning with thefirst occasion.

**

For purposes of this Fine Schedule, Reports/Information shall mean the financial,
regulatory and other information required to be submitted to the Corporation pursuant to
the Rules, Procedures, Important Notices or notices on the Corporation’s website.

***

Fourth or more occasion fines will be determined by the Corporation with the concurrenceof the Board of Directors.

If the Member’s late submission applies to more than one DTCC clearing agency
subsidiary, the fine amount will be divided equally among the clearing agencies. Where theMember is a participant of DTC and is a common member of one or more of the other clearing
agencies, the fine would be collected by DTC and allocated equally among other clearing agencies,
as appropriate. If the member is not a DTC participant, but is a common member between NSCC
and FICC, NSCC will collect the fine and allocate the appropriate portion to FICC.

Business Continuity Testing for Top Tier Firms – Fines for Failure to Test
Fine for failure to complete annual testing requirement:
Fine for failure to complete testing for two successive years:$10,000$20,000

General Continuance Standards – Fine for Failure to Notify of Falling out of Compliance
Fine for failure to notify$1,000If the Member’s failure to notify applies to more than one DTCC clearing agency
subsidiary, the fine amount will be divided equally among the clearing agencies. Where theMember is a participant of DTC and is a common member of one or more of the other clearing
agencies, the fine would be collected by DTC and allocated equally among other clearing agencies,
as appropriate. If the member is not a DTC participant, but is a common member between NSCC
and FICC, NSCC will collect the fine and allocate the appropriate portion to FICC.

316

Reportable Events-Fine for Failure of Timely Notification
Fine for failure to timely notify$5,000If the Member’s failure to notify applies to more than one DTCC clearing agency
subsidiary, the fine amount will be divided equally among the clearing agencies. Where theMember is a participant of DTC and is a common member of one or more of the other clearing
agencies, the fine would be collected by DTC and allocated equally among other clearing agencies,
as appropriate. If the member is not a DTC participant, but is a common member between NSCC
and FICC, NSCC will collect the fine and allocate the appropriate portion to FICC.

Failure to Confirm OFAC Program
Fine Name

Amount(s)Failure to confirm OFAC Program$5,000.00

Failure to Maintain or Upgrade Network Technology, or Communications Technology or
ProtocolsFine Name

Amount(s)Failure to maintain or upgrade technology$5,000317

CROSS-MARGINING AGREEMENTS•

Cross-Margining Agreement with the Chicago Mercantile Exchange, Inc. (incorporated byreference).

318

BOARD STATEMENTS OF POLICYSTATEMENT OF POLICY OF THE BOARD OF DIRECTORS OF THE
GOVERNMENT SECURITIES CLEARING CORPORATIONON THE RELEASE OF INFORMATION
Section 17A(b)(3) of the Securities Exchange Act of 1934, as amended (the “Act”),
provides, among other things, that the rules of clearing agency self-regulatory organizations must
be designed to foster cooperation and coordination with persons engaged in the clearance andsettlement of securities transactions and to protect investors and the public interest. theCorporation recognizes in Rule 29 its obligation as a self-regulatory organization to share clearing,financial, and other data on its members with other SEC-regulated, self-regulatory organizations
for regulatory purposes. Rule 3 provides the Corporation with the authority to examine thefinancial and operational conditions of its members, and to receive information relevant to suchexamination from any other SEC-regulated, self-regulatory organization. Rule 3 also requires the
Corporation to hold information furnished to the Corporation pursuant to Rule 3 in confidence as
may be required under the laws, rules and regulations applicable to the Corporation that relate to
the confidentiality of records.
In accordance with its responsibilities under its rules, and consistent with the requirementsof a clearing agency under the Act, the Board of Directors has approved the entering into of anagreement by the Corporation with other SEC-registered clearing agencies to share, for regulatory
purposes, with such other SEC-registered clearing agencies financial and operational information
relating to members that are also members of such other SEC-registered clearing agencies. The
Board of Directors has also approved the filing of such agreement with the Securities andExchange Commission. Such agreement is not intended to limit the ability under the Act of the
Corporation, for regulatory purposes, to share data on its members whenever such is deemednecessary or appropriate. It is, however, a first step toward formalizing certain minimum levels of
information sharing, with the intent to standardize such reporting.

319

INTERPRETIVE GUIDANCE WITH RESPECT TO
WATCH LIST CONSEQUENCES
Being placed on the Watch List may result in Clearing Fund-related consequences as wellas other consequences under the Rules:
A.

Clearing Fund-Related Consequences
1.

