528 Federal Register / Vol. 77, No. 3 / Thursday, January 5, 2012 / Notices 

1 15 U.S.C. 78s(b)(1). 

2Securities Exchange Act Release No. 65788 

(November 18, 2011), 76 FR 72741 (November 25, 

2011). 

3Members will be able to input such limits into 

the Trade Risk Pro interface in order to receive 

system alerts in the event of a breach; however, 

these limits will not trigger a block by NSCC on any 

activity processed through NSCC’s clearance and 

settlement systems. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66068; File No. SR–NSCC– 

2011–10] 

Self-Regulatory Organizations; The 

National Securities Clearing 

Corporation; Order Granting Approval 

of a Proposed Rule Change To Amend 

Rules Relating To the Creation of a 

Service To Provide Post-Trade 

Information 

December 29, 2011. 

I. Introduction 

On November 7, 2011, The National 

Securities Clearing Corporation 

(‘‘NSCC’’) filed proposed rule change 

SR–NSCC–2011–10 with the Securities 

and Exchange Commission 

(‘‘Commission’’) pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’).1 Notice of the proposed 

rule change was published in the 

Federal Register on November 25, 

2011.2 The Commission received no 

comment letters. For the reasons 

discussed below, the Commission is 

granting approval of the proposed rule 

change. 

II. Description 

NSCC is creating an optional service 

for NSCC members, ‘‘Trade Risk Pro’’ or 

‘‘DTCC Trade Risk Pro,’’ which will 

enable members to monitor intraday 

trading activity of their organizations, 

their correspondent firms, or both 

through review of post-trade data. An 

effective risk management structure 

provides for multiple check points, 

including pre-trade controls and posttrade surveillance. Industry participants 

have indicated to NSCC that pre-trade 

monitoring as a stand-alone risk 

management tool may not provide 

adequate protection for firms or against 

systemic risk. For example, many orders 

are never actually executed and thus a 

pre-trade filter could overestimate 

potential positions or could generate 

false positives if not combined with 

information about what orders are 

actually executed. In addition, clearing 

firms only see their correspondents’ 

orders that are routed through the 

clearing firm’s trading desks or through 

the firm’s order entry systems. Orders 

sent directly to the market can bypass 

pretrade controls. Trade Risk Pro will 

provide NSCC’s members with a method 

to monitor clearing activity in their 

accounts and to set parameters that will 

enable them to monitor exposure. 

As approved, the service will be 

available to NSCC members on a 

voluntary basis to provide those 

members electing to participate in the 

service with: (1) Post-trade data relating 

to unsettled equity and fixed income 

securities trades for a given day that 

have been compared or recorded 

through NSCC’s trade capture 

mechanisms on that day (‘‘RP Trade 

Date Data’’) and (2) other information 

based upon data the participating 

member may itself provide at start of or 

throughout the day (‘‘RP Memberprovided Data’’), as provided in NSCC’s 

Rules and Procedures governing the 

proposed service (RP Trade Date Data 

and RP Member-provided Data shall 

collectively be referred to as ‘‘RP 

Transaction Data’’). This will include 

allowing members the ability to input or 

load trade information from prior days 

into the system to supplement their 

view of overall risk exposure. As such, 

the Trade Risk Pro service will offer an 

industry-wide post-trade reporting 

system that will allow members to 

monitor their U.S. equity and fixedincome trading exposure. 

