78892 Federal Register / Vol. 85, No. 235 / Monday, December 7, 2020 / Notices 

14 15 U.S.C. 78s(b)(3)(A). 

15 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(2). 

5Capitalized terms not defined herein are defined 

in the Rules, available at http://www.dtcc.com/∼/ 

media/Files/Downloads/legal/rules/nscc_rules.pdf. 

Shares to the same halt requirements 

currently applicable to the similar 

product structures of Index Fund 

Shares, Managed Fund Shares and 

Exchange Traded Fund Shares. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 14 and Rule 19b– 

4(f)(6) thereunder.15

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NASDAQ–2020–078 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2020–078. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2020–078 and 

should be submitted on or before 

December 28, 2020. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–26784 Filed 12–4–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90543; File No. SR–NSCC– 

2020–018] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change, as Modified by 

Amendment No. 1, To Amend the Fee 

Structure 

December 1, 2020. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on November 

16, 2020, National Securities Clearing 

Corporation (‘‘NSCC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change. On November 30, 2020, NSCC 

filed Amendment No. 1 to the proposed 

rule change, which revised a portion of 

the rule text and corresponding 

description in the notice relating to 

NSCC’s current policy regarding the 

issuance of rebates to Participants. 

NSCC filed the proposed rule change, as 

modified by Amendment No. 1, 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(2) thereunder.4

The proposed rule change, as modified 

by Amendment No. 1, is described in 

Items I, II, and III below, which Items 

have been prepared primarily by NSCC. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change, as modified by 

Amendment No. 1, from interested 

persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change, as Modified by 

Amendment No. 1 

The proposed rule change, as 

modified by Amendment No. 1, consists 

of amendments to Addendum A (Fee 

Structure) of the NSCC Rules & 

Procedures (‘‘Rules’’) 5 in order to (i) 

modify the Clearing Fund Maintenance 

Fee (‘‘Maintenance Fee’’), (ii) modify the 

‘‘value out of the net’’ component of the 

Clearance Activity Fee, and (iii) replace 

the description currently under the 

heading ‘‘NSCC Pricing Policy’’ with a 

description of NSCC’s current policy 

regarding the issuance of rebates to 

Members, as described in greater detail 

below. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change, as Modified by 

Amendment No. 1 

In its filing with the Commission, the 

clearing agency included statements 

concerning the purpose of and basis for 

the proposed rule change, as modified 

by Amendment No. 1, and discussed 

any comments it received on the 

proposed rule change, as modified by 

Amendment No. 1. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

clearing agency has prepared 


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6Securities Exchange Act Release No. 78525 

(August 9, 2016), 81 FR 54146 (August 15, 2016) 

(SR–NSCC–2016–002). 

7Securities Exchange Act Release No. 89141 

(June 24, 2020), 85 FR 39253 (June 30, 2020) (SR– 

NSCC–2020–011) (‘‘June Filing’’). 

8Policy Tools, Interest on Required Reserve 

Balances and Excess Balances, https://

www.federalreserve.gov/monetarypolicy/ 

reqresbalances.htm. 

9See June Filing, supra note 7 (discussing the 

rationale for the three modifications made to the 

Maintenance Fee). 

10See June Filing, supra note 7 (discussing 

NSCC’s cost of funding). 

11Not only could a downgrade to an NSCC credit 

rating increase NSCC costs and expenses, but, more 

importantly, it could reduce the overall availability 

of default liquidity resources to NSCC if investors 

or lending banks reduce their current levels of 

engagement with NSCC. 

12The Depository Trust & Clearing Corporation 

(‘‘DTCC’’) is the parent company of DTC, NSCC, 

and FICC. DTCC operates on a shared services 

model for DTC, NSCC, and FICC. Most corporate 

functions are established and managed on an 

enterprise-wide basis pursuant to intercompany 

agreements under which it is generally DTCC that 

provides a relevant service to DTC, NSCC, or FICC. 

13See File No. SR–DTC–2020–014 and File No. 

SR–FICC–2020–014 available at https://

www.dtcc.com/legal/sec-rule-filings. 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change, as Modified by 

Amendment No. 1 

1. Purpose 

The purpose of this proposed rule 

change, as modified by Amendment No. 

