Federal Register / Vol. 87, No. 110 / Wednesday, June 8, 2022 / Notices 34913 

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

2 17 CFR 240.19b–4. 

3Amendment No. 1 made a correction to the 

Exhibit 5 of the filing, specifically, to insert an 

additional cross-reference into a proposed 

definition that had been omitted. 

4Capitalized terms not defined herein are defined 

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

Files/Downloads/legal/rules/nscc_rules.pdf. 5See Section I(B)(2) of Procedure XV, id. 

6See Rule 4 and Procedure XV, supra note 3. 

NSCC’s market risk management strategy is 

designed to comply with Rule 17Ad–22(e)(4) under 

the Act, where these risks are referred to as ‘‘credit 

risks.’’ 17 CFR 240.17Ad–22(e)(4). 

7The Rules identify when NSCC may cease to act 

for a Member and the types of actions NSCC may 

take. For example, NSCC may suspend a firm’s 

membership with NSCC or prohibit or limit a 

Member’s access to NSCC’s services in the event 

that Member defaults on a financial or other 

obligation to NSCC. See Rule 46, supra note 3. 

8Supra note 3. 

Representative: Kenneth R. Moeller; 

Comments Due: June 10, 2022. 

This Notice will be published in the 

Federal Register. 

Erica A. Barker, 

Secretary. 

[FR Doc. 2022–12328 Filed 6–7–22; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95026; File No. SR–NSCC– 

2022–005] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing of 

Proposed Rule Change, as Modified by 

Amendment No. 1, To Revise the 

Excess Capital Premium Charge 

June 2, 2022. 

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 May 30, 

2022, National Securities Clearing 

Corporation (‘‘NSCC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been prepared 

by the clearing agency. On June 1, 2022, 

NSCC filed Amendment No. 1 to the 

proposed rule change, to make a 

correction to the proposed rule change.3

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 

The proposed rule change consists of 

modifications to Procedure XV (Clearing 

Fund Formula and Other Matters) of 

NSCC’s Rules & Procedures (‘‘Rules’’) 4

to revise the Excess Capital Premium 

(‘‘ECP’’) charge by enhancing the 

methodology for calculating the charge 

to (1) compare a Member’s applicable 

capital amounts with the amount it 

contributes to the Clearing Fund that 

represents its volatility charge, (2) for 

Members that are broker-dealers, use net 

capital amounts rather than excess net 

capital amounts in the calculation of the 

ECP charge; and for all other Members, 

use equity capital in the calculation of 

the ECP charge, and (3) establish a cap 

of 2.0 for the Excess Capital Ratio (as 

defined below) that is used in 

calculating a Member’s ECP charge. 

The proposed changes would also 

improve the transparency of the Rules 

regarding the ECP charge by (1) 

clarifying the capital amounts that are 

used in the calculation of the charge by 

introducing new defined terms, (2) 

removing NSCC’s discretion to waive or 

reduce the charge, and (3) providing 

that NSCC may calculate the charge 

based on updated capital information, 

as described in greater detail below. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

clearing agency has prepared 

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 

1. Purpose 

NSCC is proposing to modify the ECP 

charge, which is a component of its 

Clearing Fund that NSCC may impose 

on a Member when a portion of that 

Member’s Required Fund Deposit 

(defined in the Rules as the ‘‘Calculated 

Amount’’) exceeds its applicable capital 

amounts by 1.0 (defined in the Rules as 

the ‘‘Excess Capital Ratio’’), as described 

in greater detail below.5 The proposed 

changes would revise the ECP charge by 

enhancing the methodology for 

calculating the charge to (1) compare a 

Member’s applicable capital amounts 

with the amount it contributes to the 

Clearing Fund that represents its 

volatility charge, (2) for Members that 

are broker-dealers, use net capital 

amounts rather than excess net capital 

amounts in the calculation of the ECP 

charge; and for all other Members, use 

equity capital in the calculation of the 

ECP charge, and (3) establish a cap of 

2.0 for the Excess Capital Ratio that is 

used in calculating a Member’s ECP 

charge. 

The proposed changes would also 

improve the transparency of the Rules 

regarding the ECP charge by (1) 

clarifying the capital amounts that are 

used in the calculation of the charge by 

introducing new defined terms, (2) 

removing NSCC’s discretion to waive or 

reduce the charge, and (3) providing 

that NSCC may calculate the charge 

based on updated capital information, 

as described in greater detail below. 

(i) Overview of the Required Fund 

Deposit and NSCC’s Clearing Fund 

As part of its market risk management 

strategy, NSCC manages its credit 

exposure to Members by determining 

the appropriate Required Fund Deposits 

to the Clearing Fund and monitoring its 

sufficiency, as provided for in the 

Rules.6 The Required Fund Deposit 

serves as each Member’s margin. 

The objective of a Member’s Required 

Fund Deposit is to mitigate potential 

losses to NSCC associated with 

liquidating a Member’s portfolio in the 

event NSCC ceases to act for that 

Member (hereinafter referred to as a 

‘‘default’’).7 The aggregate of all 

Members’ Required Fund Deposits 

constitutes the Clearing Fund of NSCC. 

NSCC would access its Clearing Fund 

should a defaulting Member’s own 

Required Fund Deposit be insufficient 

to satisfy losses to NSCC caused by the 

liquidation of that Member’s portfolio. 

