Document ID: SEC-2017-0484-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2017-03-22T04:00Z

[Federal Register Volume 82, Number 54 (Wednesday, March 22, 2017)]
[Notices]
[Pages 14781-14785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05606]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80260; File No. SR-NSCC-2017-001]

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of a Proposed Rule Change To Describe the 
Illiquid Charge That May Be Imposed on Members

March 16, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, as amended (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on March 13, 2017, National Securities Clearing 
Corporation (``NSCC'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the clearing 
agency. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of amendments to NSCC's Rules & 
Procedures (``Rules'') \3\ in order to provide transparency in the 
Rules with respect to an existing margin charge described below 
(``Illiquid Charge'') and to codify NSCC's current practices with 
respect to the assessment and collection of the Illiquid Charge. The 
Illiquid Charge is currently imposed on Members' Net Unsettled 
Positions in certain securities that are not traded on or subject to 
the rules of an exchange and that exceed applicable volume thresholds, 
when all conditions to the application of the charge, described below, 
are met. Such securities, to be defined in the Rules as ``Illiquid 
Securities,'' lack marketability, based on insufficient access to a 
trading venue, and may have low and volatile share prices. Therefore, 
the Illiquid Charge is designed to mitigate the risk that NSCC may face 
when liquidating Illiquid Securities following a Member default and 
such liquidation is difficult or delayed due to a lack of interest in a 
particular Illiquid Security or limitations on the share price of the 
Illiquid Security.
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    \3\ Capitalized terms used herein and not otherwise defined 
herein are defined in the Rules, available at www.dtcc.com/~/media/
Files/Downloads/legal/rules/nscc_rules.pdf.

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[[Page 14782]]