1, is to amend Addendum A (Fee 

Structure) of the Rules in order to (i) 

modify the Maintenance Fee, (ii) modify 

the ‘‘value out of the net’’ component of 

the Clearance Activity Fee, and (iii) 

replace the description currently under 

the heading ‘‘NSCC Pricing Policy’’ with 

a description of NSCC’s current policy 

regarding the issuance of rebates to 

Members. 

(i) Overview 

NSCC provides clearance and 

settlement services for trades executed 

by its Members in the U.S. equity, 

corporate and municipal bond, and unit 

investment trust markets. 

Members are assessed fees in 

accordance with Addendum A (Fee 

Structure). The current Fee Structure 

covers a multitude of fees that are 

assessed on Members based upon their 

activities and the services utilized. 

NSCC operates a cost plus low margin 

pricing model and has in place 

procedures to control costs and to 

regularly review pricing levels against 

costs of operation. It reviews pricing 

levels against its costs of operation 

typically during the annual budget 

process. The budget is approved 

annually by the Board. NSCC’s fees are 

cost-based plus a markup, as approved 

by the Board or management (pursuant 

to authority delegated by the Board), as 

applicable. This markup or ‘‘low 

margin’’ is applied to recover 

development costs and operating 

expenses, and to accumulate capital 

sufficient to meet regulatory and 

economic requirements. 

Maintenance Fee 

NSCC implemented the Maintenance 

Fee in the current Fee Structure in 2016 

in order to (i) diversify NSCC’s revenue 

sources, mitigating NSCC’s dependence 

on revenues driven by trading volumes, 

and (ii) add a more stable revenue 

source that would contribute to NSCC’s 

operating margin by offsetting 

increasing costs and expenses.6 The fee 

is charged to all NSCC Members and 

Limited Members that are required to 

make deposits to the NSCC Clearing 

Fund (collectively, ‘‘Contributing 

Members’’) in proportion to the 

Contributing Member’s average, end of 

day, monthly cash deposit to the 

Clearing Fund. 

Until June 2020, the Maintenance Fee 

had been calculated monthly, in arrears, 

as the product of (A) 0.25 percent and 

(B) the average of the Contributing 

Member’s actual cash deposit to the 

NSCC Clearing Fund as of the end of 

each day of the month, multiplied by 

the number of days in that month and 

divided by 360. However, by its terms 

at the time, the fee had been waived if 

the monthly rate of return on NSCC’s 

investment of the cash portion in the 

Clearing Fund was less than 0.25 

percent for the month (‘‘Waiver 

Provision’’). 

In June 2020, NSCC modified the 

Maintenance Fee in three ways.7 First, 

NSCC removed the Waiver Provision. 

Second, instead of using a fixed rate of 

0.25 percent when calculating the 

Maintenance Fee, NSCC calculated the 

fee using the corresponding month’s 

average Interest Rate on Excess Reserves 

(i.e., the IOER rate) that is determined 

by the Board of Governors of the Federal 

Reserve System.8 Third, NSCC set a 

ceiling of 0.25 percent and a floor of 

0.00 percent on the IOER rate used in 

the fee calculation. 

Those three modifications were 

designed to help address an immediate 

financial issue that NSCC was 

experiencing due to the coronavirus 

global pandemic and overall reaction by 

the financial markets, and, based on 

information at the time, to better 

position NSCC going forward, with 

respect to its ability to fund its default 

liquidity resources in various economic 

environments, as well as to improve the 

overall functioning of the Maintenance 

Fee.9 However, after completing NSCC’s 

annual budgeting process that began in 

August and finished in October 2020— 

in which NSCC evaluated its short- and 

long-term financial position in 

consideration of expected Contributing 

Member activity, revenues, cost of 

funding,10 market volatility, and the 

financial markets more broadly, 

concerns remained around NSCC’s net 

income operating margin. 

To help address this issue, NSCC 

proposes to further modify the 

Maintenance Fee. Specifically, NSCC 

will no longer calculate the fee using the 

corresponding month’s average IOER 

rate but, instead, return to using a fixed 

rate of 0.25 percent, which, 

consequently, would render the current 

floor of 0.00 percent unnecessary. NSCC 

is using a fixed rate of 0.25 percent so 

that Members will not be charged an 

amount greater than what was possible 

under the original and current 

calculation of the fee. 