Pursuant to the Rules, each Member’s 

Required Fund Deposit consists of a 

number of applicable components, each 

of which is calculated to address 

specific risks faced by NSCC, as 

identified within Procedure XV of the 

Rules.8

While many components of the 

Clearing Fund are designed to measure 

risks presented by the net unsettled 

positions a Member submits to NSCC to 

be cleared and settled, some 

components measure and mitigate other 

risks that NSCC may face, such as credit 

risks. For example, a Member may be 

required to make an additional deposit 

to the Clearing Fund pursuant to 

Section I(B)(1) of Procedure XV of the 

Rules if it is placed on the Watch List, 

which is defined in Rule 1 (Definitions 

and Descriptions) of the Rules as a list 

of Members who NSCC deems to pose 

heightened risk to it and its other 


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9See Section 4 of Rule 2B, which describes 

NSCC’s ongoing monitoring and review of Members 

and the factors NSCC considers in assigning 

Members a credit rating that could result in a 

Member being placed on the Watch List, supra note 

3. 

10The special charge is described in Section 

I(A)(1)(c) and (2)(c) of Procedure XV, the MRD 

charge is described in Section I(A)(1)(e) and (2)(d) 

of Procedure XV, the coverage component charge is 

described in Section I(A)(1)(f) and (2)(e) of 

Procedure XV, and the MLA charge is described in 

Section I(A)(1)(g) and (2)(f) of Procedure XV, supra 

note 3. 

11Supra note 8. 

12Pursuant to Section 2(b)(iv) of Rule 15, NSCC 

may require a Member to provide NSCC with 

adequate assurances of that Member’s financial 

responsibility in the form of increased Clearing 

Fund deposits. Supra note 3. 

13Supra note 3. 

14See Section 1. B.1. of Addendum B, supra note 

3. NSCC has proposed changes to the membership 

standards set forth in Addendum B that would 

modify the capital requirements for Members. See 

Securities Exchange Act Release No. 94068 (January 

26, 2022), 21 FR 5544 (February 1, 2022) (SR– 

NSCC–2021–016). 

15See Section 2(A) of Rule 2B, supra note 3. 

16Supra note 3. 

17When NSCC determines to collect a lower 

amount than that amount calculated pursuant to the 

Rules, as provided for under Procedure XV, NSCC 

may, for example, calculate that lower amount by 

reducing the Excess Capital Ratio used in the 

calculation to 2.0. Supra note 3. 

18See footnote 7 of Procedure XV, supra note 3. 

19See Securities Exchange Act Release No. 54457 

(September 15, 2006), 71 FR 55239 (September 21, 

2006) (SR–FICC–2006–03 and SR–NSCC–2006–03). 

20The volatility component is designed to capture 

the market price risk associated with each 

Member’s portfolio at a 99th percentile level of 

confidence. NSCC has two methodologies for 

calculating the volatility component—a modelbased volatility-at-risk, or VaR, charge and a 

haircut-based calculation, for certain positions that 

are excluded from the VaR charge calculation. The 

charge that is applied to a Member’s Required Fund 

Deposit with respect to the volatility component is 

referred to as the volatility charge and is the sum 

of the applicable VaR charge and the haircut-based 

calculation. Amounts calculated pursuant to 

Sections I(A)(1)(a)(iv) and (2)(a)(iv) of Procedure XV 

with respect to long positions in Net Unsettled 

Positions in Family-Issued Securities are designed 

to address wrong-way risk presented by these 

Members based on consideration of 

relevant factors.9

Similarly, the ECP charge is a 

component of the Clearing Fund that is 

designed to mitigate the heightened 

default risk a Member could pose to 

NSCC if it operates with lower capital 

levels relative to its margin 

requirements. Each Business Day, NSCC 

determines if a Member may be subject 

to the ECP charge by first determining 

its Calculated Amount. The Calculated 

Amount is a portion of a Member’s 

Required Fund Deposit designed to 

represent its margin requirements to 

NSCC. A Member’s Calculated Amount 

is calculated as its Required Fund 

Deposit excluding any applicable 

special charge, margin requirement 

differential charge, coverage component 

charge or margin liquidity adjustment 

charge,10 plus any additional amounts 

the Member is required to deposit to the 

Clearing Fund either due to being 

placed on the Watch List 11 or pursuant 

to Rule 15 (Assurances of Financial 

Responsibility and Operational 

Capability) of the Rules.12

NSCC then divides the Member’s 

Calculated Amount by its current 

capital amount, which is the amount 

reported to NSCC pursuant to its 

ongoing membership standards, as set 

out in Rule 2B (Ongoing Membership 

Requirements and Monitoring) and 

Addendum B (Qualifications and 

Standards of Financial Responsibility, 

Operational Capability and Business 

History) of the Rules.13 Pursuant to the 

current membership standards in 

Addendum B of the Rules, Members 

that are broker-dealers are required to 

maintain a certain level of excess net 

capital, and Members that are banks are 

required to maintain a certain level of 

equity capital as a requirement for 

continued membership with NSCC.14

Pursuant to Section 2 of Rule 2B of the 

Rules, Members are required to provide 

NSCC with financial information, 

including information regarding 

Members’ current capital amounts, on a 

regular basis and NSCC uses these 

reported capital amounts in the 

calculation of the ECP charge.15

Pursuant to Section I(B)(2) of 

Procedure XV, if a Member’s Calculated 

Amount, when divided by its applicable 

capital amount, is greater than the 

Excess Capital Ratio of 1.0, NSCC may 

require that Member to deposit an ECP 

charge.16 The applicable ECP charge 

may be equal to the product of (1) the 

amount by which a Member’s 

Calculated Amount exceeds its 

applicable capital amount, multiplied 

by (2) the Member’s Excess Capital 

Ratio. Members are able to access and 

view reports regarding their Clearing 

Fund and, through these reports, 

Members may be alerted when their 

Calculated Amount divided by the 

applicable capital amount is greater 

than 0.5, as an early warning regarding 

their capital levels. 