Overview of the Trade Risk Pro Service 

Through Trade Risk Pro, NSCC will 

utilize market and other information to 

report post-trade activity to 

participating members. Such reporting 

will incorporate RP Trade Date Data 

from transactions in equity and 

municipal and corporate debt securities 

after such transactions have: (1) Passed 

through the NSCC’s edit checks and not 

been pended or rejected and (2) been 

recorded or compared through NSCC’s 

Universal Trade Capture and/or RealTime Trade Matching trade capture and 

comparison systems. In addition, Trade 

Risk Pro will allow participating 

members to input or load start of day 

and intraday positions (i.e., RP Memberprovided Data) to allow members to 

view their organization’s (or one or 

more correspondent’s) aggregate open 

positions in securities cleared through 

NSCC. Within Trade Risk Pro, members 

will be able to create ‘‘Risk Entities’’ to 

track activity for specific 

correspondents and clients as well as 

their own trading desks and to define 

the rules for the aggregation of trade 

data, to set parameters on open 

positions allowable for each Risk Entity, 

and to receive alerts for the display of 

breaches or near breaches of the 

parameters.3 Trade Risk Pro will 

provide members with a screen-based 

view of their trade data residing in 

Trade Risk Pro for a given day 

aggregated and organized according to 

parameters set by the member. Displays 

provided to participating members will 

offer the option to view aggregate and 

net value, to view share exposure across 

markets and other liquidity 

destinations, and to see exposure at the 

CUSIP and individual trade levels. In 

conformance with NSCC’s Rule 49 

(Release of Clearing Data and Clearing 

Fund Data), each member will only be 

able to view information with respect to 

its own clearing account(s). Trade Risk 

Pro will be a reporting service only and 

any action taken by a member as a result 

of any alert, parameter breach, or other 

information associated with the service 

will be at the discretion of the member 

and not either in whole or part by 

NSCC. 

NSCC will create a new Rule 54 

(Trade Risk Pro) and Procedure XVII 

(Trade Risk Pro) to reflect the proposed 

rule changes described below. The new 

rule change also will amend Rule 58 

(Limitations of Liability) and will 

update Rule 1 (Definitions) to include 

definitions for RP Trade Data, RP 

Member-provided Data, and RP 

Transaction Data, as described more 

fully below. 

1. Establishing and Maintaining Risk 

Entities and Limits 

As an initial step in using the Trade 

Risk Pro service, members will be 

required to establish Risk Entities (e.g., 

trading activity of a single desk, a 

correspondent, single or multiple NSCC 

clearing number(s), or a combination of 

entities). Trade Risk Pro will provide 

members with the ability to create Risk 

Entities through the defining and 

updating of the data structure and 

relationships for the entities to which 

they assign a parameter or risk limit. 

The Risk Entity definitions entered by 

members will drive position 

calculations and displays in Trade Risk 

Pro. Trade Risk Pro will provide 

members with a facility to set share and 

dollar limits with respect to each Risk 

Entity at a gross and net level, and it 

may provide for additional limits as 

NSCC may determine from time to time 

are appropriate. 

Through the use of trade arrays, each 

member may define the Risk Entities so 

that only trades that the member intends 

to belong to that Risk Entity are 

included. For each trade, relevant data 

elements to create a trade array may 

include: (1) The member’s account 

number(s), (2) the executing broker, (3) 

the submitting market or firm, and (4) 

other categories as allowed by NSCC 


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Federal Register / Vol. 77, No. 3 / Thursday, January 5, 2012 / Notices 529 

4Post-implementation of Trade Risk Pro, NSCC 

may eventually at its discretion provide for realtime updates. 

5 15 U.S.C. 78q–1(b)(3)(F). 

6 In approving this proposal, the Commission has 

considered its impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f). 

7 17 CFR 200.30–3(a)(12). 

from time to time. Use of these elements 

will create an array so that each 

transaction will be assigned by virtue of 

the array to one or more Risk Entities. 

Users can assign multiple trade arrays to 

a single Risk Entity. 

Once implemented, updates and 

changes made to Risk Entities by the 

member will take effect overnight with 

a cut-off time designated by NSCC from 

time to time.4 Although Trade Risk Pro 

will prohibit double counting of trades 

within the same Risk Entity, it is 

possible that two separate Risk Entities 

may contain defined elements as 

specified by the member that cause a 

specific trade to be included into both 

Risk Entities. 

2. Limit Monitoring 

Trade Risk Pro will aggregate and 

make available position information for 

purposes of the member’s limit 

monitoring. The aggregate data will be 

the sum of RP Member-provided data 

and RP Trade Date Data with the 

aggregated data defined as RP 

Transaction Data in NSCC’s Rules and 

Procedures. RP Trade Date Data, RP 

Member-provided Data, and other 

relevant data will be aggregated and 

sorted, and the data will then be 

displayed to the member. The display 

may include shares and values on a 

gross or net basis or any other total 

aggregation and sorting methods as 

NSCC may from time to time make 

available to members. RP Trade Date 

Data will be carried at contract amount 

unless another pricing method is 

implemented by NSCC. RP Memberprovided Data will be priced according 

to information provided by the member. 