NSCC believes that reverting to a 

fixed rate in calculating the 

Maintenance Fee would have a number 

of benefits. For example, by using a 

fixed rate, the fee would no longer 

fluctuate as the IOER rate fluctuates, 

which should help Contributing 

Members better anticipate the cost of the 

fee and, for NSCC, stabilize revenue 

generated from the fee. Greater stability 

in the revenue generated from the fee 

would help support NSCC’s net income 

operating margin and, accordingly, its 

credit ratings, which are key factors in 

NSCC’s costs, expenses, and funding.11

Additionally, the proposed change 

would help provide consistent pricing 

between NSCC and its affiliate clearing 

agencies, The Depository Trust 

Company (‘‘DTC’’) and Fixed Income 

Clearing Corporation (‘‘FICC’’),12 as both 

DTC and FICC have filed proposed rule 

changes concurrently with this filing 

that would result in the same 

calculation of their respective 

maintenance fees.13

Clearance Activity Fee 

The ‘‘value out of the net’’ component 

of the Clearance Activity Fee in the Fee 

Structure is a fee based on the daily 

aggregate market value of all settling 

CNS positions after netting. It is 

currently $2.12 per million dollars of 

settling value (i.e., the absolute value of 


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14The current ‘‘value out of the net’’ component 

of the Clearance Activity Fee was implemented in 

2019 as part of fee changes to address pricing 

complexity. See Securities Exchange Act Release 

No. 84770 (December 10, 2018), 83 FR 64374 

(December 14, 2018) (SR–NSCC–2018–011). 

15NSCC manages its general business risk by 

holding sufficient liquid net assets funded by equity 

to cover potential general business losses so it can 

continue operations and services as going concerns 

if those losses materialize, in compliance with the 

requirements of Rule 17Ad–22(e)(15). 17 CFR 

240.17Ad–22(e)(15). NSCC maintains a Clearing 

Agency Policy on Capital Requirements which 

defines the amount of capital it must maintain for 

this purpose and sets forth the manner in which 

this amount is calculated. See Securities Exchange 

Act Release No. 89360 (July 21, 2020), 85 FR 45280 

(July 27, 2020) (SR–NSCC–2020–014) (amending 

original filing). 

the CNS Long Positions and Short 

Positions).14

Due to the coronavirus global 

pandemic and overall reaction by the 

financial markets, NSCC’s cost of 

funding has risen sharply in 2020, 

particularly for NSCC’s key default 

liquidity resources. The unexpected 

increases in cost and expense to secure 

and maintain those default liquidity 

resources has added millions of dollars 

to NSCC’s expense. 

As described above, after completing 

NSCC’s 2020 annual budgeting 

process—in which NSCC evaluated its 

short- and long-term financial position 

in consideration of expected Member 

activity, revenues, cost of funding, 

market volatility, and the financial 

markets more broadly, concerns 

remained around NSCC’s net income 

operating margin. In order to address 

this issue and to better align cost with 

revenue, NSCC proposes to modify the 

‘‘value out of the net’’ component of the 

Clearance Activity Fee from $2.12 per 

million dollars of settling value to $2.56 

per million dollars of settling value. 

Specifically, NSCC anticipates that the 

proposed change would enable NSCC to 

offset the increase in its cost and 

expense while generating a low net 

income operating margin, consistent 

with NSCC’s cost plus low margin 

pricing model. 

NSCC believes modifying the ‘‘value 

out of the net’’ component of the 

Clearance Activity Fee would further 

help support NSCC’s net income 

operating margin and, accordingly, its 

credit ratings, which, as described 

above, are key factors in NSCC’s costs, 

expenses, and funding. 

Rebate Policy 

NSCC is also proposing to amend 

Section VIII of the Fee Structure to 

replace the description currently under 

the heading ‘‘NSCC Pricing Policy’’ with 

a description of its current policy 

regarding the issuance of rebates to 

Members. In connection with this 

change, the proposed change would also 

amend the title of Section VIII to ‘‘NSCC 

Rebate Policy’’ to better describe the 

policy in this section. 

Section VIII of the Fee Structure 

currently includes an outdated 

description of NSCC’s policy to adjust 

Members’ invoices based on NSCC’s 

revenues. This description states that 

NSCC may adjust invoices down in the 

form of a discount or up in the form of 

a surcharge, based on its revenues. 