Under Section I(B)(2) of Procedure 

XV, NSCC may collect a lower ECP 

charge than the amount calculated 

pursuant to the Rules, may determine 

not to collect the ECP charge from a 

Member at all, and may return all or a 

portion of a collected ECP charge if it 

believes the imposition or maintenance 

of the ECP charge is not necessary or 

appropriate.17 Section I(B)(2) of 

Procedure XV describes some 

circumstances when NSCC may 

determine not to collect an ECP charge 

from a Member, which includes, for 

example, when an ECP charge results 

from trading activity for which the 

Member submits later offsetting activity 

that lowers its Required Fund Deposit.18

The discretion to adjust, waive or return 

an ECP charge was designed to provide 

NSCC with the ability to determine 

when a calculated ECP charge may not 

be necessary or appropriate to mitigate 

the risks it was designed to address.19

Since the ECP charge was adopted, 

NSCC has calculated and assessed the 

ECP charge consistent with the Rules, 

and NSCC has exercised its discretion to 

both reduce and waive the ECP charge 

when NSCC has deemed it necessary or 

appropriate. NSCC recently reviewed 

the effectiveness of the ECP charge to 

identify ways NSCC could enhance both 

the calculation of the charge and the 

disclosures regarding the charge in the 

Rules. In connection with this review, 

NSCC discussed the ECP charge and its 

proposed enhancements with Members, 

NSCC management, and NSCC’s 

supervisors at the Commission. As a 

result of this review, NSCC is proposing 

to make several enhancements to the 

ECP charge, as described in greater 

detail below. 

These enhancements are designed to 

improve NSCC’s ability to measure the 

increased default risks that are 

presented by Members who operate 

with lower capital. The proposed 

changes would simplify the calculation 

of the charge and the description of the 

charge in the Rules, making it more 

predictable to Members. The proposed 

changes are designed to improve the 

transparency of the ECP charge to 

Members by removing NSCC’s 

discretion to waive or reduce the charge 

and providing that NSCC may calculate 

the charge based on updated capital 

information. The proposed 

improvements to the transparency of the 

ECP charge also include clarifying the 

descriptions of the capital amounts that 

would be used in the calculation of the 

charge through new defined terms. 

Collectively, the proposal would make 

the ECP charge more consistent, 

transparent, and predictable to 

Members, while maintaining the 

effectiveness of NSCC’s risk-based 

margining methodology as it relates to 

the ECP charge. 

(ii) Use Members’ Volatility Component 

as the Calculated Amount 

NSCC is proposing to replace the 

Calculated Amount with the amount 

collected as that Member’s volatility 

component as determined pursuant to 

Sections I(A)(1)(a)(i)–(iii) and (2)(a)(i)– 

(iii) of Procedure XV of the Rules.20


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positions, not volatility risks, and, as such, are not 

a part of a Member’s volatility charge. See Sections 

I(A)(1)(a) and (2)(a) of Procedure XV, supra note 3. 

21See supra note 9. 

22See definition of ‘‘CNS Fails Position’’ in Rule 

1, and see also Section I(A)(1)(e) of Procedure XV, 

supra note 3. 

23See definitions of ‘‘Net Unsettled Position’’ and 

‘‘Net Unsettled Balance Order Position’’ in Rule 1, 

supra note 3. 

24See Section 2.A of Rule 2B, which requires 

Members to provide NSCC with a copy of their 

Form X–17–A–5 (Financial and Operational 

Combined Uniform Single (‘‘FOCUS’’) Report), 

Consolidated Report of Condition and Income 

(‘‘Call Report’’), or an equivalent, supra note 3. 

25Supra note 3. 

26 17 CFR 240.15c3–1. See Securities Exchange 

Act Release No. 70072 (July 30, 2013), 78 FR 51823 

(August 21, 2013) (File No. S7–08–07). 

27Supra note 3. 

In both determining if an ECP charge 

is applicable and in calculating an ECP 

charge, NSCC currently compares a 

Member’s Calculated Amount to its 

reported capital levels. As described 

above, the Calculated Amount is 

defined in Section I(B)(2) of Procedure 

XV as a Member’s Required Fund 

Deposit, excluding certain components 

and including other additional deposits 

to the Clearing Fund.21 Because a goal 

of the ECP charge is to identify and 

mitigate risks presented when a 

Member’s capital levels may not be 

adequate to meet its margin 

requirements to NSCC, the Calculated 

Amount is designed to represent a 

material portion of those margin 

requirements. 

As described above, because each 

component of the Clearing Fund is 

calculated to address specific risks faced 

by NSCC, some components are applied 

only to certain positions in a Member’s 

portfolio. For example, the CNS fails 

charge, which is included in the 

Calculated Amount, is based on the 

market value of only a Member’s CNS 

Fails Positions (as defined in the Rules) 

of the Member.22 The volatility 

component of the Clearing Fund 

measures the market price volatility of 

all of a Member’s Net Unsettled 

Positions and Net Balance Order 

Unsettled Positions (as defined in the 

Rules). Therefore, the volatility 

component is often considered a 

comprehensive measurement of the 

risks presented by a Member’s clearing 

activity and usually comprises the 

largest portion of a Member’s Required 

Fund Deposit.23 NSCC believes that 

replacing the Calculated Amount with a 

Member’s volatility charge would 

provide an appropriate measure for 

purposes of the ECP charge. 