    In order to provide transparency in the Rules with respect to the 
existing Illiquid Charge, and to codify NSCC's existing practices with 
respect to the charge, NSCC is proposing to amend (i) Rule 1 
(Definitions and Descriptions) to add certain defined terms associated 
with the Illiquid Charge, and (ii) Procedure XV (Clearing Fund Formula 
and Other Matters) to clarify the circumstances and manner in which 
NSCC calculates and imposes the Illiquid Charge. The proposed rule 
change also would make a technical change to Procedure XV to define the 
``Market Maker Domination Charge,'' to create additional clarity and 
ease of reference in the Rules, as further described 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
    The proposed rule change would provide transparency in the Rules 
with respect to the existing Illiquid Charge, which NSCC currently may 
impose on Members,\4\ as part of each Member's Required Deposit to the 
NSCC Clearing Fund when all conditions to the application of the 
charge, described below, are met. NSCC imposes the Illiquid Charge on 
Members with Net Unsettled Positions in Illiquid Securities, defined 
below, that exceed applicable volume thresholds. The Illiquid Charge is 
designed to mitigate the additional risk presented to NSCC resulting 
from these securities' lack of marketability and/or insufficient access 
to a trading venue. The Illiquid Charge is charged in addition to, and 
separately from, an existing haircut margin charge that NSCC may also 
currently impose on positions in classes of securities that are less 
amenable to statistical analysis, which include Illiquid Securities.\5\ 
When all conditions to the application of the Illiquid Charge are met, 
the charge is applied as part of a Member's start of day Required 
Deposit, which is due each business day.
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    \4\ The Illiquid Charge is currently imposed pursuant to 
Procedure XV, Sections (I)(A)(1)(e) and I.(A)(2)(d). Id.
    \5\ The haircut margin charge of the Clearing Fund formula for 
CNS trades and Balance Order trades is described in Procedure XV, 
Sections I.(A)(1)(a)(ii) and I.(A)(2)(a)(ii), respectively. Supra 
note 3.
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1. The Required Deposit and the Illiquid Charge
    NSCC uses a risk-based margin methodology to assess Required 
Deposits from all Members. The Required Deposit is composed of a number 
of risk-based component charges (as margin), including the Illiquid 
Charge, which are calculated and assessed daily. The objective of the 
Required Deposit is to mitigate potential losses to NSCC associated 
with the liquidation of the Member's portfolio if NSCC ceases to act 
for a Member (hereinafter referred to as a ``default''). NSCC considers 
a number of risks when evaluating the effectiveness of its margining 
methodology.
    NSCC is presented with certain risks when it clears and settles 
larger volumes of its Members' Net Unsettled Positions in securities 
that are generally considered illiquid. In order to add further clarity 
to its Rules, NSCC is proposing to define ``Illiquid Security'' in Rule 
1 (Definitions) as a security, other than a family-issued security,\6\ 
that is either (i) not traded on or subject to the rules of a national 
securities exchange registered under the Act; or (ii) is an OTC 
Bulletin Board or OTC Link issue.
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    \6\ ``Family issued securities'' are defined in Procedure XV, 
Section I.(B). Supra note 3.
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    Because Illiquid Securities are not traded on or subject to the 
rules of any exchange, these securities have limited access to a 
trading venue, lack marketability, and may have low or volatile share 
prices. Therefore, net sell positions in Illiquid Securities present 
NSCC with a risk that liquidation of positions in these securities may 
be difficult or delayed, increasing NSCC's exposure, and this risk is 
greater when a Member's portfolio contains larger volumes of Illiquid 
Securities, which could contribute to a prolonged or impaired 
liquidation. Additionally, net buy positions in Illiquid Securities 
that have a share price below a penny pose specific risks to NSCC, 
described below.
    In order to address the risks presented by larger volumes of Net 
Unsettled Positions in Illiquid Securities, NSCC currently calculates 
and collects the Illiquid Charge. The Illiquid Charge is a component of 
the Required Deposit and, as described in greater detail below, is 
calculated to address these risks.
    The Illiquid Charge is charged in addition to and separate from a 
haircut charge that NSCC also currently applies to Illiquid Securities 
that are traded over-the-counter. The Rules currently permit it to 
collect a margin charge calculated as a haircut of at least 10 percent 
of the absolute value of Net Unsettled Positions in classes of 
securities whose volatility is less amenable to statistical analysis, 
which include, but are not limited to, Illiquid Securities.\7\ This 
haircut is designed to cover the uncertain effect of market price 
volatility on portfolios that contain Illiquid Securities that are 
traded over-the-counter. However, because the haircut is a flat charge 
(calculated as a percentage of the absolute value of such positions), 
it does not completely address the lack of liquidity and marketability 
that are characteristic of Illiquid Securities. As such, the haircut 
charge on its own may not fully mitigate all of the risks presented by 
positions in these securities. Therefore, to account for the difference 
between the risk coverage provided by the haircut charge, which 
primarily addresses market price volatility of Illiquid Securities, and 
the remaining risk presented by such securities, including their lack 
of liquidity and marketability, NSCC also applies the Illiquid Charge.
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    \7\ Supra note 5.
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    This proposed rule change would amend the Rules to add transparency 
with respect to the existing Illiquid Charge and, in doing so, would 
codify NSCC's current practices with respect to the calculation and 
collection of the this margin charge.
    The volume thresholds that must be met in order for the charge to 
be applied, the methodology for calculating the Illiquid Charge, and 
the exceptions to and application of the Illiquid Charge are each 
described below.\8\
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    \8\ The methodology for calculating the Illiquid Charge has been 
effective for many years. NSCC evaluates the effectiveness of this 
methodology as part of its regular review of its margin calculations 
and any future changes would be subject to a separate proposed rule 
change pursuant to Section 19(b)(1) of the Act, and the rules 
thereunder, and advance notice pursuant to Section 806(e)(1) of 
Title VIII of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act entitled the Payment, Clearing, and Settlement 
Supervision Act of 2010, and the rules thereunder. 15 U.S.C. 
78s(b)(1); 12 U.S.C. 5465(e)(1).
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2. Net Buy Illiquid Positions and Net Sell Illiquid Positions
    Subject to the exceptions to the Illiquid Charge, described later 
in this filing, NSCC calculates an Illiquid

[[Page 14783]]