NSCC did historically provide its 

Members with a discount on their 

invoices, but it does not have any record 

of adjusting Members’ invoices up, in 

the form of a surcharge, in the past. 

NSCC views its practice of providing 

a rebate to its Members as a corporate 

function, and not related to its operation 

as a self-regulatory organization. An 

NSCC rebate is essentially a return of 

the revenue that NSCC collects through 

the fees it charges Members for its 

services (as set forth in Addendum A of 

the Rules). Rebates are not related to the 

amounts Members deposit with NSCC 

as their Required Fund Deposits, which 

are made up of risk-based margin 

charges calculated pursuant to 

Procedure XV of the Rules. The 

determination to provide a rebate is 

made at the corporation-level, based on 

a number of factors and considerations, 

as described below, and is not a separate 

determination made for each individual 

Member. 

Following the financial recession of 

2008, NSCC ceased providing such 

discounts in connection with the 

implementation of a financial strategy to 

strengthen its financial position and 

health. As a result of that strategy and 

improved financial markets, in 2019 

NSCC determined to reinstitute its 

practice of discounting Members’ 

invoices, in the form of a rebate, based 

on its financial performance. In 

connection with this decision, NSCC is 

proposing to replace the language under 

the heading ‘‘NSCC Pricing Policy’’ in 

Section VIII of the Fee Structure to 

describe its current rebate practice. This 

proposed change would not change 

NSCC’s current rebate practice but 

would provide Members with 

transparency into this practice and the 

governance around rebates. 

(ii) Proposed Fee Changes 

NSCC is proposing to change the 

Maintenance Fee in Subsection G 

(Clearing Fund Maintenance Fee) of 

Section V (Pass-Through and Other 

Fees) of the Fee Structure. Specifically, 

NSCC is proposing to modify the 

Maintenance Fee by removing language 

regarding application of the IOER rate 

and a floor of 0.00 percent. 

In addition, NSCC is proposing to 

change the Clearance Activity Fee in 

Subsection A (Clearance Activity Fee) of 

Section II (Trade Clearance Fees) of the 

Fee Structure. Specifically, NSCC is 

proposing to modify the ‘‘value out of 

the net’’ component of the Clearance 

Activity Fee from $2.12 per million of 

settling value to $2.56 per million of 

settling value. 

Finally, NSCC is proposing to amend 

Section VIII of the Fee Structure to 

replace the description currently under 

the heading ‘‘NSCC Pricing Policy’’ with 

a description of its current policy 

regarding the issuance of rebates to 

Members, as described above. 

First, in connection with this change, 

the proposed change would also amend 

the title of Section VIII to ‘‘NSCC Rebate 

Policy’’ to better describe the policy in 

this section. 

Second, the proposed language would 

describe that NSCC may provide 

Members with a rebate of excess net 

income, and would define excess net 

income as either income of NSCC or 

income related to one business line of 

NSCC, after application of expenses, 

capitalization costs, and applicable 

regulatory requirements. The language 

would also state that a rebate is 

discretionary, to make it clear that 

NSCC is not obligated to provide a 

rebate. 

Third, the proposed language would 

state that a rebate would be approved by 

the Board. The proposed language 

would also state that, in determining 

whether a rebate is appropriate, the 

Board would consider one or more of 

the following, as appropriate: NSCC’s 

regulatory capital requirements,15

anticipated expenses, investment needs, 

anticipated future expenses with respect 

to improvement or maintenance of 

NSCC’s operations, cash balances, 

financial projections, and appropriate 

level of shareholders’ equity. 

Fourth, the proposed language would 

state that, if the Board determined to 

issue a rebate, it would set a rebate 

period and a rebate payment date, both 

of which are used to determine which 

Members are eligible for a rebate. The 

proposed language would state that 

Members that maintain their 

membership during all or a portion of 

the rebate period and on the rebate 

payment date are eligible for a rebate. 

Finally, the proposed language would 

describe how rebates are applied to the 

invoices of eligible Members. The 

proposed language would state that 

rebates are applied to all eligible 

Members on a pro-rata basis based on 


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16 15 U.S.C. 78q–1(b)(3)(D). 

17 17 CFR.17Ad–22(e)(23)(ii). 

18 15 U.S.C. 78q–1(b)(3)(D). 

19See Rule 4 and Procedure XV, supra note 5. 

20 Id. 

21See supra note 13. 

