[Federal Register Volume 80, Number 177 (Monday, September 14, 2015)]
[Notices]
[Pages 55113-55114]
[FR Doc No: 2015-23061]

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ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OGC-2015-0612; FRL 9933-93-OGC]

Proposed Consent Decree, Clean Air Act Citizen Suit

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed settlement agreement; request for public
comment.

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SUMMARY: In accordance with section 113(g) of the Clean Air Act, as
amended (``CAA''), notice is hereby given of a proposed settlement
agreement to settle lawsuits filed by Sinclair Wyoming Refining Company
and Sinclair Casper Refining Company (``Petitioners''), in the United
States Courts of Appeal for the Tenth and District of Columbia
Circuits: Sinclair Wyoming Refining Co. et al. v. EPA, No. 14-9594
(10th Cir.) and Sinclair Wyoming Refining Co. et al. v. EPA, No. 14-
1209 (D.C. Cir.). On October 24, 2014, Petitioners filed petitions for
review challenging EPA's August 29, 2014 denials of Sinclair's requests
for extensions of its small refinery temporary exemptions for its
refineries in Evansville and Sinclair, Wyoming (collectively, the
``Small Refinery Temporary Exemptions''). Under the terms of the
proposed settlement agreement, Petitioners may submit a request for an
extension of their Small Refinery Temporary Exemptions with respect to
Petitioners' 2014 obligations under the Renewable Fuel Standards
(``RFS'') Program (the ``2014 Exemption Request''). After EPA
determines that the 2014 Exemption Request is complete, EPA will issue
its decision to Petitioners on the 2014 Extension Request within 90
calendar days.

DATES: Written comments on the proposed settlement agreement must be
received by October 14, 2015.

ADDRESSES: Submit your comments, identified by Docket ID number EPA-HQ-
OGC-2015-0612, online at www.regulations.gov (EPA's preferred method);
by email to<EMAIL_ADDRESS>mailed to EPA Docket Center,
Environmental Protection Agency, Mailcode: 2822T, 1200 Pennsylvania
Ave. NW., Washington, DC 20460-0001; or by hand delivery or courier to
EPA Docket Center, EPA West, Room 3334, 1301 Constitution Ave. NW.,
Washington, DC, between 8:30 a.m. and 4:30 p.m. Monday through Friday,
excluding legal holidays. Comments on a disk or CD-ROM should be
formatted in Word or ASCII file, avoiding the use of special characters
and any form of encryption, and may be mailed to the mailing address
above.

FOR FURTHER INFORMATION CONTACT: Susan Stahle, Air and Radiation Law
Office (2344A), Office of General Counsel, U.S. Environmental
Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460;
telephone:<PHONE_NUMBER>; fax number<PHONE_NUMBER>; email address:
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Additional Information About the Proposed Consent Decree

    The proposed settlement agreement would settle Petitioners'
petitions for review in the United States Courts of Appeal for the
Tenth and District of Columbia Circuits challenging, under

section 307(b)(1) of the Clean Air Act, EPA's August 29, 2014 denials
of Petitioners' requests for extensions of their Small Refinery
Temporary Exemptions (see Sinclair Wyoming Refining Co. et al. v. EPA,
No. 14-9594 (10th Cir.) and Sinclair Wyoming Refining Co. et al. v.
EPA, No. 14-1209 (D.C. Cir.) (jointly, the ``Pending Cases''). The
proposed settlement agreement provides that after Petitioners submit
their 2014 Exemption Request, EPA will, within 14 business days after
receiving the 2014 Exemption Request, either make a determination that
the Request is complete or advise Sinclair in writing of any additional
information needed to make the Request complete (an Incompleteness
Determination). After EPA determines that the 2014 Exemption Request is
complete, EPA will issue its decision to Petitioners on the 2014
Exemption Request within 90 calendar days. Within five business days of
EPA issuing its decision on the 2014 Exemption Request, Petitioners
will (1) voluntarily dismiss the Pending Cases with prejudice and (2)
send a letter to EPA withdrawing its January 13, 2015 ``Request for
Reconsideration of Petition for Partial Extension of Small Refinery RFS
Exemptions'' regarding EPA's August 29, 2014 denials of Petitioners'
requests for extensions of the Small Refinery Temporary Exemptions.
    For a period of 30 days following the date of publication of this
notice, the Agency will receive written comments relating to the
proposed settlement agreement from persons who were not named as
parties or intervenors to the litigation in question. EPA or the
Department of Justice may withdraw or withhold consent to the proposed
settlement agreement if the comments disclose facts or considerations
that indicate that such consent is inappropriate, improper, inadequate,
or inconsistent with the requirements of the Act. Unless EPA or the
Department of Justice determines that consent to the agreement should
be withdrawn, the terms of the agreement will be affirmed.

II. Additional Information About Commenting on the Proposed Consent
Decree

A. How can I get a copy of the consent decree?

    Direct your comments to the official public docket for this action
under Docket ID No. EPA-HQ-OGC-2015-0612 which contains a copy of the
settlement agreement. The official public docket is available for
public viewing at the Office of Environmental Information (OEI) Docket
in the EPA Docket Center, EPA West, Room 3334, 1301 Constitution Ave.
NW., Washington, DC. The EPA Docket Center Public Reading Room is open
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal
holidays. The telephone number for the Public Reading Room is (202)
566-1744, and the telephone number for the OEI Docket is (202) 566-
1752.
    An electronic version of the public docket is available through
www.regulations.gov. You may use the www.regulations.gov to submit or
view public comments, access the index listing of the contents of the
official public docket, and to access those documents in the public
docket that are available electronically. Once in the system, key in
the appropriate docket identification number then select ``search''.
    It is important to note that EPA's policy is that public comments,
whether submitted electronically or in paper, will be made available
for public viewing online at www.regulations.gov without change, unless
the comment contains copyrighted material, CBI, or other information
whose disclosure is restricted by statute. Information claimed as CBI
and other information whose disclosure is restricted by statute is not
included in the official public docket or in the electronic public
docket. EPA's policy is that copyrighted material, including
copyrighted material contained in a public comment, will not be placed
in EPA's electronic public docket but will be available only in
printed, paper form in the official public docket. Although not all
docket materials may be available electronically, you may still access
any of the publicly available docket materials through the EPA Docket
Center.

B. How and to whom do I submit comments?

    You may submit comments as provided in the ADDRESSES section.
Please ensure that your comments are submitted within the specified
comment period. Comments received after the close of the comment period
will be marked ``late.'' EPA is not required to consider these late
comments.
    If you submit an electronic comment, EPA recommends that you
include your name, mailing address, and an email address or other
contact information in the body of your comment and with any disk or CD
ROM you submit. This ensures that you can be identified as the
submitter of the comment and allows EPA to contact you in case EPA
cannot read your comment due to technical difficulties or needs further
information on the substance of your comment. Any identifying or
contact information provided in the body of a comment will be included
as part of the comment that is placed in the official public docket,
and made available in EPA's electronic public docket. If EPA cannot
read your comment due to technical difficulties and cannot contact you
for clarification, EPA may not be able to consider your comment.
    Use of the www.regulations.gov Web site to submit comments to EPA
electronically is EPA's preferred method for receiving comments. The
electronic public docket system is an ``anonymous access'' system,
which means EPA will not know your identity, email address, or other
contact information unless you provide it in the body of your comment.
In contrast to EPA's electronic public docket, EPA's electronic mail
(email) system is not an ``anonymous access'' system. If you send an
email comment directly to the Docket without going through
www.regulations.gov, your email address is automatically captured and
included as part of the comment that is placed in the official public
docket, and made available in EPA's electronic public docket.