Charge for each ``Illiquid Position.'' The term ``Illiquid Position'' 
means a Net Unsettled Position in an Illiquid Security that exceeds 
applicable volume thresholds, as described below. For NSCC Members that 
transact in Illiquid Positions, NSCC applies different volume 
thresholds and Illiquid Charge calculation methods for net buy Illiquid 
Positions or net sell Illiquid Positions, in order to address the 
different risk profiles of these positions.\9\
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    \9\ In the event of a Member default, NSCC would complete the 
liquidation of an Illiquid Position by buying or selling that 
position into the market. The different risk profiles of net buy 
positions and net sell positions are based on, in part, the 
difference in the potential responsiveness of prices change to 
quantity that may occur when NSCC is liquidating a net buy position 
in an Illiquid Security, compared to when it is liquidating a net 
sell position in an Illiquid Security.
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a. Net Buy Illiquid Positions
    The Illiquid Charge only applies to a Member's net buy position in 
Illiquid Securities with a share price below one cent that meets the 
applicable volume threshold, as described below, such that it is an 
Illiquid Position.
    NSCC assesses the Illiquid Charge on a Member's net buy position if 
that position meets a volume threshold of greater than 100 million 
shares for a Member with a rating on NSCC's credit risk matrix (``CRRM 
rating'') \10\ of 1-4, and a volume threshold of greater than 10 
million shares for a Member with a CRRM rating of 5-7. A Member with a 
stronger CRRM rating would be assessed an Illiquid Charge on net buy 
Illiquid Positions at a higher volume threshold because NSCC believes 
these Members pose a lower risk of default.\11\
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    \10\ See Rule 2B, Section 4, supra note 3. The credit risk 
matrix applies a 7-point rating system, with ``1'' being the 
strongest rating and ``7'' being the weakest rating. Members with a 
weaker CRRM rating present a heightened credit risk to NSCC or have 
demonstrated a higher risk related to their ability to meet 
settlement. Members that are not rated by the credit risk matrix are 
not subject to the Illiquid Charge.
    \11\ Id.
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    If the volume threshold is met, the net buy position in Illiquid 
Securities is an Illiquid Position and is subject to the Illiquid 
Charge. The Illiquid Charge only applies to net buy Illiquid Positions 
in Illiquid Securities with a share price below one cent. If a 
transaction in any security, including an Illiquid Security, with a 
share price below one cent is entered into NSCC's Continuous Net 
Settlement system or Balance Order Accounting Operation, NSCC rounds up 
the price of the security to one cent. Therefore, when a Member holds a 
buy position in a sub-penny security, NSCC records the position's value 
at a higher price than the actual per share price of the position. The 
difference may reduce the Member's Required Deposit, particularly for a 
large quantity of buy positions in a sub-penny security.
    To address this risk, NSCC calculates the Illiquid Charge for net 
buy Illiquid Positions by multiplying the aggregate quantity of shares 
in such positions by one cent. NSCC assesses and collects the resulting 
amounts as the Illiquid Charge component of affected Members' Required 
Deposit.
b. Net Sell Illiquid Positions
    The Illiquid Charge only applies to a Member's net sell position in 
Illiquid Securities if that position meets the applicable volume 
threshold, as described below, such that it is an Illiquid Position.
    When determining if the volume thresholds for net sell positions in 
Illiquid Securities apply, NSCC first offsets the quantity of shares in 
a Member's sell position against the number of shares of the same 
Illiquid Security held by the Member at The Depository Trust Company 
(``DTC inventory offset''). Consequently, a Member could fall below the 
applicable volume thresholds after this offset, and therefore, would 
not be subject to the Illiquid Charge. The DTC inventory offset is not 
applied to Members with the weakest CRRM rating.\12\