Currently, determining a Member’s 

Calculated Amount requires a more 

complicated calculation, as it uses a 

Member’s Required Fund Deposit, 

excludes certain components, and 

includes other deposits. The proposal 

would simplify this calculation 

significantly by using only the volatility 

component. One of the tools NSCC 

provides to its Members is a calculator 

that allows them to determine their 

potential volatility charge based on 

trading activity. Therefore, this 

proposed change would make the 

calculation of the ECP charge both 

clearer and more predictable for 

Members. 

NSCC does not expect that any impact 

of this proposed change on the number 

of ECP charges or the size of the 

calculated ECP charges would 

materially impact NSCC’s ability to 

manage the risks the ECP charge is 

designed to address. NSCC believes the 

benefits of using a simpler, clearer, and 

more predictable calculation that is 

based on the most comprehensive 

component of the Clearing Fund 

outweigh any risk related to the 

reduction in the ECP charges NSCC 

would collect. 

(iii) Use Net Capital for Broker-Dealer 

Members and Equity Capital for All 

Other Members in the Calculation of the 

ECP Charge 

In the calculation of the ECP charge, 

NSCC is proposing to use net capital 

rather than excess net capital for 

Members that are broker-dealers, and 

equity capital for all other Members. As 

described in greater detail below, in 

connection with these proposed 

changes, NSCC would also improve the 

transparency of the Rules by adopting 

definitions of ‘‘Net Capital’’ and ‘‘Equity 

Capital.’’ 

As described above, NSCC’s ongoing 

membership requirements, set forth in 

Rule 2B of the Rules, require Members 

to provide NSCC with regular 

information regarding their financial 

positions, including capital levels.24

This information is provided, in part, to 

confirm that Members continue to 

maintain the minimum financial 

requirements of membership set forth in 

Addendum B of the Rules.25 Currently, 

NSCC also uses these reported capital 

amounts in the calculation of the ECP 

charge. 

First, NSCC believes it would be 

appropriate to revise the capital 

measure used to calculate the ECP 

charge for broker-dealer Members to 

replace excess net capital with net 

capital. This revision would align the 

capital measures used for broker-dealer 

Members and other Members, which 

would result in more consistent 

calculations of the ECP charge across 

different types of Members. 

In addition to creating consistency in 

the calculations for different Members, 

NSCC believes that using net capital 

rather than excess net capital would 

also provide NSCC with a better 

measure of the increased default risks 

presented when a Member operates at 

low net capital levels relative to its 

margin requirements. This approach 

would be consistent with the rationale 

for the Commission’s amendments to 

Rule 15c3–1 under the Act (the ‘‘Net 

Capital Rule’’), which were designed to 

promote a broker-dealer’s capital quality 

and require the maintenance of ‘‘net 

capital’’ (i.e., capital in excess of 

liabilities) in specified amounts as 

determined by the type of business 

conducted.26 The Net Capital Rule was 

designed to ensure the availability of 

funds and assets (including securities) 

in the event that a broker-dealer’s 

liquidation becomes necessary. The Net 

Capital Rule represented a net worth 

perspective, which is adjusted by 

unrealized profit or loss, deferred tax 

provisions, and certain liabilities as 

detailed in the rule. It also included 

deductions and offsets and required that 

a broker-dealer demonstrate compliance 

with the Net Capital Rule, including 

maintaining sufficient net capital at all 

times (including intraday). 

Similarly, NSCC believes that the Net 

Capital Rule is an effective process of 

separating liquid and illiquid assets and 

computing a broker-dealer’s regulatory 

net capital that should replace NSCC’s 

existing practice of using excess net 

capital in the calculation of the ECP 

charge. 

Second, NSCC is proposing to revise 

the Rules to provide that, for all 

Members that are not broker-dealers, it 

would use equity capital in calculating 

the ECP charge. Currently, the Rules 

state that NSCC would use a Member’s 

capital amount set forth in the 

membership standards in Addendum B 

of the Rules.27 Section 1.B of 

Addendum B describes the membership 

standards of Members, and currently 

states that the applicable capital 

measure for Members that are banks is 

equity capital, for Members that are 

trust companies and not banks the 

applicable capital measure is 

consolidated capital, and for other legal 

entities that are Members the applicable 

capital measure is determined by NSCC. 

Currently, and historically, NSCC has 

had very few Members that are trusts 

and not banks. For all Members that are 

not banks, non-bank trusts or brokerdealers (which generally include, for 

example, exchanges and registered 

clearing agencies), NSCC uses those 


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Members’ reported equity capital in the 

calculation of the ECP charge. 

Therefore, in practice, the ECP charge is 

calculated for the majority of Members 

that are not broker-dealers using their 

equity capital, and this proposed change 

is not expected to have a material 

impact on the collection of ECP charges. 

The proposal would simplify the 

calculation of the ECP charge for 

Members that are not broker-dealers by 

stating in Section I(B)(2) of Procedure 

XV that NSCC would use equity capital 

rather than use different measures that 

are based on other membership 

requirements. This proposed change 

would also create consistency in the 

calculations across Members. 

(iv) Establish a Cap for the Excess 

Capital Ratio 

NSCC is proposing to set a maximum 

amount of Excess Capital Ratio that is 

used in calculating Members’ ECP 

charge to 2.0. NSCC believes capping 

the multiplier that is used in this 

calculation would allow NSCC to 

appropriately address the risks it faces 

without imposing an overly burdensome 

ECP charge. Historically, the Excess 

Capital Ratio has rarely exceeded 2.0 in 

the calculation of Members’ ECP 

charges, and in cases when 2.0 was 

exceeded NSCC typically exercised the 

discretion provided to it in the Rules to 

reduce the applicable charge. NSCC’s 

discretion was appropriate in these 

circumstances because NSCC believes it 

is able to mitigate the risks presented to 

it by a Member’s lower capital levels by 

collecting an ECP charge calculated 

with an Excess Capital Ratio that is at 

or below 2.0. 