22 15 U.S.C. 78q–1(b)(3)(D). 

such Members’ gross fees paid to NSCC 

within the applicable rebate period, 

excluding pass-through fees and interest 

earned on Required Fund Deposits. The 

proposed language would also state that 

rebates are 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. The proposed language 

would also note that rebate amounts 

may be adjusted for miscellaneous 

charges and discounts. 

(iii) Expected Member Impact 

The proposed rule change, as 

modified by Amendment No. 1, is 

expected to increase NSCC’s annual 

revenue by approximately $31.6 

million. 

In general, NSCC anticipates that, as 

result of the proposed changes, 

approximately 62% of impacted 

affiliated family of members would have 

a fee increase of less than $1,000 per 

year, approximately 24% of impacted 

affiliated family of members would have 

a fee increase between $1,000 to 

$100,000 per year, approximately 10% 

of impacted affiliated family of members 

would have a fee increase of $100,000 

to $1 million per year, and 

approximately 4% of impacted affiliated 

family of members would have a fee 

increase of $1 million or greater per 

year. 

(iv) Member Outreach 

NSCC has conducted ongoing 

outreach to each Member in order to 

provide them with notice of the 

proposed changes and the anticipated 

impact for the Member. As of the date 

of this filing, no written comments 

relating to the proposed changes have 

been received in response to this 

outreach. The Commission will be 

notified of any written comments 

received. 

(v) Implementation Timeframe 

NSCC would implement this proposal 

on January 1, 2021. As proposed, a 

legend would be added to the Fee 

Structure stating there are changes that 

became effective upon filing with the 

Commission but have not yet been 

implemented. The proposed legend also 

would include the date on which such 

changes would be implemented and the 

file number of this proposal, and state 

that, once this proposal is implemented, 

the legend would automatically be 

removed. 

2. Statutory Basis 

NSCC believes this proposal is 

consistent with the requirements of the 

Act, and the rules and regulations 

thereunder applicable to a registered 

clearing agency. Specifically, NSCC 

believes the proposed changes to modify 

the Maintenance Fee and the ‘‘value out 

of the net’’ component of the Clearance 

Activity Fee are consistent with Section 

17A(b)(3)(D) of the Act 16 and the 

proposed change to include a 

description of NSCC’s current policy 

regarding the issuance of rebates to 

Members is consistent with Rule 17Ad– 

22(e)(23)(ii),17 as promulgated under the 

Act, for the reasons described below. 

Section 17A(b)(3)(D) of the Act 18

requires that the Rules provide for the 

equitable allocation of reasonable dues, 

fees, and other charges among its 

participants. NSCC believes that the 

proposed changes to the Maintenance 

Fee and the ‘‘value out of the net’’ 

component of the Clearance Activity 

Fee are consistent with this provision of 

the Act. 

As described above, the proposal 

would modify the Maintenance Fee to 

no longer calculate the fee using the 

corresponding month’s average IOER 

rate; rather, the calculation would revert 

to using a fixed rate of 0.25 percent, 

thus, negating the need to maintain the 

current floor of 0.00 percent. 

Because the proposed change would 

not alter how the Maintenance Fee is 

currently allocated (i.e., charged) to 

Contributing Members, NSCC believes 

the fee would continue to be equitably 

allocated. More specifically, as 

mentioned above, the Maintenance Fee 

is and would continue to be charged to 

all Contributing Members in proportion 

to the Contributing Member’s average 

monthly cash deposit to the Clearing 

Fund. As such, and as is currently the 

case, Contributing Members that make 

greater use of NSCC’s guaranteed 

services or which have activity in those 

services that present greater risk to 

NSCC would generally be subject to a 

larger Maintenance Fee because such 

Contributing Members would typically 

be required to maintain larger Clearing 

Fund deposits pursuant to the Rules.19

Conversely, Contributing Members that 

use NSCC’s guaranteed services less or 

which have activity that presents less 

risk would generally be subject to a 

smaller Maintenance Fee because such 

Contributing Members would typically 

be required to maintain smaller Clearing 

Fund deposits pursuant to the Rules.20

The proposed change to the 

Maintenance Fee would not adjust that 

allocation. For this reason, NSCC 

believes the Maintenance Fee would 

continue to be equitably allocated 

among Contributing Members. 