    Dated: September 3, 2015.
Gautam Srinivasan,
Acting Associate General Counsel.
[FR Doc. 2015-23061 Filed 9-11-15; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register Volume 85, Number 203 (Tuesday, October 20, 2020)]
[Notices]
[Pages 66646-66656]
[FR Doc No: 2020-23138]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90181; File No. SR-NSCC-2020-016]

Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Amendment No. 2 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and
2, To Introduce the Margin Liquidity Adjustment Charge and Include a
Bid-Ask Risk Charge in the VaR Charge

October 14, 2020.
    On July 30, 2020, National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\
proposed rule change SR-NSCC-2020-016 to add two new charges to NSCC's
margin methodology.\3\ On August 13, 2020, NSCC filed Amendment No. 1
to the proposed rule change, to make clarifications and corrections to
the proposed rule change.\4\ The proposed rule change, as modified by
Amendment No. 1, was published for public comment in the Federal
Register on August 20, 2020.\5\ The Commission has received comment
letters on the proposed rule change, as modified by Amendment No. 1.\6\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ NSCC also filed the proposals contained in the proposed rule
change as advance notice SR-NSCC-2020-804 with the Commission
pursuant to Section 806(e)(1) of the Dodd-Frank Wall Street Reform
and Consumer Protection Act entitled the Payment, Clearing, and
Settlement Supervision Act of 2010 (``Clearing Supervision Act''),
12 U.S.C. 5465(e)(1), and Rule 19b-4(n)(1)(i) of the Act, 17 CFR
240.19b-4(n)(1)(i).
    \4\ Amendment No. 1 made clarifications and corrections to the
description of the proposed rule change and Exhibits 3 and 5 of the
filing. On August 13, 2020, NSCC filed Amendment No. 1 to the
advance notice to make similar clarifications and corrections to the
advance notice.
    \5\ Securities Exchange Act Release No. 89558 (August 14, 2020),
85 FR 51521 (August 20, 2020) (``Notice''). The advance notice, as
modified by Amendment No. 1, was published for public comment in the
Federal Register on September 4, 2020. Securities Exchange Act
Release No. 89719 (September 1, 2020), 85 FR 55332 (September 4,
2020) (File No. SR-NSCC-2020-804). The comment period for the
advance notice, as modified by Amendment No. 1 closed on September
21, 2020, and the Commission received no comments.
    \6\ Comments received are available at https://www.sec.gov/comments/sr-nscc-2020-016/srnscc2020016.htm.
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    On August 27, 2020, NSCC filed Amendment No. 2 to the proposed rule
change to provide additional data for the Commission to consider in
analyzing the proposed rule change.\7\ The proposed rule change, as
modified by Amendment Nos. 1 and 2, is hereinafter referred to as the
``Proposed Rule Change.'' On October 2, 2020, pursuant to Section
19(b)(2) of the Act,\8\ the Commission designated a longer period
within which to approve, disapprove, or institute proceedings to
determine whether to approve or disapprove the Proposed Rule Change.\9\
The Commission is publishing this notice to solicit comments on
Amendment No. 2 from interested persons and, for the reasons discussed
below, to approve the Proposed Rule Change on an accelerated basis.
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    \7\ In Amendment No. 2, NSCC updated Exhibit 3 to the proposed
rule change to include impact analysis data with respect to the
proposed rule change. NSCC filed Exhibit 3 as a confidential exhibit
to the proposed rule change pursuant to 17 CFR 240.24b-2. On August
27, 2020, NSCC filed Amendment No. 2 to the advance notice to
provide similar additional data for the Commission's consideration.
The advance notice, as amended by Amendment Nos. 1 and 2, is
hereinafter referred to as the ``Advance Notice.'' On October 2,
2020, the Commission published notice of filing of Amendment No. 2
and notice of no objection to the Advance Notice. Securities
Exchange Act Release No. 90034 (September 28, 2020), 85 FR 62342
(October 2, 2020) (File No. SR-NSCC-2020-804).
    \8\ 15 U.S.C. 78s(b)(2).
    \9\ Securities Exchange Act Release No. 90084 (October 2, 2020),
85 FR 63607 (October 8, 2020).
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I. Description of the Proposed Rule Change

    First, the Proposed Rule Change would revise NSCC's Rules and
Procedures (``Rules'') \10\ to introduce the Margin Liquidity
Adjustment Charge (``MLA Charge'') as an additional margin component.
Second, the Proposed Rule Change would revise the Rules to add a bid-
ask spread risk charge (``Bid-Ask Spread Charge'') to NSCC's margin
calculations.
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    \10\ Capitalized terms not defined herein are defined in the
Rules, available at http://dtcc.com/~/media/Files/Downloads/legal/
rules/nscc_rules.pdf.
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A. Background

    NSCC provides central counterparty (``CCP'') services, including
clearing, settlement, risk management, and a guarantee of completion
for virtually all broker-to-broker trades involving equity securities,
corporate and municipal debt securities, and certain other securities.
In its role as a CCP, a key tool that NSCC uses to manage its credit
exposure to its members is determining and collecting an appropriate
Required Fund Deposit (i.e., margin) for each member.\11\ The aggregate
of all members' Required Fund Deposits (together with certain other
deposits required under the Rules) constitutes NSCC's Clearing Fund,
which NSCC would access should a defaulted member's own Required Fund
Deposit be insufficient to satisfy losses to NSCC caused by the
liquidation of that member's portfolio.\12\
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    \11\ See Rule 4 (Clearing Fund) and Procedure XV (Clearing Fund
Formula and Other Matters) of the Rules (``Procedure XV''), supra
note 10.
    \12\ See id.
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    Each member's Required Fund Deposit consists of a number of
applicable components, which are calculated to address specific risks
that the member's portfolio presents to NSCC.\13\ Generally, the
largest component of a member's Required Fund Deposit is the volatility
charge, which is intended to capture the risks related to the movement
of market prices associated with the securities in a member's
portfolio.\14\ NSCC's methodology for calculating the volatility charge
of the Required Fund Deposit depends on the type of security. For most
securities (e.g., equity securities), NSCC calculates the volatility
charge as the greater of (1) the larger of two separate calculations
that utilize a parametric Value at Risk (``VaR'') model, (2) a gap risk
measure calculation based on the largest non-index position in a
portfolio that exceeds a concentration threshold, which addresses
concentration risk that the largest non-index position can present
within a member's portfolio, and (3) a portfolio margin floor
calculation based on the market values of the long and short positions
in the portfolio, which addresses risks that might not be adequately
addressed with the other volatility charge calculations.\15\ For
certain other securities (e.g., corporate and municipal bonds), NSCC's
Rules apply a haircut-based volatility charge that is calculated by
multiplying the absolute value of the positions by a percentage.\16\
The volatility charge is designed to calculate the potential losses on
a portfolio over a three-day period of risk assumed necessary to
liquidate the portfolio, within a 99 percent confidence level.\17\
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    \13\ See id.
    \14\ See id.
    \15\ See id.; see also Securities Exchange Act Release No. 82780
(February 26, 2018), 83 FR 9035 (March 2, 2018) (File No. SR-NSCC-
2017-808); Securities Exchange Act Release No. 82781 (February 26,
2018), 83 FR 9042 (March 2, 2018) (File No. SR-NSCC-2017-020).
    \16\ See id.
    \17\ See Notice, supra note 5 at 51522.
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    NSCC states that it regularly assesses market and liquidity risks
as such risks relate to its margin methodology to evaluate whether
margin levels are commensurate with the particular risk attributes of
each relevant product, portfolio, and market.\18\ NSCC states

that the proposed MLA Charge and Bid-Ask Spread Charge are necessary
for NSCC to effectively account for risks associated with certain types
and attributes of member portfolios.\19\
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    \18\ See id.
    \19\ See id.
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B. Margin Liquidity Adjustment Charge