Therefore, given that NSCC is now 

proposing to remove its discretion to 

waive the ECP charge, as described 

below, NSCC believes capping the 

Excess Capital Ratio at 2.0 would 

continue to provide NSCC with an 

appropriate measure of the risks 

presented to it relative to Members’ 

capital levels. This proposed change 

would also provide Members with more 

clarity and transparency into the ECP 

charge, by allowing them to predict and 

estimate the maximum amount of their 

potential ECP charge. 

(v) Improve Transparency Regarding the 

ECP Charge 

NSCC is proposing changes to Section 

I(B)(2) of Procedure XV to improve 

transparency regarding the ECP charge 

by (a) clarifying the description of the 

capital amounts that NSCC uses in the 

calculation of the ECP charge by 

adopting new defined terms, (b) 

removing NSCC’s discretion to waive or 

reduce the charge, and (c) providing that 

NSCC may calculate the charge based on 

updated capital information. 

First, NSCC is proposing to clarify the 

description of the capital amounts that 

it uses to calculate the ECP charge by 

introducing defined terms and 

specifying the reporting requirements 

that NSCC relies on to obtain that 

capital information for Members. As 

described above, for Members that are 

broker-dealers, NSCC is proposing to 

use a Member’s net capital amount, and 

for all other Members, NSCC would use 

a Member’s equity capital in the 

calculation of the ECP charge. In order 

to improve the clarity of the Rules, 

NSCC is proposing to introduce a 

defined term for ‘‘Equity Capital’’ in 

Rule 1 and to revise a proposed defined 

term for ‘‘Net Capital’’ in order to align 

the two defined terms. The proposal 

would also revise Section I(B)(2) of 

Procedure XV in describing the 

calculation of the ECP charge to use 

these defined terms where appropriate. 

Finally, the proposal would amend 

Addendum B to include the new 

defined term for Equity Capital. 

The definition of Equity Capital 

would be, as of a particular date, the 

amount equal to the equity capital as 

reported on the Member’s or Limited 

Member’s most recent Call Report, or, if 

the Member or Limited Member is not 

required to file a Call Report, then as 

reported on its most recent financial 

statements or equivalent reporting. 

NSCC would also align a proposed 

definition of Net Capital to be, as of a 

particular date, the amount equal to the 

net capital as reported on the Member’s 

or Limited Member’s most recent 

FOCUS Report, or, if the Member or 

Limited Member is not required to file 

a FOCUS Report, then as reported on its 

most recent financial statements or 

equivalent reporting. 

In addition to using these new 

defined terms, NSCC would also add a 

statement to Section I(B)(2) of Procedure 

XV to clarify to Members that the 

amounts used in the calculation of the 

ECP charge would be the amounts 

included in their regular reporting that 

is provided to NSCC pursuant to the 

ongoing membership reporting 

requirements, specifically in their 

FOCUS Report or Call Report, as 

applicable, or in an equivalent financial 

statement or report that is delivered to 

NSCC pursuant to the same 

requirement. Collectively, these 

proposed changes would provide 

Members with improved clarity and 

certainty regarding the amounts that 

would be used in calculating the ECP 

charge. 

Second, the proposed changes would 

eliminate NSCC’s discretion to waive or 

reduce the ECP charge. NSCC believes 

that the proposed changes to the ECP 

charge described in this filing would 

have the collective impact of 

eliminating most circumstances in 

which NSCC would have exercised this 

discretion. For example, the proposal to 

cap the Excess Capital Ratio at 2.0 and 

the proposal to specify that NSCC may 

calculate an ECP charge based on 

updated capital amounts, both address 

the most common circumstances when 

NSCC has either waived or reduced the 

ECP charge in the past. By eliminating 

this discretion, the proposal would 

provide Members with more certainty in 

predicting when an ECP charge may be 

applied and how any such charge would 

be calculated. Therefore, NSCC has 

determined that it is no longer necessary 

to retain discretion to waive or reduce 

the ECP charge under the proposed 

methodology. 

Third, NSCC would provide that it 

may calculate the ECP charge based on 

updated capital information. As 

described above, NSCC would use the 

net capital or equity capital amounts 

that are reported on Members’ most 

recent financial reporting or financial 

statements delivered to NSCC in 

connection with the ongoing 

membership reporting requirements. 

Under the proposal, if a Member’s 

capital amounts change between the 

dates when it submits these financial 

reports, it may provide NSCC with 

updated capital information for 

purposes of calculating the ECP charge. 

Today, when NSCC exercises its 

discretion to waive or reduce the 

amount of an applicable ECP charge, 

NSCC occasionally does so by applying 

updated capital information in its 

calculation. Therefore, in connection 

with eliminating this discretion, NSCC 

would disclose in the Rules that it may 

use updated capital information in the 

calculation of an ECP charge rather than 

require Members to wait until the 

issuances of their next financial 

reporting or financial statements for 

changes in their capital positions to be 

reflected in an ECP charge calculation. 

NSCC is proposing to retain some 

discretion in when it would accept 

updated capital information for this 

purpose. For example, NSCC may 

require a Member to provide 

documentation of the circumstances 

that caused a change in capital 

information, and if adequate evidence is 

not available or NSCC does not believe 

the evidence sufficiently verifies that 

the Member’s capital position has 

changed, NSCC would continue to 

calculate the ECP charge for that 

Member based on the prior capital 

information available to NSCC until the 


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28 15 U.S.C. 78q–1(b)(3)(F). 