Similarly, NSCC believes that the 

Maintenance Fee would continue to be 

a reasonable fee under the proposed 

change described above. For example, 

by using a fixed rate, instead of a rate 

that fluctuates with the IOER rate, 

Contributing Members should be better 

able to anticipate the cost of the fee. 

Meanwhile, a fixed rate would not only 

improve NSCC’s ability to estimate 

revenue from the fee, but it also would 

stabilize the revenue received from the 

fee. As described above, greater stability 

in the revenue generated from the fee 

would help support NSCC’s net income 

operating margin and, accordingly, its 

credit ratings, which are key factors in 

NSCC’s costs, expenses, and funding. 

Additionally, using a fixed rate of 0.25 

percent would help ensure that 

Contributing Members are not charged 

an amount greater than what was 

possible under the original and current 

calculation of the fee. Lastly, the 

proposed change would help establish 

consistent pricing between NSCC and 

its affiliates, DTC and FICC, regarding 

each of their respective Maintenance 

Fees, as concurrent proposals by DTC 

and FICC would result in the same 

calculation.21 For this reason, NSCC 

believes the Maintenance Fee would 

continue to be reasonable. Based on the 

forgoing, NSCC believes the proposed 

rule change to the Maintenance Fee is 

consistent with Section 17A(b)(3)(D) of 

the Act.22

NSCC believes the proposed rule 

change to the ‘‘value out of the net’’ 

component of the Clearance Activity 

Fee would provide for the equitable 

allocation of reasonable fees. Because 

the proposed change would not alter 

how the Clearance Activity Fee is 

currently allocated (i.e., charged) to 

Members, NSCC believes the fee would 

continue to be equitably allocated. More 

specifically, as mentioned above, the 

‘‘value out of the net’’ component of the 

Clearance Activity Fee is based on a 

Member’s daily aggregate market value 

of all settling CNS positions after 

netting. As such, and as is currently the 

case, Members that make greater use of 

NSCC’s guaranteed services would 

generally be subject to a larger Clearance 

Activity Fee because such Members 

would typically have higher value of net 

positions after netting. Conversely, 

Members that use NSCC’s guaranteed 

services less would generally be subject 

to a smaller Clearance Activity Fee 


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78896 Federal Register / Vol. 85, No. 235 / Monday, December 7, 2020 / Notices 

23 Id. 

24 17 CFR 240.17Ad–22(e)(23)(ii). 

25 Id. 

26 15 U.S.C. 78q–1(b)(3)(I). 

27See June Filing, supra note 7. 

28 Id. 

because such Members would typically 

have lower value of net positions after 

netting. The proposed change to the 

‘‘value out of the net’’ component of the 

Clearance Activity Fee would not adjust 

that allocation. For this reason, NSCC 

believes the Clearance Activity Fee 

would continue to be equitably 

allocated among Members. 

NSCC believes that the Clearance 

Activity Fee would continue to be a 

reasonable fee under the proposed 

change described above. This is because 

the proposed change to modify the 

‘‘value out of the net’’ component of the 

Clearance Activity Fee is designed to 

offset NSCC’s increased costs and 

expenses while generating a low net 

income operating margin. As described 

above, in determining the appropriate 

level of the proposed change to modify 

the ‘‘value out of the net’’ component of 

the Clearance Activity Fee, NSCC 

considered a variety of factors, 

including expected Member activity, 

revenues, cost of funding, market 

volatility, and the financial markets 

more broadly. Based on that 

consideration, NSCC believes the 

proposed change would allow NSCC to 

assess a fee that is better aligned with 

NSCC’s increased costs and expenses. 

Having the ability to assess a fee that is 

better aligned with NSCC’s increased 

costs and expenses would further help 

support NSCC’s net income operating 

margin and, accordingly, its credit 

ratings, which are key factors in NSCC’s 

costs, expenses, and funding. For this 

reason, NSCC believes the Clearance 

Activity Fee would continue to be 

reasonable. Based on the forgoing, NSCC 

believes the proposed rule change to the 

‘‘value out of the net’’ component of the 

Clearance Activity Fee is consistent 

with Section 17A(b)(3)(D) of the Act.23

Rule 17Ad–22(e)(23)(ii) under the Act 

requires that NSCC establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to provide 

sufficient information to enable 

participants to identify and evaluate the 

risks, fees, and other material costs they 

incur by participating in the covered 

clearing agency.24 The proposed change 

would replace an outdated description 

of NSCC’s past practice of adjusting 

Members’ invoices with an updated 

description of its current rebate practice, 

which, when applicable, results in a 

reduction to the amount of fees a 

Member owes to NSCC. By updating the 

Fee Structure with a clear, transparent 

description of NSCC’s current rebate 

practice, the proposed change would 

provide Members with sufficient 

information to evaluate the fees they 

may incur by participating in NSCC. 