    NSCC's current margin methodology does not account for the risk of
a potential increase in costs that NSCC could incur when liquidating a
defaulted member's portfolio that contains a concentration of large
positions, as compared to the overall market, in a particular security
or group of securities sharing a similar risk profile.\20\ In a member
default, liquidating such large positions within a potentially
compressed timeframe \21\ (e.g., in a fire sale) could have an impact
on the underlying market, resulting in price moves that increase NSCC's
risk of incurring additional liquidation costs. Therefore, NSCC
designed the MLA Charge to address this specific risk.\22\
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    \20\ See Notice, supra note 5 at 51522-23.
    \21\ NSCC's risk models assume the liquidation occurs over a
period of three business days. See Notice, supra note 5 at 51523.
    \22\ See id.
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    The MLA Charge would be based on comparing the market value of
member portfolio positions in specified asset groups \23\ to the
available trading volume of those asset groups. If the market value of
a member's positions in a certain asset group is large in comparison to
the available trading volume of that asset group,\24\ then it is more
likely that NSCC would have to manage reduced marketability and
increased liquidation costs for those positions during a member default
scenario. Specifically, NSCC's margin methodology would assume for each
asset group that a certain share of the market can be liquidated
without price impact.\25\ Aggregate positions in an asset group which
exceed this share are generally considered as large and would therefore
incur application of the MLA Charge to anticipate and address those
increased costs.
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    \23\ The specified asset groups would include (1) equities
(excluding equities defined as Illiquid Securities pursuant to the
Rules), (2) Illiquid Securities, (3) unit investment trusts, or
UITs, (4) municipal bonds (including municipal bond exchange-traded
products, or ``ETPs''), and (5) corporate bonds (including corporate
bond ETPs). NSCC would then further segment the equities asset group
into the following subgroups: (i) Micro-capitalization equities,
(ii) small capitalization equities, (iii) medium capitalization
equities, (iv) large capitalization equities, (v) treasury ETPs, and
(vi) all other ETPs. See id.
    \24\ NSCC states that it would determine average daily trading
volume by reviewing data that is made publicly available by the
Securities Industry and Financial Markets Association (``SIFMA''),
at https://www.sifma.org/resources/archive/research/statistics. See
id.
    \25\ NSCC would establish the particular share for each asset
group or subgroup based on empirical research which includes the
simulation of asset liquidation over different time horizons. See
Notice, supra note 5 at 51523-25.
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    For each position in a market capitalization subgroup of the
equities asset group, NSCC would calculate the market impact cost by
multiplying four components: (1) An impact cost coefficient that is a
multiple of the one-day market volatility of that subgroup and is
designed to measure impact costs, (2) the gross market value of the
position in that subgroup, (3) the square root of the gross market
value of the position in that subgroup in the portfolio divided by an
assumed percentage of the average daily trading volume of that
subgroup, and (4) a measurement of the relative weight of the position
in that subgroup of the portfolio. With respect to the fourth
component, NSCC states that this measurement would include aggregating
the weight of each CUSIP in that position relative to the weight of
that CUSIP in the subgroup, such that a portfolio with fewer positions
in a subgroup would have a higher measure of concentration for that
subgroup.\26\
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    \26\ NSCC would calculate the relative weight by dividing the
absolute market value of a single CUSIP in the member's portfolio by
the total absolute market value of that portfolio. See Notice, supra
note 5 at 51523-24.
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    For each position in the municipal bond, corporate bond, Illiquid
Securities and UIT asset groups, and for positions in the treasury ETP
and other ETP subgroups of the equities asset group, NSCC would
calculate the market impact cost by multiplying three components: (1)
An impact cost coefficient that is a multiple of the one-day market
volatility of that asset group or subgroup, (2) the gross market value
of the position in that asset group or subgroup, and (3) the square
root of the gross market value of the position in that asset group or
subgroup in the portfolio divided by an assumed percentage of the
average daily trading volume of that subgroup.\27\
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    \27\ See supra note 24.
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    For each asset group or subgroup, NSCC would compare the calculated
market impact cost to a portion of the volatility charge that is
allocated to positions in that asset group or subgroup.\28\ If the
ratio of the calculated market impact cost to the applicable one-day
volatility charge is greater than a threshold, NSCC would apply an MLA
Charge to that asset group or subgroup.\29\ If the ratio of these two
amounts is equal to or less than this threshold, NSCC would not apply
an MLA Charge to that asset group or subgroup. The threshold would be
based on an estimate of the market impact cost that is incorporated
into the calculation of the applicable one-day volatility charge, such
that NSCC would only apply an MLA Charge when the calculated market
impact cost exceeds this threshold.
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    \28\ For purposes of this calculation, NSCC would use a portion
of the applicable volatility charge that is based on a one-day
assumed period of risk and calculated by applying a simple square-
root of time scaling, referred to in this advance notice as ``one-
day volatility charge.'' See Notice, supra note 5 at 51524. Any
changes that NSCC deems appropriate to this assumed period of risk
would be subject to NSCC's model risk management governance
procedures set forth in the Clearing Agency Model Risk Management
Framework (``Model Risk Management Framework''). See Securities
Exchange Act Release Nos. 81485 (August 25, 2017), 82 FR 41433
(August 31, 2017) (File No. SR-NSCC-2017-008); 84458 (October 19,
2018), 83 FR 53925 (October 25, 2018) (File No. SR-NSCC-2018-009);
88911 (May 20, 2020), 85 FR 31828 (May 27, 2020) (File No. SR-NSCC-
2020-008).
    \29\ NSCC would set the initial threshold at 0.4, because
approximately 40 percent of the one-day volatility charge currently
addresses market impact costs. NSCC would review this threshold from
time to time and any changes that NSCC deems appropriate would be
subject to NSCC's model risk management governance procedures set
forth in the Model Risk Management Framework. See id.
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    When applicable, an MLA Charge for each asset group or subgroup
would be calculated as a proportion of the product of (1) the amount by
which the ratio of the calculated market impact cost to the applicable
one-day volatility charge exceeds the threshold, and (2) the one-day
volatility charge allocated to that asset group or subgroup.
    For each portfolio, NSCC would total the MLA Charges for positions
in each of the subgroups of the equities asset group to determine an
MLA Charge for the positions in the equities asset group. NSCC would
then total the MLA Charge for positions in the equities asset group
together with each of the MLA Charges for positions in the other asset
groups to determine a total MLA Charge for a member.
    In certain circumstances, NSCC may be able to partially mitigate
the risks that the MLA Charge is designed to address by extending the
time period for liquidating a defaulted member's portfolio beyond the
three day period. Accordingly, the Proposed Rule Change also describes
a method that NSCC would use to reduce a member's total MLA Charge when
the volatility charge component of the member's margin increases beyond
a specified point. Specifically, NSCC would reduce the member's MLA
Charge where the market impact cost of a particular portfolio,
calculated as part of determining the MLA Charge, would be large
relative to the one-day volatility

charge for that portfolio (i.e., a portion of the three-day assumed
margin period of risk). When the ratio of calculated market impact cost
to the one-day volatility charge is lower, NSCC would not adjust the
MLA Charge. However, as the ratio gets higher, NSCC would reduce the
MLA Charge. NSCC designed this reduction mechanism to avoid assessing
unnecessarily large MLA Charges.\30\
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    \30\ See Notice, supra note 5 at 51524.
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    On a daily basis, NSCC would calculate the final MLA Charge for
each member (if applicable), to be included as a component of each
member's Required Fund Deposit.
    Finally, NSCC would amend the Rules to add the MLA Charge to the
list of Clearing Fund components that are excluded from the calculation
of the Excess Capital Premium charge.\31\ The Excess Capital Premium is
imposed on a member when the member's Required Fund Deposit exceeds its
excess net capital. NSCC states that including the MLA Charge in the
calculation of the Excess Capital Premium could lead to more frequent
and unnecessary Excess Capital Premium charges, which is not the
intended purpose of the Excess Capital Premium charge and could place
an unnecessary burden on members.\32\
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    \31\ See Section I.(B)(2) of Procedure XV, supra note 10.
    \32\ See Notice, supra note 5 at 51524.
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C. Bid-Ask Spread Charge

    The bid-ask spread refers to the difference between the observed
market price that a buyer is willing to pay for a security and the
observed market price at which a seller is willing to sell that
security. NSCC faces the risk of potential bid-ask spread transaction
costs when liquidating the securities in a defaulted member's
portfolio. However, NSCC's current margin methodology does not account
for this risk of potential bid-ask spread transaction costs to NSCC in
connection with liquidating a defaulted member's portfolio. Therefore,
NSCC designed the Bid-Ask Spread Charge to address this deficiency in
its current margin methodology.
    The Bid-Ask Spread Charge would be haircut-based and tailored to
different groups of assets that share similar bid-ask spread
characteristics. NSCC would assign each asset group a specified bid-ask
spread haircut rate (measured in basis points (``bps'')) that would be
applied to the gross market value of the portfolio's positions in that
particular asset group. NSCC would calculate the product of the gross
market value of the portfolio's positions in a particular asset group
and the applicable basis point charge to obtain the bid-ask spread risk
charge for these positions. NSCC would total the applicable bid-ask
spread risk charges for each asset group in a member's portfolio to
calculate the member's final Bid-Ask Spread Charge.
    NSCC determined the proposed initial haircut rates based on an
analysis of bid-ask spread transaction costs using (1) the results of
NSCC's annual member default simulation and (2) market data sourced
from a third-party data vendor. NSCC's proposed initial haircut rates
are listed in the table below:

------------------------------------------------------------------------
                                                                Haircut
                         Asset group                             (bps)
------------------------------------------------------------------------
Large and medium capitalization equities.....................        5.0
Small capitalization equities................................       12.3
Micro-capitalization equities................................       23.1
ETPs.........................................................        1.5
------------------------------------------------------------------------

    NSCC proposes to review the haircut rates annually.\33\ Based on
analyses of recent years' simulation exercises, NSCC does not
anticipate that these haircut rates would change significantly year
over year.\34\ NSCC may also adjust the haircut rates following its
annual model validation review, to the extent the results of that
review indicate the current haircut rates are not adequate to address
the risk presented by transaction costs from a bid-ask spread.\35\
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    \33\ See Notice, supra note 5 at 51525.
    \34\ See id.
    \35\ All proposed changes to the haircuts would be subject to
NSCC's model risk management governance procedures set forth in the
Model Risk Management Framework. See supra note 28.
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D. Description of Amendment No. 2

    In Amendment No. 2, NSCC updated Exhibit 3 to the Proposed Rule
Change to include impact analysis data with respect to the Proposed
Rule Change. Specifically, Amendment No. 2 includes impact studies for
various time periods detailing the average and maximum MLA and Bid-Ask
Charges for each member, by both percentage and amount. NSCC filed
Exhibit 3 as a confidential exhibit to the Proposed Rule Change
pursuant to 17 CFR 240.24b-2.

II. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \36\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that such proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to such organization. After careful consideration, the
Commission finds that the Proposed Rule Change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to NSCC. In particular, the Commission finds that the
Proposed Rule Change is consistent with Sections 17A(b)(3)(F) and
(b)(3)(I) \37\ of the Act and Rules 17Ad-22(e)(4) and (e)(6)
thereunder.\38\
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    \36\ 15 U.S.C. 78s(b)(2)(C).
    \37\ 15 U.S.C. 78q-1(b)(3)(F) and (b)(3)(I).
    \38\ 17 CFR 240.17Ad-22(e)(4) and (e)(6).
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A. Consistency With Section 17A(b)(3)(F)

    Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a clearing agency, such as NSCC, be designed to promote the prompt
and accurate clearance and settlement of securities transactions,
assure the safeguarding of securities and funds which are in the
custody or control of the clearing agency or for which it is
responsible, remove impediments to and perfect the mechanism of a
national system for the prompt and accurate clearance and settlement of
securities transactions, and, in general, to protect investors and the
public interest.\39\ The Commission believes that the Proposed Rule
Change is consistent with Section 17A(b)(3)(F) of the Act.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    First, as described above in Section I.A and B, NSCC's current
margin methodology does not account for the potential increase in
market impact costs that NSCC could incur when liquidating a defaulted
member's portfolio where the portfolio contains a concentration of
large positions in a particular security or group of securities sharing
a similar risk profile. In addition, as described above in Section I.C,
NSCC's margin methodology does not account for the risk of potential
bid-ask spread transaction costs when liquidating the securities in a
defaulted member's portfolio. NSCC proposes to address these risks by
adding the MLA Charge and Bid-Ask Spread Charge, respectively, to its
margin methodology.\40\
---------------------------------------------------------------------------

    \40\ The Commission notes that the other clearing agencies it
regulates have charges to account for these types of risks in their
margin methodologies, and that addressing these types of risks has
received a great deal of industry focus in recent years.
---------------------------------------------------------------------------

    NSCC designed the MLA Charge and Bid-Ask Spread Charge to ensure
that NSCC collects margin amounts sufficient to manage NSCC's risk of
incurring costs associated with liquidating defaulted member
portfolios. Based on its review of the Proposed Rule Change, including
confidential

Exhibit 3 thereto,\41\ the Commission understands that the proposed MLA
Charge and Bid-Ask Spread Charge would generally provide NSCC with
additional resources to manage potential losses arising out of a member
default. As discussed above, NSCC designed the MLA Charge and Bid-Ask
Spread Charge, respectively, to reflect two distinct and specific risks
presented to NSCC: (1) The risk associated with liquidating a defaulted
member's portfolio that holds concentrated positions in securities
sharing similar risk profiles; as well as (2) the risks associated with
the bid-ask spread costs relevant to the securities in the defaulted
member's portfolio. As a result, any margin increases that result from
the MLA and the Bid-Ask Spread Charges are limited to address those
respective risks. This targeted increase in available financial
resources should decrease the likelihood that losses arising out of a
member default stemming from the liquidation of concentrated positions
or bid-ask spreads would cause NSCC to exhaust its financial resources
and threaten the operation of its critical clearance and settlement
services. Accordingly, the Commission believes that the Proposed Rule
Change should help NSCC to continue providing prompt and accurate
clearance and settlement of securities transactions in the event of a
member default.
---------------------------------------------------------------------------

    \41\ Specifically, the confidential Exhibit 3 submitted by NSCC
includes, among other things, impact studies for various time
periods detailing the average and maximum MLA and Bid-Ask Spread
Charges for each member, by both percentage and amount, a detailed
methodology describing the calculation of the MLA and Bid-Ask Spread
Charges, and information regarding how NSCC determined the
appropriate methodology.
---------------------------------------------------------------------------

    Second, as discussed above, in a member default scenario, NSCC
would access its Clearing Fund should the defaulted member's own
Required Fund Deposit be insufficient to satisfy losses to NSCC caused
by the liquidation of that member's portfolio. NSCC proposes to add the
MLA Charge and Bid-Ask Spread Charge to its margin methodology to
augment its ability to manage the potential costs of liquidating a
defaulted member's portfolio by collecting additional margin to cover
such costs. This, in turn, could reduce the possibility that NSCC would
need to mutualize among the non-defaulting members a loss arising out
of the close-out process. Reducing the potential for loss mutualization
could, in turn, reduce the potential knock-on effects to non-defaulting
members, their customers, and NSCC arising out of a member default.
Accordingly, the Commission believes the Proposed Rule Change would
promote the safeguarding of securities and funds which are in the
custody or control of NSCC or for which NSCC is responsible, consistent
with Section 17A(b)(3)(F) of the Act.
    One commenter argues that the Proposed Rule Change is not in the
public interest and would harm investors and small businesses by
dampening small business capital formation and liquidity and
discouraging trading activity, as discussed more fully below.\42\ The
Commission disagrees that the proposal is not in the public interest.
The Commission believes that the proposal should help protect investors
and the public interest by mitigating some of the risks presented by
NSCC as a CCP. Because a defaulting member could place stresses on NSCC
with respect to NSCC's ability to meet its clearance and settlement
obligations upon which the broader financial system relies, it is
important that NSCC has a strong margin methodology to limit NSCC's
credit risk exposure in the event of a member default. As described
above, the Proposed Rule Change would add two charges specifically
designed to address risks that are not currently addressed in NSCC's
margin methodology related to: (1) The potential costs that NSCC may
incur when liquidating a portfolio that is concentrated in a particular
security or group of securities with a similar risk profile, and (2)
the potential costs that NSCC may incur to cover the bid-ask spread
when liquidating a portfolio. These changes should help ensure that
NSCC collects sufficient margin that is more commensurate with the
risks associated with the potential concentration and bid-ask spread
liquidation costs identified above, and thus more effectively cover its
credit exposures to its members. By collecting margin that more
accurately reflects the risk characteristics of such portfolios and the
bid-ask spreads of securities they contain (i.e., the potential
associated costs of liquidating such portfolios), NSCC would be in a
better position to absorb and contain the spread of any losses that
might arise from a member default. Therefore, the proposal is designed
to reduce the possibility that NSCC would need to call for additional
resources from non-defaulting members due to a member default, which
could inhibit the ability of these non-defaulting members to facilitate
securities transactions. Accordingly, the Commission believes that the
proposal is designed to protect investors and the public interest by
mitigating some of the risks presented by NSCC as a CCP.\43\
---------------------------------------------------------------------------

    \42\ Letter from James C. Snow, President/CCO, Wilson-Davis &
Co., Inc. (received September 30, 2020) at 1 (``Wilson-Davis
Letter'').
    \43\ See Securities Exchange Act Release No. 78961 (September
28, 2016), 81 FR 70786, 70849 (October 13, 2016) (``While central
clearing generally benefits the markets in which it is available,
clearing agencies can pose substantial risk to the financial system
as a whole, due in part to the fact that central clearing
concentrates risk in the clearing agency.'').
---------------------------------------------------------------------------

    One commenter asserts that the proposal dampens capital formation
and liquidity and that firms and investors would stop participating in
trades because of the proposal.\44\ Specifically, the commenter states
that broker-dealers would not be able to trade securities issued by
small companies because the ``insurance requirement'' would be too
high. In addition, the commenter states that investors would be
dissuaded from trading in such securities. Overall, the commenter
argues that the Proposed Rule Change is inconsistent with the
Commission's mission of facilitating capital formation.
---------------------------------------------------------------------------

    \44\ Wilson-Davis Letter at 4-5.
---------------------------------------------------------------------------

    First, with respect to the comment regarding liquidity and capital
formation, the Commission believes that limiting NSCC's exposure to its
members by allowing NSCC to collect margin to address the two risks
that are not currently addressed would benefit members due to NSCC's
decreased exposure to losses resulting from a member default.
Effectively mitigating such risks would, in turn, reduce the likelihood
that NSCC would have to call on its members to contribute additional
resources, which otherwise could be used by its members to facilitate
securities transactions thereby providing liquidity to the securities
markets. Thus, the Commission believes that NSCC's proposal, by helping
non-defaulting members preserve their financial resources, could
promote liquidity provision in such circumstances because these
resources would be available to facilitate securities transactions.
    Nevertheless, the Commission acknowledges that the proposal could
result in an increase in the margin required to be collected from a
member, which, in turn, may result in such member incurring additional
costs to access needed liquidity. Despite these potential impacts, the
Commission is not persuaded that the Proposed Rule Change would have a
negative effect on small business capital formation such that it would
be inconsistent with the public interest or, more broadly, the
Commission's mission. To the extent that members incur funding costs