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    \12\ Id.
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    Therefore, subject to the DTC inventory offset, if applicable, NSCC 
assesses the Illiquid Charge on a Member's net sell position if that 
position meets a volume threshold that is based on the percentage of 
the average daily volume (``ADV'') \13\ of the position in Illiquid 
Securities, that Member's CRRM rating, and, in some cases, that 
Member's excess net capital (``ENC'').
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    \13\ ``ADV'' is the average daily volume over the most recent 
twenty business days as determined by NSCC.
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    The volume threshold is 1 million shares for Members with a CRRM 
rating between 1-4, when the net sell position in Illiquid Securities 
represents more than or equal to 25 percent of the ADV. The volume 
threshold is 500,000 shares for Members with a CRRM rating between 5-7, 
when the net sell position in Illiquid Securities represents more than 
or equal to 25 percent of the ADV and the Member's ENC is greater than 
$10 million. The volume threshold is 100,000 shares for Members with a 
CRRM rating between 5-7, when the net sell position in Illiquid 
Securities represents more than or equal to 25 percent of the ADV and 
the Member's ENC is less than or equal to $10 million.
    If the volume threshold is met, the net sell position in Illiquid 
Securities is an Illiquid Position and is subject to the Illiquid 
Charge. To calculate the Illiquid Charge for net sell Illiquid 
Positions, NSCC considers (a) the Current Market Price \14\ of the 
subject Illiquid Security and (b) the quantity of shares in such 
position compared to the ADV of that Illiquid Security, as set forth 
below. Additionally, the Illiquid Charge is substituted by minimum 
price per share if certain conditions are met, as described below.
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    \14\ The term ``Current Market Price'' is defined in Rule 1. 
Supra note 3.
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    (A) If the Illiquid Position has a Current Market Price equal to or 
below $1.00, NSCC calculates the Illiquid Charge as the product of the 
aggregate quantity of shares in the Illiquid Position and either (i) 
the highest market price of the Illiquid Security during the preceding 
20 trading days (``One Month High Price'') \15\ or (ii) the Current 
Market Price of the Illiquid Security multiplied by a factor between 2 
and 10, depending on the market price.\16\
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    \15\ The ``One Month High Price'' means the highest of all NSCC 
observed market prices over the most recent 20 trading day period 
for purposes of the Illiquid Charge.
    \16\ Generally, the factor applied would be 10 where the market 
price is less than $0.10; the factor applied would be 5 where the 
market price is between $0.10 and $0.20; the factor applied would be 
2 where the market price is between $0.20 and $1.00. Where the 
market price is greater than $1.00, a $0.50 price increment is 
applied.
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    (B) If the Illiquid Position has a Current Market Price that is 
greater than $1.00, NSCC calculates the Illiquid Charge as the product 
of the aggregate quantity of shares in the Illiquid Position and either 
(i) the One Month High Price or (ii) the Current Market Price of the 
Illiquid Security rounded up to the next $0.50 increment.
    In determining whether to use the One Month High Price or the 
Current Market Price of the Illiquid Security to calculate the Illiquid 
Charge, NSCC compares the percentage of the ADV to the share quantity 
in the Illiquid Position. If the share quantity in the Illiquid 
Position is less than 100 percent of the ADV and more than or equal to 
25 percent, then the calculation uses the lesser of the One Month High 
Price or the Current Market Price of the Illiquid Securities (rounded 
up to the next $0.50 increment, if applicable). If the quantity of 
shares in the Illiquid Position is greater than or equal to 100 percent 
of the ADV, then the calculation uses the greater of the One Month High 
Price or the Current Market Price of the Illiquid Security (rounded up 
to the next $0.50 increment, if applicable).