Additional Clearing Fund Deposits

Pursuant to Section 12(e) of Rule 3, the Corporation may require a Netting Member thathas been placed on the Watch List to make and maintain a deposit to the Clearing Fund over andabove the amount determined in accordance with the provisions of Rule 4 or such higher amountas the Board may deem necessary for the protection of the Corporation or other Members.
The determination of whether a Netting Member that is on the Watch List should be subject
to an additional Clearing Fund deposit is based on factors determined to be relevant by the
Corporation from time to time, including:2.

a.

the overall financial condition and financial stability or volatility of
the Netting Member, which may include a review of the Netting
Member’s credit rating history and outlook;b.

the liquidity arrangement, if any, of the Netting Member;c.

the Clearing Fund requirement history, transaction volume trends,
simulated closeout results, stress test results, backtest results andoutstanding positions of the Netting Member;d.

adverse news reports and/or regulatory concerns relating to theNetting Member; ande.

any additional concerns relating to the financial or operational
condition of the Netting Member.

Restriction on Withdrawal of Excess Clearing Fund Deposits

Pursuant to Section 10 of Rule 4, the Corporation may retain some or all of the Excess
Clearing Fund Deposit of a Member who is on the Watch List. Nonetheless, the Corporation
generally does not retain the Excess Clearing Fund Deposit of a Watch List Member unless theMember fails to pay the Required Fund Deposit within the required timeframes established by the
Corporation, or if the Corporation has a concern that the Member will not be able to satisfy its
obligation to the Corporation.

320

3.

Non-Waiver of Minimal Clearing Fund Payment

Pursuant to Section 2(a) of Rule 4, a Member is not required to make any payment to its
Clearing Fund on a given day if the difference between the amount of the Member’s Required
Fund Deposit as reported on that day and the amount then on deposit towards satisfaction thereofis less than both (i) $250,000 and (ii) 25 percent of the amount then on deposit, provided that theMember is not on the Watch List. As such, Members that are on the Watch List must satisfy all
margin calls for their respective Clearing Funds regardless of the amount.
B.

Other Consequences

Pursuant to Section 12(e) of Rule 3, if a Netting Member is on the Watch List, theCorporation may (1) suspend the Netting Member’s right under the Rules to collect a Credit
Forward Mark Adjustment Payment during all or a portion of the time period that the Netting
Member is on the Watch List and/or (2) maintain possession of the securities and/or cash thatcomprise the Netting Member’s Collateral Allocation Entitlement as the result of its GCF Repo
Transaction activity. Nonetheless, the Corporation generally does not retain these credits and/or
entitlements unless the Netting Member fails to pay the Required Fund Deposit within the required
timeframes established by the Corporation, or if the Corporation has a concern that the Netting
Member will not be able to satisfy its obligation to the Corporation.

321

INTERPRETIVE GUIDANCE WITH RESPECT TO
SETTLEMENT FINALITY
1.

Interpretive Guidance With Respect to Settlement Finality – Funds-Only Settlement

The point of finality for funds-only settlement by the Corporation is defined by the Federal
Reserve Bank Operating Circular 12, 1 which governs NSS processing by the FRB. The
Corporation and each Member’s Funds-Only Settling Bank is a “Settler” and together are in a
“Settlement Arrangement” (each term as defined in Operating Circular 12) for purposes of fundsonly settlement. 2 DTC, as the Settlement Agent (as defined in the Rules and in Operating Circular12), provides the Settlement File (as defined in Operating Circular 12) to the FRB. 3 Each Settler
maintains a Master Account (as defined in Operating Circular 12) with the FRB. 4 The point of
finality in accordance with Operating Circular 12 is, for debits, the time at which the Settler’s
Master Account is debited by the FRB, 5 and, for credits, the time at which the Settler’s MasterAccount is credited by the FRB. 6
Therefore, the point of finality with respect to funds-only settlement by the Corporation is
the point at which each of the Master Accounts for the Corporation and the Funds-Only Settling
Banks designated by each of the Members have been debited and credited through NSS pursuant
to the Settlement File provided by the Settlement Agent.
2.

Interpretive Guidance With Respect to Settlement Finality – Settlement for
Securities Deliveries and Related Payment Obligations.

Settlement for securities deliveries and related payment obligations occurs (i) on the booksof the Corporation’s designated clearing bank for each Member whose designated clearing bankfor such settlement is the same as the Corporation’s designated clearing bank and (ii) through theFedwire system, for each Member whose designated clearing bank for such settlement is not thesame as the Corporation’s designated clearing bank.
(a)

Point of Finality on the Books of the Corporation’s Clearing Bank.

The point of finality relating to settlement of securities deliveries and related payment
obligations that occurs on the books of the Corporation’s clearing bank is the point at which the
Corporation’s clearing bank has acted upon a settlement instruction from the Corporation.

1

Federal Reserve Banks Operating Circular 12, as promulgated from time to time by the FRB (hereinafter,“Operating Circular 12”), available at https://www.frbservices.org.