associated with additional margin, they may choose to distribute these
costs across transactions in all securities for which they make markets
rather than allocate those costs only to transactions in securities
that require additional margin. Thus, the fact that members have
flexibility in how they allocate costs could mitigate negative impacts,
if any, on the liquidity and capital formation of a particular subset
of issuers.
    Both the MLA Charge and the Bid-Ask Spread Charge would apply to
all securities cleared and settled at NSCC and would not be directed to
any particular group of securities. The MLA Charge would only apply to
portfolios where the market value of a member's positions in a certain
asset group is large in comparison to the available trading volume of
that asset group. Thus, the application of the charge depends on the
particular mix of securities within the specified asset groups in a
member's portfolio and does not depend solely on the presence of
particular types of securities. The Bid-Ask Spread Charge would apply
to all the securities in a member's portfolio and would not apply only
to a particular type of security. The Commission acknowledges that the
haircuts that would determine the Bid-Ask Spread Charge would, in part,
consider the nature of the security, with the highest haircut
percentages applicable to micro-cap and small-cap securities. However,
based on its consideration of NSCC's determination of the haircut
schedule, as informed by NSCC's analysis of bid-ask spread transaction
costs using (1) the results of NSCC's annual member default simulation,
and (2) market data sourced from a third-party data vendor, the
Commission believes that the haircut schedule is appropriate given that
such securities likely would exhibit larger bid-ask spreads, making the
higher haircut more conservative and consistent with NSCC's regulatory
requirements to collect margin commensurate with the risks presented by
the securities.
    Further, the Commission is not persuaded by the commenter's
generalized statements on the potential impact on small business
capital formation that could result from implementation of the Proposed
Rule Change, which are lacking any specific data or analysis in support
thereof. The Commission acknowledges the possibility that, as the
commenter asserted, issuers of securities in smaller companies may
experience a reduction in liquidity because of the increased margin
requirements applicable to transactions in such securities.
Nevertheless, the Commission believes that small business issuers that
are more liquid could benefit from greater access to capital to the
extent that the proposal leads to a net increase in demand for more
liquid securities and a net decrease in demand for less liquid
securities. Further, the Commission does not agree with the commenter
that investors would be dissuaded from trading in such securities. The
Commission is aware of research suggesting that the stock prices of
smaller companies fall in response to a reduction in liquidity until
such securities provide an adequate desired return for investors.\45\
Thus, as long as stock prices can adjust to reflect the reduced
liquidity, affected small issuers may still be able to attract capital
from investors, albeit at a higher cost that appropriately reflects the
risks inherent in the clearance and settlement of the securities they
issue. Moreover, to the extent that investment decisions are driven by
other factors, such as the future prospects of specific companies,
there might be no decrease in access to capital or little change in
cost.
---------------------------------------------------------------------------

    \45\ See, e.g., Viral Acharya and Lasse H. Pedersen, 2005, Asset
pricing with liquidity risk, Journal of Financial Economics 77(2)
375-410.
---------------------------------------------------------------------------

    In addition, the commenter's arguments ignore the potential
benefits to small businesses when their securities are eligible for
central clearing by NSCC. As do other clearing agencies, NSCC provides
a number of services that mitigate risk, reduce costs, and enhance
processing efficiencies for the securities markets, market
participants, issuers (including small issuers), and investors. By
reducing NSCC's risk exposure to its members and thus the likelihood of
its failure, the proposal helps ensure that NSCC would continue to
provide such services, which would benefit securities markets, market
participants, issuers (including small issuers), and investors. Thus,
the commenter does not take into account any potential positive impacts
on small business capital formation that may arise as a result of the
Proposed Rule Change.
    Second, the Commission is not persuaded that the Proposed Rule
Change will not protect investors solely because of the potential for
increased costs. The Commission notes that although the proposal may
result in an increase in margin requirements for particular portfolios
(as a result of the MLA Charge) and to reflect the bid-ask spread (as a
result of the Bid-Ask Spread Charge), such an increase is designed to
allow NSCC to reduce the risks when liquidating a portfolio in the
event of a member default. As a result, NSCC should be more resilient
so that it can satisfy its obligations as a CCP, which facilitates the
protection of investors by helping to ensure that investors receive the
proceeds from their securities transactions. In addition, as discussed
earlier, the Commission believes that the proposal should help protect
investors and the public interest by mitigating some of the risks
presented by NSCC as a CCP.
    Therefore, notwithstanding the potential unspecified impact on
capital formation in smaller and less liquid markets, as described
above, the Commission believes that, in light of the potential benefits
to investors arising from the Proposed Rule Change and the overall
improved risk management at NSCC, the Proposed Rule Change is designed
to protect investors and the public interest, consistent with Section
17A(b)(3)(F) of the Act.
    Finally, one commenter asserted that the Proposed Rule Change would
add impediments to the national system for clearance and settlement
because it would create more complicated algorithms that slow the
clearance process, burdens settlement and harms investors, firms and
small businesses.\46\ Based on the Commission's review of the materials
that NSCC has filed in connection with this Proposed Rule Change and
its general knowledge of the information technology systems and
infrastructure in place at NSCC, the Commission concludes that the
Proposed Rule Change would not slow the clearance and settlement
process at NSCC. The Proposed Rule Change is designed to enable NSCC to
address two risks that are not currently reflected in its margin
methodology. The proposal introduces the MLA Charge as an additional
margin component, and adds a Bid-Ask Spread Charge to NSCC's margin
calculations. The Commission believes that these new margin charges
will better enable NSCC to establish a risk-based margin system that
(1) considers and produces margin levels commensurate with the risks
associated with liquidating member portfolios in a default scenario,
including decreased marketability of a portfolio's securities due to
large positions in securities sharing similar risk profiles and bid-ask
transaction costs, and (2) uses an appropriate method for measuring
credit exposure that accounts for such risk factors and portfolio
effects.\47\ The operation of the risk-based margin

system, as amended by the proposal, would not interfere with the
clearance and settlement of securities transactions. As a result, the
proposal should not slow the clearance process, burden settlement or
harm investors, firms and small businesses. Instead, the Proposed Rule
Change should help ensure that NSCC will continue to perform its vital
role to settle transactions on time and at their agreed upon terms in
the event of a member default, which will better protect investors,
firms, small businesses, and the broader financial system. Moreover,
the Commission does not believe that the Proposed Rule Change would
impose any additional impediments on the national system of clearance
and settlement; the fact that the application of the revised margin
methodology may, in some instances, result in increased margin
requirements (as discussed in more detail in Section II.B below) does
not constitute the imposition of such an impediment.
---------------------------------------------------------------------------

    \46\ Id. at 1, 5.
    \47\ See Securities Exchange Act Release No. 90034 (September
28, 2020), 85 FR 62342 (October 2, 2020) (File No. SR-NSCC-2020-
804).
---------------------------------------------------------------------------

    The commenter also argues that the Proposed Rule Change is an
ineffective attempt by NSCC to address its credit risks.\48\ The
commenter argues that NSCC could address the risk directly by modifying
the settlement timeline. According to the commenter, if the NSCC
proposed rules that would eliminate the two-day settlement cycle in
favor of immediate, same-day electronic settlement, the market risk
exposure would be eliminated. The Commission disagrees with the
commenter. The securities industry transitioned to the current two-day
settlement cycle on September 5, 2017, only after a multi-year,
industry-wide initiative \49\ and the Commission's amendment of Rule
15c6-1.\50\ Therefore, the commenter's suggestion that NSCC could
unilaterally shorten the current two-day settlement to a same-day
settlement cycle is not a feasible alternative to the Proposed Rule
Change.
---------------------------------------------------------------------------

    \48\ Wilson-Davis Letter at 4.
    \49\ See Securities Exchange Act Release No. 78962 (September
28, 2016), 81 FR 69240, 69254 (October 5, 2016) (``Discussion of
Current Efforts To Shorten the Settlement Cycle in the U.S.'').
    \50\ See Securities Exchange Act Release No. 80295 (March 22,
2017), 82 FR 15564 (March 29, 2017).
---------------------------------------------------------------------------

B. Consistency With Section 17A(b)(3)(I) of the Act

    Section 17A(b)(3)(I) of the Act requires that the rules of a
clearing agency do not impose any burden on competition not necessary
or appropriate in furtherance of the Act.\51\ This provision does not
require the Commission to find that a proposed rule change represents
the least anti-competitive means of achieving the goal. Rather, it
requires the Commission to balance the competitive considerations
against other relevant policy goals of the Act.\52\
---------------------------------------------------------------------------

    \51\ 15 U.S.C. 78q-1(b)(3)(I).
    \52\ See Bradford National Clearing Corp., 590 F.2d 1085, 1105
(D.C. Cir. 1978).
---------------------------------------------------------------------------