[[Page 14784]]

    Furthermore, depending on the result of the calculation described 
above, the Illiquid Charge would remain subject to a minimum price per 
share, which shall not be less than $0.01. Therefore, when calculating 
the Illiquid Charge, the One Month High Price or the Current Market 
Price of the Illiquid Security is substituted by the minimum price per 
share if the One Month High Price or the Current Market Price, as 
applicable, is below the minimum price per share.
3. Exceptions and Exclusions From the Illiquid Charge
    In order to avoid duplicate margin charges, NSCC does not apply the 
Illiquid Charge to Illiquid Positions when a greater Market Maker 
Domination (``MMD'') charge is also applicable to those positions. The 
MMD charge applies to a position in a security that is greater than 
forty percent of the overall unsettled Long Position in that security, 
if such position is held by the Market Maker in that security.\17\ NSCC 
also excludes family-issued securities from the definition of Illiquid 
Securities.
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    \17\ For purposes of calculating the MMD charge, the overall 
unsettled Long Position is calculated as the sum of each Member's 
net Long Position. Application and calculation of the MMD charge is 
described in Procedure XV of the Rules, Sections I.(A)(1)(d) and 
I.(A)(2)(c). Supra note 3.
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a. Market Maker Domination Charge Exception
    NSCC assesses and collects an MMD charge as part of a Member's 
Required Deposit to address the risk presented by a concentrated 
position in a security when the Member holding the position is the 
market maker. There may be instances when a Member's Illiquid Position 
triggers both the Illiquid Charge and the MMD charge. Because these 
margin components are calculated to address duplicative risk concerns, 
NSCC imposes only the greater of the two charges when both charges are 
applicable.
    Additionally, in order to improve clarity and create ease of 
reference in the Rules, NSCC would amend the Rules by defining the term 
``Market Maker Domination Charge'' in Procedure XV, Section I.(A)(1)(d) 
and using the defined term in Section I.(A)(2)(c).\18\
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    \18\ Supra note 3.
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b. Family-Issued Securities Charge Exception
    Additionally, family-issued securities are excluded from the 
definition of Illiquid Securities and, therefore, are not subject to 
the Illiquid Charge. Family-issued securities have a different risk 
profile than other illiquid securities. In particular, these securities 
expose NSCC to specific wrong-way risk.\19\ Therefore, NSCC margins 
family-issued securities separately, through the margining methodology 
that currently applies to these securities, in order to address those 
unique risk characteristics.\20\
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    \19\ See Principles for financial market infrastructures, issued 
by the Committee on Payment and Settlement Systems and the Technical 
Committee of the International Organization of Securities 
Commissions 47n.65 (April 2012), available at http://www.bis.org/publ/cpss101a.pdf.
    \20\ The definition of family-issued securities and the margin 
methodology applicable to positions in these securities is described 
in Procedure XV of the Rules, Section I.(B)(1). Supra note 3.
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    In order to improve clarity and because family-issued securities 
have a different risk profile than other illiquid securities, NSCC 
would exclude family-issued securities from the definition of 
``Illiquid Security'' in the proposed rule change.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act, requires, in part, that the Rules 
be designed to assure the safeguarding of securities and funds that are 
within the custody or control of the clearing agency.\21\ By 
incorporating the Illiquid Charge into the Rules, the proposed change 
helps protect NSCC from potential losses in the event that a Member 
defaults. Specifically, the Illiquid Charge is calculated and collected 
by NSCC in order to mitigate the risk that its liquidation of Illiquid 
Securities, following a Member default, is difficult or delayed due to 
the nature of those securities, as described above. Therefore, by 
enabling NSCC to better assess and collect funds, as it deems 
necessary, the Illiquid Charge would promote the safeguarding of 
securities and funds that are within its custody or control, consistent 
with the requirements of Section 17(b)(3)(F) of the Act.\22\
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    \21\ 15 U.S.C. 78q-1(b)(3)(F).
    \22\ Id.
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    Rule 17Ad-22(b)(1) under the Act requires, in part, that NSCC 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to limit its exposures to potential 
losses from defaults by its Members under normal market conditions, so 
that NSCC's operations would not be disrupted and non-defaulting 
participants would not be exposed to losses that it cannot anticipate 
or control.\23\ Illiquid Securities lack marketability, may present 
insufficient access to a trading venue, and may have low and volatile 
share prices. Therefore, the Illiquid Charge is designed to mitigate 
the risk that NSCC faces that liquidation of these securities in the 
event of a Member default could be difficult or delayed as a result of 
these characteristics. As such, this charge is designed to obtain funds 
from Members that are sufficient to cover the risks presented by such 
Illiquid Position. This management of NSCC's credit exposures to its 
Members is consistent with Rule 17Ad-22(b)(1) under the Act.\24\
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    \23\ 17 CFR 240.17Ad-22(b)(1).
    \24\ Id.
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    Rule 17Ad-22(b)(2) under the Act requires NSCC to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to use margin requirements to limit its credit 
exposures to participants under normal market conditions.\25\ The 
Illiquid Charge is a component of Members' Required Deposits, which are 
calculated to ensure that NSCC covers its credit exposures at a 
confidence level of at least 99 percent under normal market conditions. 
Therefore, NSCC believes that the proposed rule change is consistent 
with Rule 17Ad-22(b)(2) under the Act.\26\
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    \25\ 17 CFR 240.17Ad-22(b)(2).
    \26\ Id.
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    The proposal is also designed to be consistent with Rules 17Ad-
22(e)(4) and (e)(6) under the Act, which were recently adopted by the 
Commission.\27\ Rule 17Ad-22(e)(4)(i) will require NSCC to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to effectively identify, measure, monitor, and 
manage its credit exposures to Members and those exposures arising from 
its payment, clearing, and settlement processes, including by 
maintaining sufficient financial resources to cover its credit exposure 
to each Member fully with a high degree of confidence.\28\ NSCC's 
Illiquid Charge is calculated and imposed to cover credit exposures 
estimated by NSCC based on the amount and nature of Illiquid Securities 
in a Member's portfolio and is designed to obtain from such Member 
financial resources sufficient to cover those credit exposures posed by 
such Illiquid Positions with a high degree of confidence. NSCC believes 
that management of its credit exposure to