29 17 CFR 240.17Ad–22(e)(4)(i), (e)(6)(i) and 

(e)(23)(ii). 

30 15 U.S.C. 78q–1(b)(3)(F). 31 Id. 

next financial reporting or financial 

statements are delivered. NSCC believes 

it is appropriate to retain some 

discretion to allow NSCC to determine 

if updated capital information is 

adequately verified before it agrees to 

rely on that information for this 

calculation. NSCC believes the proposal 

to disclose that Members would have 

the opportunity to provide updated 

capital information to NSCC to be used 

in an ECP charge calculation would 

improve the transparency of the Rules 

despite NSCC’s proposal to retain a 

certain level of discretion. 

(vi) Proposed Changes to Procedure XV 

of the Rules 

The proposal would also amend 

Section I(B)(2) of Procedure XV of the 

Rules. This section would describe the 

calculation used to determine if an ECP 

charge may be applicable to a Member. 

The revised description of this 

calculation would (i) replace the 

definition of Calculated Amount with 

Members’ volatility charge, (ii) replace 

references to the capital amounts used 

in the calculation with the new defined 

terms for Net Capital and Equity Capital, 

and (iii) state that the Excess Capital 

Ratio used in calculating an ECP charge 

is set at a maximum of 2.0. The 

proposed change also includes a 

statement that the applicable capital 

amounts used in the calculation would 

be the amounts most recently reported 

to NSCC on Members’ FOCUS Reports 

or Call Reports, as applicable, or other 

equivalent financial reporting submitted 

to NSCC pursuant to Section 2 of Rule 

2B. Finally, the proposal would state 

that NSCC may, in its sole discretion, 

accept updated capital amounts in 

calculating an ECP charge. 

(vii) Impact Study Results 

NSCC has provided the Commission 

with the results of an impact study that 

reviewed the potential impacts of the 

proposal during the period of June 1, 

2020 through December 31, 2021. The 

study showed that the proposed 

enhancement would have reduced the 

number of ECP charges that would have 

been triggered by the calculation by 65 

percent, from 327 ECP charges triggered 

for 17 Members to 114 ECP charges 

triggered for 14 Members. The total 

aggregate amount that would have been 

triggered by the proposed calculation if 

the proposal was effective during that 

time would have been reduced from 

$50.95 billion (the actual total amount 

of ECP charges triggered by the current 

calculation during that period) to 

approximately $17.22 billion (the total 

amount of ECP charges that would have 

been triggered during that time by the 

proposed calculation). The average 

amount that would have been calculated 

for each Member would have been 

reduced from $155.8 million to 

approximately $151.1 million. The 

study showed that the proposal would 

have had no impact to NSCC’s overall, 

or Member-level, end-of-day Clearing 

Fund Requirement backtesting coverage. 

Over the impact study period, NSCC 

waived and reduced calculated ECP 

charges by $38.46 billion. NSCC waived 

a total of 20 ECP charges, that totaled 

approximately $25.77 billion. If the 

proposal had been in place at that time, 

15 of these charges would have been 

collected from Members (although the 

amount would have been reduced), 

totaling $6.43 billion, 2 charges would 

not have been triggered as the calculated 

ECP ratio was below 1.0, and NSCC 

would have waived 3 of the ECP charges 

following receipt of updated financial 

information. NSCC reduced the amount 

of 16 ECP charges by a total of 

approximately $12.69 billion. If the 

proposal had been in place at that time, 

6 of these charges would have been still 

collected, totaling $6.35 billion, and 10 

charges would not have been triggered 

as the calculated ECP ratio was below 

1.0. 

(viii) Implementation Timeframe 

NSCC would implement the proposed 

changes no later than 30 Business Days 

after the approval of the proposed rule 

change by the Commission. NSCC 

would announce the effective date of 

the proposed changes by Important 

Notice posted to its website. 

2. Statutory Basis 

NSCC believes the proposed rule 

change is consistent with the 

requirements of the Act, and the rules 

and regulations thereunder applicable to 

a registered clearing agency. In 

particular, NSCC believes the proposed 

rule change is consistent with Section 

17A(b)(3)(F) of the Act,28 and Rules 

17Ad–22(e)(4)(i), (e)(6)(i) and (e)(23)(ii), 

each promulgated under the Act,29 for 

the reasons described below. 

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

requires that the rules of NSCC be 

designed to, among other things, 

promote the prompt and accurate 

clearance and settlement of securities 

transactions and to assure the 

safeguarding of securities and funds 

which are in the custody or control of 

the clearing agency or for which it is 

responsible.30

NSCC believes the proposed changes 

are consistent with the requirements of 

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

such changes enhance the effectiveness 

of the ECP charge by (1) replacing the 

Calculated Amount with a Member’s 

volatility component, (2) replacing 

excess net capital with net capital for 

broker-dealer Members and using equity 

capital for all other Members, and (3) 

establishing a cap for the Excess Capital 

Ratio. As described above, NSCC 

believes these proposed changes would 

create a simpler, clearer calculation of 

the ECP charge that is based on more 

consistent metrics, while allowing 

NSCC to continue to effectively address 

the heightened default risks presented 

by Members that operate at lower 

capital levels. 

The Clearing Fund is a key tool that 

NSCC uses to mitigate potential losses 

to NSCC associated with liquidating a 

Member’s portfolio in the event of 

Member default. Each of the proposed 

enhancements described above are 

designed to collectively improve 

NSCC’s ability to collect amounts that 

reflect the risks posed by its Members. 