    Both commenters argue that the Proposed Rule Change would
disproportionately impact member firms with lower operating margins or
higher costs of capital.\53\ The Commission acknowledges that the
Proposed Rule Change could entail increased margin charges to some
members, including members that invest in concentrated positions in
securities sharing a common risk profile and members that invest in
securities that have larger bid-ask spreads, which may include microcap
and small cap securities. Nevertheless, as discussed above, the
Proposed Rule Change would calculate the MLA Charge and Bid-Ask Spread
Charge based on the composition of a member's portfolio, regardless of
member size or type, and the charges would not target or apply solely
to Illiquid Securities or securities with a smaller market
capitalization. Instead, as discussed above in Sections I.B and I.C,
both the MLA and Bid-Ask Spread Charges would serve to address
particular potential costs that NSCC may incur when liquidating a
portfolio in a member default. To the extent a particular member's
margin would increase under the Proposed Rule Change, that increase
would be based on the mix of securities that make up the member's
portfolio and NSCC's requirement to collect margin to appropriately
address the associated risks, which it currently does not do.
---------------------------------------------------------------------------

    \53\ See Wilson-Davis Letter at 4-5; Letter from Cass Sanford,
Associated General Counsel, OTC Markets Group (September 11, 2020)
at 2 (``OTC Letter''). One commenter further states that the
Proposed Rule Change would double its required margin, based on an
impact study it received from NSCC. (Wilson-Davis Letter at 2.) The
commenter states that the impact study covered only one quarter of
information and concludes that NSCC is making this decision based
solely on that analysis. NSCC responds that the impact study cited
in the Wilson-Davis Letter did not include any potential impacts of
the Proposed Rule Change because that impact study was provided by
NSCC to Wilson-Davis in connection with the separate Illiquid
Securities Proposal. NSCC states that it conducted member outreach
in August 2020, providing members with, among other things, an
impact study on the Proposed Rule Change based on data from the
first quarter of 2020. NSCC further states that the data show a
total margin increase to NSCC members by an average of 5.3% from the
proposed MLA Charge and by an average of 3.6% from the proposed Bid-
Ask Spread Charge. See Letter from Timothy J. Cuddihy, Managing
Director, DTCC Financial Risk Management (October 7, 2020) (``NSCC
Letter'') at 2. Additionally, the confidential materials filed by
NSCC as part of the Proposed Rule Change include an analysis of the
impacts of both charges, by member, over the year-long time period
June 2019 through May 2020. Based on the Commission's review of the
impact analysis, the Proposed Rule Change would not cause any NSCC
member's volatility charge to double.
---------------------------------------------------------------------------

    In addition, the Commission acknowledges that the impact of
increased margin requirements may present higher costs to some members
relative to others due to a number of factors, such as access to
liquidity resources, cost of capital, business model, and applicable
regulatory requirements. These higher relative burdens may weaken
certain members' competitive positions relative to other members.
However, some members, particularly those most affected by the change,
may respond to increased margin requirements by adjusting their
liquidity management and business models, such as by holding less
concentrated positions or shifting liquidity provision towards
securities that are less likely to incur the proposed charges.\54\ Such
effects may mitigate competitive effects on members. Moreover, the
Commission also notes that NSCC is required to manage the risk
presented by each member by establishing a risk-based margin
system.\55\ NSCC's members include a large and diverse population of
entities. By participating in NSCC, each member is subject to the same
margin methodology which is designed to satisfy NSCC's regulatory
obligation to manage the risk presented by its members.
---------------------------------------------------------------------------

    \54\ See Section II.A infra (discussing capital formation).
    \55\ See 17 CFR 240.17Ad-22(e)(6)(i).
---------------------------------------------------------------------------

    Moreover, the Commission believes that the Proposed Rule Change
would not impose a burden on competition that is not necessary or
appropriate in furtherance of the Act. As discussed above, NSCC faces
the risk of liquidation costs when a member's portfolio contains large
positions in securities sharing similar risk profiles. Similarly, NSCC
faces the risk of costs that would materialize in connection with the
bid-ask spread of the securities in a member's portfolio. Such costs
are currently unaccounted for in NSCC's current margin methodology.
NSCC has provided impact analyses demonstrating that the Proposed Rule
Change would result in margin levels that better reflect the risks
associated with (1) concentrated large positions in securities sharing
a similar risk profile, and (2) bid-ask spread transaction costs than
NSCC's current margin methodology. Since certain securities and
portfolio compositions present NSCC with unique liquidation risks, the
Commission believes it is appropriate

for NSCC to require members holding such securities or portfolio
compositions to provide margin amounts commensurate with the identified
risks. Thus, the Commission believes that the MLA Charge and Bid-Ask
Spread Charge are margin requirements that represent an appropriate
response to the risk characteristics of members' portfolio holdings,
and not an undue burden on competition. Accordingly, the Commission
believes that the Proposed Rule Change would help NSCC better maintain
sufficient financial resources to cover its credit exposures to each
member in full with a high degree of confidence. By helping NSCC to
better manage its credit exposure, the Proposed Rule Change would help
NSCC better mitigate the potential losses to NSCC associated with
liquidating a member's portfolio in the event of a member default, in
furtherance of NSCC's obligations under Section 17A(b)(3)(F) of the
Act.
    Additionally, the Commission notes that in order to avoid excessive
MLA Charges, NSCC has identified circumstances that would warrant
reducing a member's MLA Charge when NSCC could otherwise partially
mitigate the relevant risks by extending the time period for
liquidating a defaulted member's portfolio beyond the three day period.
The Commission views this specific contemplation by NSCC of a targeted
reduction in the MLA Charge as a feature of the Proposed Rule Change
that demonstrates an approach towards managing the relevant risks
through appropriate (i.e., not simply ``larger'') margin requirements.
    Therefore, for the reasons stated above, the Commission believes
that the Proposed Rule Change is consistent with the requirements of
Section 17A(b)(3)(I) of the Act \56\ because any competitive burden
imposed by the proposal is necessary or appropriate in furtherance of
the Act.
---------------------------------------------------------------------------

    \56\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

C. Consistency With Rule 17Ad-22(e)(4)(i)

    Rule 17Ad-22(e)(4)(i) 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.\57\
---------------------------------------------------------------------------

    \57\ 17 CFR 240.17Ad-22(e)(4)(i).
---------------------------------------------------------------------------

    As described above in Section I.A and B, NSCC's current margin
methodology does not account for the risk of a potential increase in
market impact costs that NSCC could incur when liquidating a defaulted
member's portfolio where the portfolio contains a large position in
securities sharing similar risk profiles. Additionally, as described
above, NSCC's current margin methodology does not account for the risk
of potential bid-ask spread transaction costs when liquidating the
securities in a defaulted member's portfolio. NSCC proposes to address
such risks by adding the MLA Charge and Bid-Ask Spread Charge to its
margin methodology. Adding these margin charges to NSCC's margin
methodology should better enable NSCC to collect margin amounts
commensurate with the risk attributes of a broader range of its
members' portfolios than NSCC's current margin methodology.
Specifically, the MLA Charge should better enable NSCC to manage the
risk of increased costs to NSCC associated with the decreased
marketability of a defaulted member's portfolio where the portfolio
contains a large position in securities sharing similar risk profiles.
Additionally, since NSCC's current margin methodology does not account
for bid-ask spread transaction costs associated with liquidating a
defaulted member's portfolio, the Bid-Ask Spread Charge should enable
NSCC to manage such risks and costs.
    One commenter suggests that the Proposed Rule Change is duplicative
of a separate NSCC proposal regarding Illiquid Securities that is
currently pending before the Commission.\58\ The commenter argues that
since both proposals include provisions that would affect margin levels
with respect to Illiquid Securities, both proposals appear to address
the same concerns. Therefore, the commenter suggests that instead of
approving the Proposed Rule Change, the Commission should consolidate
NSCC's associated Advance Notice together with the Illiquid Securities
Proposal and extend the public comment period before the Commission
makes a substantive determination. The Commission disagrees with the
commenter. The Proposed Rule Change (and NSCC's associated Advance
Notice) and the Illiquid Securities Proposal deal with separate and
distinguishable aspects of NSCC's margin methodology, even if there is
a group of Illiquid Securities to which both proposals would apply. The
Illiquid Securities Proposal is designed to amend the method by which
NSCC determines the appropriate volatility component of margin for a
particular security, i.e., calculate appropriate margin to cover
potential losses on a portfolio using historical, mid-point securities
prices. The Proposed Rule Change is designed to address two specific
risks that are not captured directly by historical mid-point security
price movements that may arise specifically during the liquidation of a
member's portfolio in the event of a default: (1) The potential added
costs of liquidating large concentrated positions in a limited period
of time, and (2) bid-ask spread transactions costs.
---------------------------------------------------------------------------

    \58\ OTC Markets Letter at 1-2 (citing Securities Exchange Act
Release No. 88615 (April 9, 2020), 85 FR 21037 (April 15, 2020) (SR-
NSCC-2020-802) (``Illiquid Securities Proposal'')).
---------------------------------------------------------------------------