[[Page 14785]]

Members in this way is consistent with Rule 17Ad-22(e)(4)(i) under the 
Act.\29\
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    \27\ The Commission adopted amendments to Rule 17Ad-22, 
including the addition of new subsection 17Ad-22(e), on September 
28, 2016. See Securities Exchange Act Release No. 78961 (September 
28, 2016), 81 FR 70786 (October 13, 2016) (S7-03-14). NSCC is a 
``covered clearing agency'' as defined by new Rule 17Ad-22(a)(5) and 
must comply with new subsection (e) of Rule 17Ad-22 by April 11, 
2017. Id.
    \28\ Id.
    \29\ Id.
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    Rule 17Ad-22(e)(6)(v) and (vi) under the Act will require, in part, 
NSCC to establish, implement, maintain and enforce written policies and 
procedures reasonably designed to cover its credit exposures to its 
Members by establishing a risk-based margin system that, at a minimum, 
uses an appropriate method for measuring credit exposure that accounts 
for relevant product risk factors and portfolio effects across products 
and is monitored by management on an ongoing basis and regularly 
reviewed, tested and verified.\30\ The Illiquid Charge is determined 
using a risk-based margin methodology designed to maintain the coverage 
of NSCC's credit exposures to its Members at a confidence level of at 
least 99 percent. The charge is calculated to address the unique risk 
characteristics presented by Illiquid Securities, specifically their 
lack of marketability and their low and volatile share prices. 
Therefore, NSCC believes that the proposal is also consistent with Rule 
17Ad-22(e)(6)(v) and (vi) under the Act.\31\
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    \30\ Id.
    \31\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    NSCC does not believe that the Illiquid Charge imposes any burden 
on competition that is not necessary or appropriate.\32\ This charge is 
necessary for NSCC to limit its exposures to potential losses from 
defaults by Members. The Illiquid Charge is imposed on Members on an 
individualized basis in an amount reasonably calculated to mitigate the 
risks posed to NSCC by Illiquid Securities. NSCC employs reasonable 
methods to calculate and impose an individualized charge in an amount 
designed to address the risk that NSCC's liquidation of Illiquid 
Securities, following a Member default, is difficult or delayed due to 
the risk characteristics of these securities, as described above. NSCC 
believes any burden on competition imposed by the addition of the 
Illiquid Charge to the Rules would be necessary and appropriate to 
limit NSCC's exposures to the risks being mitigated by such charge.
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    \32\ 15 U.S.C. 78q-1(b)(3)(I).
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    NSCC has not received any written comments relating to this 
proposal. NSCC will notify the Commission of any written comments it 
receives.

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-2017-001 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-2017-001. 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 Web site (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 Web site 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 Web site (http://dtcc.com/legal/sec-rule-filings.aspx). All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NSCC-2017-001 and should be 
submitted on or before April 12, 2017.
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    \33\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-05606 Filed 3-21-17; 8:45 am]
BILLING CODE 8011-01-P