The proposal to enhance the calculation 

of the ECP charge by replacing the 

Calculated Amounts with Members’ 

volatility charges would make the 

calculation clearer and more predictable 

to Members. The proposal to use net 

capital for broker-dealer Members and 

equity capital for all other Members in 

the calculation of the ECP charge would 

result in a more consistent calculation 

across different types of Members. The 

proposal to cap the Excess Capital Ratio 

at 2.0 would allow NSCC to 

appropriately address the risks it faces 

without imposing an overly burdensome 

ECP charge, and would allow NSCC to 

eliminate its discretion to waive or 

reduce the charge, resulting in a more 

transparent margining methodology. 

Together, by improving the 

consistency and predictability of the 

ECP charge, the proposed enhancements 

would also improve NSCC’s ability to 

collect amounts that reflect the risks 

posed by its Members such that, in the 

event of Member default, NSCC’s 

operations would not be disrupted, and 

non-defaulting Members would not be 

exposed to losses they cannot anticipate 

or control. In this way, the proposed 

rule change is designed to assure the 

safeguarding of securities and funds 

which are in the custody or control of 

NSCC or for which it is responsible, 

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

the Act.31

The proposed changes are also 

designed to improve the transparency of 


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32 Id. 

33 17 CFR 240.17Ad–22(e)(4)(i). 

34 Id. 

35 17 CFR 240.17Ad–22(e)(6)(i). 

36 Id. 

37 17 CFR 240.17Ad–22(e)(23)(ii). 

38 Id. 

the Rules regarding the ECP charge, for 

example, by removing NSCC’s 

discretion to recalculate, reduce or 

waive the charge, as described above, 

and by introducing new defined terms 

regarding the capital amounts used in 

the charge. By enhancing the clarity and 

transparency of the Rules, the proposed 

changes would allow Members to better 

anticipate their margin charges, which 

would allow them to more efficiently 

and effectively conduct their business in 

accordance with the Rules. In this way, 

NSCC believes the proposed changes 

would promote the prompt and accurate 

clearance and settlement of securities 

transactions, consistent with Section 

17A(b)(3)(F) of the Act.32

Rule 17Ad–22(e)(4)(i) under the Act 

requires that NSCC establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to effectively 

identify, measure, monitor, and manage 

its credit exposures to participants and 

those arising from its payment, clearing, 

and settlement processes, including by 

maintaining sufficient financial 

resources to cover its credit exposure to 

each participant fully with a high degree 

of confidence.33

As described above, NSCC believes 

the proposed rule change would enable 

NSCC to better identify, measure, 

monitor, and, through the collection of 

Members’ Required Fund Deposits, 

manage its credit exposures to Members 

by maintaining sufficient resources to 

cover those credit exposures fully with 

a high degree of confidence. 

Specifically, NSCC believes that the 

proposed enhancements to the 

calculation of the ECP charge to use the 

volatility charge rather than the 

Calculated Amount, and to use net 

capital and equity capital, as 

appropriate, would collectively make 

the calculation clearer and more 

predictable to Members. The proposal to 

use net capital rather than excess net 

capital for broker-dealer Members, and 

equity capital for all other Members, 

would also result in a more consistent 

calculation across different types of 

Members. Finally, the proposal to cap 

the Excess Capital Ratio at 2.0 would 

allow NSCC to appropriately address 

the risks it faces without imposing an 

overly burdensome ECP charge, and 

would allow NSCC to eliminate its 

discretion to waive or reduce the charge, 

resulting in a more transparent 

margining methodology. 

Overall, NSCC believes the proposal 

would improve the clarity and 

predictability of the ECP charge and, in 

this way, would enhance NSCC’s ability 

to effectively identify, measure and 

monitor its credit exposures, and would 

enhance NSCC’s ability to maintain 

sufficient financial resources to cover 

NSCC’s credit exposure to each 

participant fully with a high degree of 

confidence. As such, NSCC believes the 

proposed rule change is consistent with 

Rule 17Ad–22(e)(4)(i) under the Act.34

Rule 17Ad–22(e)(6)(i) under the Act 

requires that NSCC establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to cover its credit 

exposures to its participants by 

establishing a risk-based margin system 

that, at a minimum, considers, and 

produces margin levels commensurate 

with, the risks and particular attributes 

of each relevant product, portfolio, and 

market.35

The Required Fund Deposits are made 

up of risk-based components (as margin) 

that are calculated and assessed daily to 

limit NSCC’s exposures to Members. 

NSCC’s proposed changes to use the 

volatility charge rather than the 

Calculated Amount, and to use net 

capital and equity capital, as 

appropriate, in the calculation of the 

ECP charge would collectively make the 

calculation clearer and more predictable 

to Members, while continuing to apply 

an appropriate risk-based charge 

designed to mitigate the risks presented 

to NSCC. Similarly, the proposal to cap 

the Excess Capital Ratio at 2.0 would 

allow NSCC to appropriately address 

the risks it faces without imposing an 

overly burdensome ECP charge, and 

would allow NSCC to eliminate its 

discretion to waive or reduce the charge, 

resulting in a more transparent 

margining methodology. Overall, these 

proposed changes would improve the 

effectiveness of the calculation of the 

ECP charge and, therefore, allow NSCC 

to more effectively address the 

increased default risks presented by 

Members that operate with lower capital 

levels relative to their margin 

requirements. In this way, the proposed 

changes enhance the ability of the ECP 

charge to produce margin levels 

commensurate with the risks NSCC 

faces related to its Members’ operating 

capital levels. Therefore, NSCC believes 

the proposed rule change is consistent 

with Rule 17Ad–22(e)(6)(i) under the 

Act.36

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 for 

providing sufficient information to 

enable participants to identify and 

evaluate the risks, fees, and other 

material costs they incur by 

participating in NSCC.37 NSCC is 

proposing to improve the clarity and 

transparency of the Rules related to its 

calculation of the ECP charge in a 

number of ways described in this filing. 