    Specifically, the Illiquid Securities Proposal seeks to, among
other things, more accurately identify securities that exhibit illiquid
characteristics for margin purposes and to establish a separate
haircut-based method for determining the margin for Illiquid
Securities. NSCC's methodology for calculating the volatility component
of a member's margin depends on the type of securities in the member's
portfolio. As stated above, for most securities (e.g., equity
securities), NSCC calculates the volatility component using, among
other things, a parametric VaR model, and the volatility component
typically constitutes the largest portion of a member's required
margin. However, securities with illiquid characteristics generally
incur a wider degree of price variability and are less amenable to
statistical analysis, and, as such, may merit a more conservative
margining approach through a haircut-based method. The proposed
haircut-based method is more conservative because it does not allow for
inter-asset risk offsetting in the way that the VaR model does.
    Accordingly, for certain securities that are less amenable to the
statistical analysis provided in the VaR model, including Illiquid
Securities, NSCC currently calculates a haircut-based volatility
component by multiplying the absolute value of a member's positions in
such securities by a certain percentage. NSCC's pending Illiquid
Securities Proposal would, among other things, establish a separate
haircut-based method for determining the volatility component of the
margin for Illiquid Securities. Thus, the Illiquid Securities Proposal
would alter the way in which NSCC determines the appropriate margin for
Illiquid Securities.
    In contrast, the Proposed Rule Change is not designed to define
what

constitutes an Illiquid Security under NSCC's Rules, and it would not
alter the methodology by which NSCC determines the volatility component
of the margin for any particular securities, including Illiquid
Securities. Instead, with respect to the MLA Charge, the Proposed Rule
Change relates to a new margin charge add-on that, if triggered,
applies to all securities cleared at NSCC (i.e., not solely to Illiquid
Securities), and the proposed add-on is distinct from the underlying
margin otherwise collected for all securities (including Illiquid
Securities). Rather than addressing the volatility component of margin
and the potential losses on a portfolio, as does the Illiquid
Securities Proposal, the Proposed Rule Change is designed to address
the discrete risks of a default liquidation scenario associated with
(1) concentrated large positions in any type of security or group of
securities sharing a similar risk profile, and (2) bid-ask spread
transaction costs that are currently unaccounted for in NSCC's margin
methodology. Moreover, the MLA Charge would not automatically be
applied based on the security or type of security that is held;
instead, it would only apply to concentrated positions that could be
difficult to liquidate in a limited time in the event of a default.
Because the Proposed Rule Change and the Illiquid Securities Proposal
address wholly separate and distinct aspects of NSCC's margin
methodology, the Commission disagrees with the commenter that the two
proposals should be consolidated or otherwise disposed of together.
    The Commission believes that adding the MLA Charge and Bid-Ask
Spread Charge to NSCC's margin methodology should enable NSCC to more
effectively identify, measure, monitor, and manage its credit exposures
in connection with liquidating a defaulted member's portfolio that may
give rise to (1) decreased marketability due to large positions of
securities sharing similar risk profiles, and (2) bid-ask spread
transaction costs. Accordingly, the Commission believes that adding the
MLA Charge and Bid-Ask Spread Charge to NSCC's margin methodology would
be consistent with Rule 17Ad-22(e)(4)(i) because these new margin
charges should better enable NSCC to maintain sufficient financial
resources to cover NSCC's credit exposure to its members fully with a
high degree of confidence.\59\
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    \59\ Id.
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D. Consistency With Rules 17Ad-22(e)(6)

    Rule 17Ad-22(e)(6)(i) 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.\60\ Rule
17Ad-22(e)(6)(v) 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, uses an appropriate method for
measuring credit exposure that accounts for relevant product risk
factors and portfolio effects across products.\61\
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    \60\ 17 CFR 240.17Ad-22(e)(6)(i).
    \61\ 17 CFR 240.17Ad-22(e)(6)(v).
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    As described above in Section I.A and B, NSCC's current margin
methodology does not account for the potential increase in market
impact costs when liquidating a defaulted member's portfolio where the
portfolio contains a large position in securities sharing similar risk
profiles. NSCC proposes to address this risk by adding the MLA Charge
to its margin methodologies. To avoid excessive MLA Charges and ensure
margin requirements are commensurate with the relevant risks, NSCC also
contemplates reducing a member's MLA Charge when NSCC could otherwise
partially mitigate the relevant risks by extending the time period for
liquidating a defaulted member's portfolio beyond the three day period.
    Additionally, as described above in Section I.C, NSCC's current
margin methodology does not account for the risk of incurring bid-ask
spread transaction costs when liquidating the securities in a defaulted
member's portfolio. NSCC proposes to address this risk by adding the
Bid-Ask Spread Charge to its margin methodology. Adding the MLA Charge
and Bid-Ask Spread Charge to NSCC's margin methodology should better
enable NSCC to collect margin amounts commensurate with the risk
attributes of its members' portfolios than NSCC's current margin
methodology. Specifically, the MLA Charge should better enable NSCC to
manage the risk of increased costs to NSCC associated with the
decreased marketability of a defaulted member's portfolio where the
portfolio contains a large position in securities sharing similar risk
profiles. Moreover, the proposal to reduce the MLA Charge when NSCC
could otherwise partially mitigate the relevant risks demonstrates how
the proposal provides an appropriate method for measuring credit
exposure, in that it seeks to take into account the particular
circumstances related to a particular portfolio when determining the
MLA Charge. Additionally, since NSCC's current margin methodology does
not account for bid-ask spread transaction costs associated with
liquidating a defaulted member's portfolio, the Bid-Ask Spread Charge
should enable NSCC to manage such risks.
    Accordingly, the Commission believes that adding the MLA Charge and
Bid-Ask Spread Charge to NSCC's margin methodology would be consistent
with Rules 17Ad-22(e)(6)(i) and (v) because these new margin charges
should better enable NSCC to establish a risk-based margin system that
(1) considers and produces relevant margin levels commensurate with the
risks associated with liquidating member portfolios in a default
scenario, including decreased marketability of a portfolio's securities
due to large positions in securities sharing similar risk profiles and
bid-ask transaction costs, and (2) uses an appropriate method for
measuring credit exposure that accounts for such risk factors and
portfolio effects.\62\
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    \62\ 17 CFR 240.17Ad-22(e)(6)(i) and (v).
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    One commenter argues that the Proposed Rule Change would burden
members with margin requirements that are not commensurate with NSCC's
actual risks, as evidenced by the lack of recent settlement losses, and
instead are designed to mitigate imaginary risks.\63\ In addition, the
commenter argues that NSCC has not provided evidence of the need for
the Proposed Rule Change, again citing the lack of recent settlement
losses. However, as discussed above, the Commission believes that the
proposed changes to NSCC's margin methodology would enable it to
collect margin appropriately tailored to two particular risks that are
not currently addressed in the existing margin methodology. The
Commission does not agree that the fact that NSCC has not suffered
recent settlement losses obviates the need for the Proposed Rule
Change. Rule 17Ad-22(e)(6)(iii) 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,
calculates margin

sufficient to cover its potential future exposure to participants in
the interval between the last margin collection and the close out of
positions following a participant default.\64\ Potential future
exposure is, in turn, defined as the maximum exposure estimated to
occur at a future point in time with an established single-tailed
confidence level of at least 99 percent with respect to the estimated
distribution of future exposure.\65\ Thus, to be consistent with its
regulatory requirements, NSCC must consider potential future exposure,
which includes, among other things, losses associated with the
liquidation of a defaulted member's portfolio. Based on its review and
analysis of the Proposed Rule Change, including the confidential impact
analyses demonstrating the overall effects that the proposed changes
would have on the overall margin collected by NSCC and the confidential
margin methodology (i.e., the specific details of how NSCC would
calculate its margin requirements under the proposed changes), in
conjunction with the Commission's supervisory observations, the
Commission believes that the proposed changes would better enable NSCC
to collect margin commensurate with the different levels of risk that
members pose to NSCC as a result of their particular portfolio, which
is consistent with Rule 17Ad-22(e)(6)(i), and to calculate margin
sufficient to cover its potential future exposure to its participants,
which is consistent with Rule 17Ad-22(e)(6)(iii).
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    \63\ Wilson-Davis Letter at 3, 5.
    \64\ 17 CFR 240.17Ad-22(e)(6)(iii).
    \65\ 17 CFR 240.17Ad-22(a)(13).
---------------------------------------------------------------------------

E. Consistency With Rules 17Ad-22(e)(23)(ii)

    Rule 17Ad-22(e)(23)(ii) \66\ requires each covered clearing agency
to 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.
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    \66\ 17 CFR 240.17Ad-22(e)(23)(ii).
---------------------------------------------------------------------------