2

See defined terms set forth in Operating Circular 12.

3

See id.

4

See id. See also definition of Master Account in Federal Reserve Banks Operating Circular 1, as promulgatedfrom time to time by the FRB (hereinafter, “Operating Circular 1”), available at https://www.frbservices.org.

5

See description of posting debit balances set forth in Operating Circular 12.

6

See description of posting credit balances set forth in Operating Circular 12.

322

Pursuant to the agreement between the Corporation and the Corporation’s clearing bank, asettlement instruction is an instruction by the Corporation to the clearing bank in respect ofsettlement that: (1) (a) instructs the clearing bank to direct delivery, from the Corporation’s
account to the Member account(s) designated in such settlement instruction, of securities specified
for each such Member account and (b) specifies the dollar amounts that the clearing bank issimultaneously to take collection of from each of the respective Member accounts designated in
the settlement instruction for the Corporation’s account; or (2) (a) instructs the clearing bank todirect payment, from the Corporation’s account to the designated Member account(s), of the dollar
amounts specified in the settlement instruction for each such Member account and (b) specifies
the securities that the clearing bank is simultaneously to take receipt of from each of the Member
accounts designated in the settlement instruction for the Corporation’s account.
The Corporation’s clearing bank has acted upon such instructions when the clearing bank(i) (a) directs delivery, from the Corporation’s account to the Member account(s) designated insuch settlement instruction, of securities specified for each such Member account and(b) simultaneously collects the dollar amounts from each of the respective Member accounts
designated in the settlement instruction for the Corporation’s account; or (ii) (a) directs payment,from the Corporation’s account to the designated Member account(s), of the dollar amounts
specified in the settlement instruction for each such Member account and (b) simultaneously takesreceipt of securities from each of the Member accounts designated in the settlement instruction for
the Corporation’s account.
Therefore, the point of finality of settlement of securities deliveries and related payment
obligations that occur on the books of the Corporation’s clearing bank is when each of the accounts
held by the Corporation and the Members at the clearing bank for purposes of securities settlement
have been debited and credited in accordance with the settlement instructions provided by the
Corporation.
(b)

Point of Finality for Sponsored GC Trades.

The point of finality of settlement of Sponsored GC Trades occurs on the books of theSponsored GC Clearing Agent Bank at the point when the Sponsoring Member and SponsoredMember make the relevant payment obligation or securities delivery, as applicable, to the accountat the Sponsored GC Clearing Agent Bank specified by the pre-novation counterparty inaccordance with such procedures as the Sponsoring GC Clearing Agent Bank may specify fromtime to time.
(c)Point of Finality on the Fedwire System.

The point of finality relating to settlement of securities deliveries and related payment
obligations that occurs through the Fedwire system is defined by the Federal Reserve Banks
Operating Circular No. 7, 7 which governs book entry security account maintenance and transfers.
The Corporation’s clearing bank and each Member’s clearing bank is a “Participant” and maintains

7

Federal Reserve Banks Operating Circular 7, as promulgated from time to time by the FRB (hereinafter,“Operating Circular 7”), available at https://www.frbservices.org.

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a “Securities Account” and a “Master Account” with the FRB (each term as defined in Operating
Circular 7). 8
Operating Circular 7 provides that all debits and credits in connection with a Transfer
become final at the time the debits and credits are posted to both the Sender’s and Receiver’s
Securities Accounts and, in case of Transfer Against Payment (as defined in Operating Circular7), their corresponding Master Accounts. 9 For purposes of settlement of securities deliveries andrelated payment obligations, the clearing banks designated by the Corporation and each Member
to deliver and receive securities and related funds on behalf of the Corporation and each Member,respectively, are the Senders and Receivers described in Operating Circular 7.
Therefore, the point of finality of settlement of securities deliveries and related payment
obligations is when each of the Securities Accounts and the Master Accounts of the clearing banks
designated by the Corporation and each of the Members have been debited and credited throughthe Fedwire system in accordance with the settlement instructions provided by the Corporation. 10

8

See defined terms set forth in Operating Circular 7. See also definition of Master Account in Operating Circular
1, available at https://www.frbservices.org.

9

See description of finality set forth in Operating Circular 7.

10Each Business Day, the Corporation makes available to each Member a Report that provides settlement
information that the Corporation deems sufficient to enable each such Member to be able to settle its securities
deliveries and related payment obligations and each Member is obligated to provide the appropriate instructions
to its clearing bank to deliver and/or receive securities and related payments as set forth in the Report. Rule 12,
Section 3.

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BY-LAWS AND RESTATED CERTIFICATE OF INCORPORATIONThe By-Laws of the Corporation and the Restated Certificate of Incorporation of the
Corporation are incorporated by reference.

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