The proposed changes would clarify the 

description of the capital amounts that 

NSCC uses in the calculation of the ECP 

charge by adopting new defined terms, 

remove NSCC’s discretion to waive or 

reduce the charge, and provide that 

NSCC may calculate the charge based on 

updated capital information. 

Additionally, as described above, the 

proposed changes to use the volatility 

charge rather than the Calculated 

Amount, and to use net capital and 

equity capital, as appropriate, in the 

calculation of the ECP charge, would 

collectively make the calculation clearer 

and more predictable to Members. 

Through these proposed amendments to 

the Rules, the proposal would assist 

NSCC in providing its Members with 

sufficient information to identify and 

evaluate the risks and costs, in the form 

of Required Fund Deposits to the 

Clearing Fund, that they incur by 

participating in NSCC. In this way, 

NSCC believes the proposed changes are 

consistent with Rule 17Ad–22(e)(23)(ii) 

under the Act.38

(B) Clearing Agency’s Statement on 

Burden on Competition 

NSCC does not believe the proposed 

rule change to enhance the calculation 

of the ECP charge would impact 

competition because the proposed 

changes are designed to create a clearer 

and simpler calculation that is based on 

more consistent metrics, and is likely to 

result in lower and less frequent ECP 

charges than are applied under the 

current methodology. More specifically, 

the replacement of the Calculated 

Amount with the volatility charge, 

which is currently a portion of the 

Calculated Amount, when used in the 

calculation to determine if an ECP 

charge is applicable, is likely to result 

in fewer triggered ECP charges, as 

evidenced by the impact study 

referenced above. Additionally, the 

replacement of excess net capital with 

net capital for broker-dealer Members, 

and using equity capital for all other 

Members, would create more consistent 

calculations of the ECP charge across 

types of Members, reducing any burden 

on competition that the existing 


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39 17 CFR 200.30–3(a)(12). 

calculation could have presented. 

Finally, the proposal to cap the Excess 

Capital Ratio to 2.0 in the calculation of 

the ECP charge would limit the total 

amount a Member could be charged, 

and would provide all Members with 

more certainty and transparency into 

their potential margin requirements. 

Therefore, by creating a simpler and 

clearer calculation that uses more 

consistent metrics, the proposals would 

improve NSCC’s ability to apply the 

ECP charge more consistently across its 

Members, and reduce the impact this 

charge could have on competition. As 

noted above, in the impact study results, 

the proposed changes are also expected 

to result in fewer and lower ECP 

charges. 

Further, NSCC does not believe the 

proposed rule change to improve the 

clarity and predictability of the 

calculation of the ECP charge would 

impact competition because this 

proposed change would not impact the 

calculation of Members’ Required Fund 

Deposits. Therefore, this proposed 

change would not affect NSCC’s 

operations or the rights and obligations 

of membership. As such, NSCC believes 

the proposed rule change to improve the 

transparency of the Rules would not 

have any impact on competition. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

NSCC has not received or solicited 

any written comments relating to this 

proposal. If any written comments are 

received, they will be publicly filed as 

an Exhibit 2 to this filing, as required by 

Form 19b–4 and the General 

Instructions thereto. 

Persons submitting comments are 

cautioned that, according to Section IV 

(Solicitation of Comments) of the 

Exhibit 1A in the General Instructions to 

Form 19b–4, the Commission does not 

edit personal identifying information 

from comment submissions. 

Commenters should submit only 

information that they wish to make 

available publicly, including their 

name, email address, and any other 

identifying information. 

All prospective commenters should 

follow the Commission’s instructions on 

how to submit comments, available at 

https://www.sec.gov/regulatory-actions/ 

how-to-submit-comments. General 

questions regarding the rule filing 

process or logistical questions regarding 

this filing should be directed to the 

Main Office of the Commission’s 

Division of Trading and Markets at 

tradingandmarkets@sec.gov or 202– 

551–5777. 

NSCC reserves the right to not 

respond to any comments received. 

III. Date of Effectiveness of the 

Proposed Rule Change, and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) by order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

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– 

NSCC–2022–005 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–2022–005. 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 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– 

2022–005 and should be submitted on 

or before June 29, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.39

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–12289 Filed 6–7–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

34606; File No. 812–15298] 

BlackRock Capital Investment 

Advisors, LLC and BlackRock Private 

Credit Fund 

June 2, 2022. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’ or ‘‘SEC’’). 

ACTION: Notice. 

Notice of an application under section 

6(c) of the Investment Company Act of 

1940 (the ‘‘Act’’) for an exemption from 

sections 18(a)(2), 18(c) and 18(i) and 

section 61(a) of the Act. 

Summary of Application: Applicants 

request an order to permit certain 

closed-end management investment 

companies that have elected to be 

regulated as business development 

companies (‘‘BDCs’’) to issue multiple 

classes of shares with varying sales 

loads and asset-based service and/or 

distribution fees. 

Applicants: BlackRock Capital 

Investment Advisors, LLC and 

BlackRock Private Credit Fund. 

Filing Dates: The application was 

filed on January 21, 2022 and amended 

on May 2, 2022. 

Hearing or Notification of Hearing: An 

order granting the requested relief will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing on any application by 

emailing the Commission’s Secretary at 

Secretarys-Office@sec.gov and serving 

the Applicants with a copy of the 


khammond on DSKJM1Z7X2PROD with NOTICES