Therefore, NSCC believes the proposed 

change would be consistent with the 

requirements of Rule 17Ad– 

22(e)(23)(ii).25

(B) Clearing Agency’s Statement on 

Burden on Competition 

NSCC does not believe that the 

proposed change to the Maintenance 

Fee would have an impact on 

competition among Contributing 

Members. As described above, the 

Maintenance Fee is charged ratably 

based on Contributing Members’ use of 

NSCC’s guaranteed services, as reflected 

in Contributing Members’ deposits to 

the Clearing Fund. Thus, the fee is 

designed to be reflective of each 

Contributing Member’s individual 

activity at NSCC. Additionally, NSCC 

does not believe reverting to a fixed rate 

of 0.25 percent in calculating the 

Maintenance Fee would have any 

impact on competition among 

Contributing Members because using 

such a rate means that Contributing 

Members still cannot be assessed an 

amount greater than what could have 

been assessed under the original and 

current calculations of the fee. 

However, appreciating that the value 

of a dollar is not consistent for each 

Contributing Member, if the change to 

no longer calculate the fee using the 

corresponding month’s average IOER 

rate would create a competitive burden 

for a Contributing Member because the 

Contributing Member could be assessed 

a higher fee at a time when that IOER 

rate is lower than the proposed 0.25 

percent fixed rate, NSCC believes such 

a burden would not be significant, given 

that the amount assessed would still be 

within the range of what could be 

assessed under the current calculation. 

Moreover, NSCC believes that any such 

burden would be necessary and 

appropriate in furtherance of the 

purposes of the Act, as permitted by 

Section 17A(b)(3)(I) of the Act.26

The burden would be necessary 

because it is essential that NSCC 

continue to offset some of its costs and 

expenses with stable revenue generated 

from the Maintenance Fee, regardless of 

the economic environment. As 

described above, not doing so could 

adversely affect NSCC’s credit ratings, 

which could further increase funding or, 

possibly, decrease the availability of 

crucial liquidity resources for NSCC. 

The burden would be appropriate 

because, as described above, the 

Maintenance Fee is calculated, using a 

balanced formula, to assess a fee that is 

reflective of the Contributing Member’s 

use of NSCC’s guaranteed services, so 

that NSCC can defray some of its costs 

and expenses in providing those 

services. More specifically, returning to 

a fixed rate of 0.25 percent would be 

appropriate because it is the same rate 

that was used prior to the change made 

in June 2020,27 and it is currently the 

ceiling used in the existing calculation; 

thus, the new calculation still would not 

use a rate any higher than it could have 

previously. 

NSCC believes the proposed rule 

change to modify the ‘‘value out of the 

net’’ component of the Clearance 

Activity Fee may have an impact on 

competition among its Members because 

the change would likely increase the 

fees of those Members that utilize 

NSCC’s guaranteed service when 

compared to their fees under the current 

Fee Structure. NSCC believes the 

proposed change could burden 

competition by negatively affecting such 

Members’ operating costs. While these 

Members may experience increases in 

their fees when compared to their fees 

under the current Fee Structure, NSCC 

does not believe the proposed change in 

and of itself mean that the burden on 

competition is significant. This is 

because even though the amount of the 

fee increase may seem significant (e.g., 

from $2.12 to $2.56 per million of 

settling value), NSCC believes the 

increase in fees would similarly affect 

all Members that utilize NSCC’s 

guaranteed services and would be 

reflective of each Member’s individual 

activity at NSCC, and therefore the 

burden on competition would not be 

significant. Regardless of whether the 

burden on competition is deemed 

significant, NSCC believes any burden 

that is created by this proposed change 

would be necessary and appropriate in 

furtherance of the purposes of the Act, 

as permitted by Section 17A(b)(3)(I) of 

the Act.28

The burden would be necessary 

because it is essential that NSCC 

continue to offset some of its costs and 

expenses with revenue generated from 

the Clearance Activity Fee, regardless of 

the economic environment. As 

described above, not doing so could 

adversely affect NSCC’s credit ratings, 

which could further increase funding or, 

possibly, decrease the availability of 

crucial liquidity resources for NSCC. 