Intraday allocations in the settlement 

system will not be taken into 

consideration because they are not fully 

effective until money settlement 

completes (i.e., after the day cycle). The 

totals will be compared to the 

parameters set by the members, and the 

members will be alerted to breaches 

based upon their set parameters. The 

alerts may take the form of visual screen 

changes or other notification methods. 

The service will also provide updated 

information when the alert is resolved 

(e.g., when the Risk Entity is within the 

relevant limit as a result of an offsetting 

transaction reducing the position or the 

participant raises the limit for a Risk 

Entity). Information such as alert 

history, members’ Risk Entity 

definitions, end of day positions, and 

other data that NSCC provides from 

time to time will be supplied to 

members in an end of day report. 

3. No Effect on Trade Guaranty and 

Other Considerations 

The rule change will provide that any 

reports and data supplied to members 

through Trade Risk Pro is not intended 

to impact the timing or status of the 

guaranty of any transaction in CNS or 

Balance Order Securities. In addition, 

the issuance of information or data 

through Trade Risk Pro to a member or 

the lack of the issuance of information 

will not of itself indicate or have any 

bearing on the status of any trade 

including, but not limited to, as 

compared, locked-in, validated, 

guaranteed, or not guaranteed. 

4. Limitation of Liability 

Trade Risk Pro provides members 

with a facility to review and monitor 

trade activity in a manner they select, 

including providing members with the 

ability to populate the service (but not 

limited to the ability to input or load 

positions), define Risk Entities and set 

limits, and receive alerts and position 

data of their choosing. Since NSCC is 

not the originator of information made 

available through Trade Risk Pro, NSCC 

will make clear that it is not responsible 

for the completeness or accuracy of 

Trade Date Data or other information or 

data which it receives from members or 

third parties used in offering the Trade 

Risk Pro service, for information or data 

that is received and compared or 

recorded by NSCC, or for any errors, 

omissions, or delays which may occur 

in the transmission of such data or 

information. In addition, because not all 

transactions are submitted to NSCC on 

a real-time basis, NSCC can only 

provide members using the service with 

Trade Date Data as it becomes compared 

or recorded. Accordingly, members 

should be aware that such Trade Date 

Data may not be complete. 

5. Indemnification 

Since each member may use the 

information for purposes of its own 

discretion, the rule change will provide 

that any member participating in Trade 

Risk Pro shall indemnify NSCC and any 

or all of its employees, officers, 

directors, shareholders, agents, and 

participants who may sustain any loss, 

liability or expense as a result of a third 

party claim related to any act or 

omission of the member made in 

reliance upon data or information 

transmitted through Trade Risk Pro by 

NSCC to the member. 

6. Implementation Time Frame 

NSCC will implement the above 

changes during the first quarter of 2012 

or soon thereafter, with the actual 

implementation date announced to 

members through an Important Notice. 

III. Discussion 

Section 17A(b)(3)(F) of the Act 

requires, among other things, that the 

rules of a clearing agency be designed to 

remove impediments to and perfect the 

mechanism of a national system for the 

prompt and accurate clearance and 

settlement of securities transactions.5

The Commission believes that by 

providing its members with a 

mechanism to their monitor post-trade 

activity on an intraday basis, the 

proposed rule change should enhance 

the risk management ability of those 

members using the service. By 

providing for enhanced risk 

management, the proposed rule change 

should help remove impediments to and 

perfect the mechanism of the national 

system for the prompt and accurate 

clearance and settlement of securities 

transactions. 

Accordingly, for the reasons stated 

above the Commission believes that the 

proposed rule change is consistent with 

NSCC’s obligation under Section 17A of 

the Exchange Act and the rules and 

regulations thereunder.6

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act, particularly 

with the requirements of Section 17A of 

the Act, and the rules and regulations 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act, that the 

proposed rule change (File No. SR– 

NSCC–2011–10) be and hereby is 

approved. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2011–33825 Filed 1–4–12; 8:45 am] 

BILLING CODE 8011–01–P 


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