The burden would be appropriate 

because, as described above, the 

Clearance Activity Fee is calculated, 


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Federal Register / Vol. 85, No. 235 / Monday, December 7, 2020 / Notices 78897 

29 15 U.S.C. 78s(b)(3)(A). 

30 17 CFR 240.19b–4(f). 

31 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(2). 

5Each capitalized term not otherwise defined 

herein has its respective meaning as set forth the 

Rules, By-Laws and Organization Certificate of DTC 

Continued 

using a balanced formula, to assess a fee 

that is reflective of the Member’s use of 

NSCC’s guaranteed services, so that 

NSCC can defray some of its costs and 

expenses in providing those services. 

More specifically, NSCC believes the 

proposed rule change to modify the 

‘‘value out of the net’’ component of the 

Clearance Activity Fee would be 

appropriate because it would allow 

NSCC to assess a fee that is better 

aligned with NSCC’s increased costs 

and expenses while generating a low net 

income operating margin. 

NSCC does not believe the proposed 

change to describe its current rebate 

practice would have any impact, or 

impose any burden, on competition 

among its Members. As described above, 

this proposed rule change, as modified 

by Amendment No. 1, would replace 

outdated information currently in the 

Fee Structure with an updated 

description of NSCC’s current rebate 

practice. As described in the proposed 

language, under its current practice, 

rebates are allocated to eligible Members 

on a pro-rata basis based on such 

Members’ gross fees paid to NSCC 

within the applicable rebate period. 

Therefore, the current practice is 

applied equally to all eligible Members. 

The proposed change to provide 

Members with transparency into this 

practice would not cause any increase 

or decrease in the rebates Members may 

receive. Therefore, this proposed rule 

change, as modified by Amendment No. 

1, would not have any impact, or 

impose any burden, on competition. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change, as Modified by Amendment No. 

1, Received From Members, 

Participants, or Others 

Written comments relating to this 

proposed rule change, as modified by 

Amendment No. 1, have not been 

solicited or received. NSCC will notify 

the Commission of any written 

comments received by NSCC. 

III. Date of Effectiveness of the 

Proposed Rule Change, as Modified by 

Amendment No. 1, and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 29 and paragraph (f) of Rule 

19b–4 thereunder.30 At any time within 

60 days of the filing of the proposed rule 

change, as modified by Amendment No. 

1, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change, as modified by Amendment No. 

1, is consistent with the Act. Comments 

may be submitted by any of the 

following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NSCC–2020–018 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–NSCC–2020–018. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change, as modified by Amendment No. 

1, that are filed with the Commission, 

and all written communications relating 

to the proposed rule change, as 

modified by Amendment No. 1, between 

the Commission and any person, other 

than those that may be withheld from 

the public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of NSCC and on DTCC’s website 

(http://dtcc.com/legal/sec-rulefilings.aspx). All comments received 

will be posted without change. Persons 

submitting comments are cautioned that 

we do not redact or edit personal 

identifying information from comment 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–NSCC– 

2020–018 and should be submitted on 

or before December 28, 2020. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–26785 Filed 12–4–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90546; File No. SR–DTC– 

2020–014] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change, as Modified 

by Amendment No. 1, To Amend the 

Guide to the DTC Fee Schedule 

December 1, 2020. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on November 

16, 2020, The Depository Trust 

Company (‘‘DTC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change. On November 30, 2020, DTC 

filed Amendment No. 1 to the proposed 

rule change, which revised a portion of 

the rule text and corresponding 

description in the notice relating to 

DTC’s current policy regarding the 

issuance of rebates to Participants. DTC 

filed the proposed rule change, as 

modified by Amendment No. 1, 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(2) thereunder.4

The proposed rule change, as modified 

by Amendment No. 1, is described in 

Items I, II, and III below, which Items 

have been prepared primarily by DTC. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change, as modified by 

Amendment No. 1, from interested 

persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change, as Modified by 

Amendment No. 1 

The proposed rule change, as 

modified by Amendment No. 1,5


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