    Both commenters argue that the Proposed Rule Change fails to
provide sufficient information to evaluate the necessity and impact of
the proposal.\67\ Specifically, one commenter argues that the proposal
provides no explanation as to why NSCC's current margin formula is
inadequate or how the proposed methodology would limit NSCC's exposure
in the event of a member default.\68\ Another commenter stated that the
Proposed Rule Change does not comply with Rule 17Ad-22(e)(23)(ii),
asserting that NSCC has not performed the ``requisite analysis'' or
gathered sufficient data to fully understand the impact of the
proposal.\69\
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    \67\ See OTC Letter at 2; Wilson-Davis Letter at 1, 4-5.
    \68\ See OTC Letter at 2.
    \69\ See Wilson-Davis Letter at 2-3. Contrary to the commenter's
implication, Rule 17Ad-22(e)(23) does not prescribe any specific
data or analysis that a covered clearing agency, like NSCC, must
perform when making changes to its margin methodology. Moreover, as
discussed above in note 41, NSCC has provided confidential impact
analyses covering a one-year time period to demonstrate the
potential impact of the Proposed Rule Change on its members.
     In addition, the commenter references Rule 17Ad-22(e)(23)(iii),
which requires a covered clearing agency, like NSCC, to establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to provide basic transaction volume and values.
See Wilson-Davis Letter at 2. However, the information described by
the commenter would not constitute basic data on transaction volumes
and values, as required by the rule, and instead would appear to
refer to more detailed analysis of the impacts of particular margin
methodologies. Moreover, NSCC publicly provides data on transaction
volumes and values in its quantitative disclosures, which are
available at https://www.dtcc.com/legal/policy-and-compliance.
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    The Commission disagrees with the commenters that the Proposed Rule
Change does not provide sufficient information to understand the
potential costs associated with participating in NSCC, based on the
materials reflected in the Proposed Rule Change.\70\ When considering
the issues raised in the Proposed Rule Change, the Commission
thoroughly reviewed (1) the Proposed Rule Change, including the
supporting exhibits that provided, among other things, confidential
impact analyses regarding the proposals in the Proposed Rule Change;
(2) the comment letters; and (3) the Commission's own understanding of
NSCC's margin methodology, with which the Commission has experience
from its general supervision of NSCC. Based on its review of these
materials, the Commission believes that, as described in the Notice,
NSCC has done exactly what the commenters seek, in that the proposal
explains why the current methodology is inadequate (i.e., it does not
address these particular risks), and how the proposed methodology would
address this issue (i.e., by including add-on charges designed to
address these particular risks). As described in the Notice and noted
above, NSCC's current margin methodology neither accounts for the risk
of a potential increase in market impact costs that NSCC could incur
when liquidating a defaulted member's portfolio that contains a
concentration of large positions, as compared to the overall market,
nor does NSCC's current margin methodology account for this risk of
potential bid-ask spread transaction costs in connection with
liquidating a defaulted member's portfolio. The Proposed Rule Change is
designed to address these specific risks and limit NSCC's exposure in
the event of a member default.
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    \70\ One commenter argues that the proposal is generally
unclear, overly technical and complicated, inappropriately relies on
information provided by NSCC to the Commission confidentially, and
thus prevents the public from fully evaluating and providing
meaningful comment on the proposal. As stated above, the Commission
believes that the proposal adequately explains why the current
methodology is inadequate (i.e., it does not address certain
specific risks), and how the proposed methodology would address this
issue (i.e., via the MLA Charge and Bid-Ask Spread Charge).
Additionally, the Commission does not believe that the Proposed Rule
Change is overly technical and complicated. The process of measuring
the risks involved with various member portfolio compositions to
determine appropriate margin levels is technical, complex, and does
not distill into a simple formula. Instead, the process often must
utilize sophisticated risk models and calculations. NSCC has
described the methodology that it would use to determine the margin
to address these specific risks with sufficient specificity to allow
a member to understand the types of portfolios that would be subject
to an additional MLA Charge and to understand the haircuts that
would apply to determine the Bid-Ask Spread Charge.
     Moreover, the Commission believes that NSCC appropriately
submitted Exhibit 3 to the filing confidentially because it includes
detailed member-level margin data and other proprietary information.
Under its Rules, NSCC is not permitted to disclose member-level
information. See Rule 49 of the Rules, supra note 10. NSCC requested
confidential treatment of such materials and its underlying detailed
methodology documentation, consistent with the applicable regulatory
requirements. See 17 CFR 240.24b-2.
---------------------------------------------------------------------------

    The Proposed Rule Change describes how NSCC would determine the MLA
and Bid-Ask Spread Charges. For both charges, the Proposed Rule Change
identifies the relevant asset groupings that NSCC would utilize. For
the MLA Charge, NSCC has described how the charge would depend on
whether a member holds large aggregate positions in an asset group.
Thus, a member should be able to consider whether its positions would
likely trigger the MLA Charge in light of the relevant holdings in its
portfolio. For the Bid-Ask Spread Charge, NSCC has identified that the
charge would be determined by application of a haircut and provided a
schedule of the applicable haircuts. Thus, a member should be able to
understand what the charge would be for a particular security. In
addition, NSCC represented that in August 2020, NSCC provided all its
Members with the results of an impact study regarding the potential
impacts of both the Illiquid Securities Proposal and the MLA Proposal
and clearly delineated between the impacts of these separate

proposals.\71\ NSCC also included a written summary of the MLA Proposal
and offered to schedule a call to discuss these proposals and their
potential impacts.\72\ Moreover, NSCC has provided impact analyses
demonstrating that the Proposed Rule Change would result in margin
levels that better reflect the risks associated with (1) concentrated
large positions in securities sharing a similar risk profile, and (2)
bid-ask spread transaction costs than NSCC's current margin
methodology. Accordingly, the Commission believes that NSCC has
demonstrated the operation and impact of the Proposed Rule Change,
i.e., that it would help NSCC better maintain sufficient financial
resources to cover its credit exposures to each member in full with a
high degree of confidence.
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    \71\ NSCC Letter at 2.
    \72\ Id. More generally, NSCC stated that it routinely reaches
out to members that may be impacted by its proposals. This outreach
includes impact study results and an offer to discuss those results
and the underlying proposal. Id.
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    Moreover, to provide transparency and assist members in
understanding their margin requirements, NSCC maintains the NSCC Risk
Management Reporting application on the Participant Browser Service
(``PBS'') and the NSCC Risk Client Portal (``Portal''), which will
include this Proposed Rule Change once it is implemented.\73\ The PBS
is a member-accessible website portal for accessing reports and other
disclosures. The Risk Management Reporting application enables a member
to view and download margin requirement information and component
details, including issue-level margin information related to start of
day volatility charges and mark-to-market, intraday exposure, and other
components. Members are able to view and download spreadsheets that
contain market amounts for current clearing positions and the
associated volatility charges. In addition, NSCC represents that the
Portal provides members the ability, for information purposes, to view
and analyze certain risks relating to their portfolios, including
calculators to assess the risks and margin impacts of certain
activities and to compare their portfolios to historical and average
values.
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    \73\ See Letter from Timothy J. Cuddihy, Managing Director DTCC
Financial Risk Management, submitted in response to comments on the
Illiquid Securities Proposal, available at, https://www.sec.gov/comments/sr-nscc-2020-802/srnscc2020802.htm.
---------------------------------------------------------------------------

    NSCC further maintains the NSCC Client Calculator on the Portal
that provides functionality for members to enter ``what-if'' position
data and to recalculate their volatility charges to determine margin
impact pre-trade. In other words, this calculator allows members to see
the impact to the volatility charge if specific transactions are
executed, or to anticipate the impact of an increase or decrease to a
current clearing position. Using this calculator, members have the
ability to download the Client Calculator portfolio detail to modify a
current margin portfolio, upload the portfolio to run a margin
calculation, and view position level outputs in order to make informed
risk management and execution decisions.
    Taken together, these tools should allow members to understand how
these charges would affect their portfolios. Accordingly,
notwithstanding the comments, the Commission believes that the Proposed
Rule Change is not inconsistent with Rule 17Ad-22(e)(23)(ii).\74\
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    \74\ 17 CFR 240.17Ad-22(e)(23)(ii).
---------------------------------------------------------------------------

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 2 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<EMAIL_ADDRESS>Please include File Number
SR-NSCC-2020-016 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-2020-016. 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 such filings will also be available for inspection
and copying at the principal office of NSCC and NSCC's website at
https://www.dtcc.com/legal.
    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-2020-016 and should be
submitted on or before November 10, 2020.

IV. Accelerated Approval of the Proposed Rule Change, as Modified by
Amendment No. 2

    The Commission finds good cause, pursuant to Section
19(b)(2)(C)(iii) of the Act,\75\ to approve the Proposed Rule Change,
as modified by Amendment Nos. 1 and 2, prior to the thirtieth day after
the date of publication of Amendment No. 2 in the Federal Register. As
noted above, in Amendment No. 2, NSCC updated the confidential Exhibit
3 to the Proposed Rule Change to include impact analysis data with
respect to the Proposed Rule Change. Specifically, Amendment No. 2
includes impact studies for various time periods detailing the average
and maximum MLA and Bid-Ask Charges for each member, by both percentage
and amount. The Commission believes that the member-level data in
Amendment No. 2 warrants confidential treatment. Amendment No. 2
neither modifies the Proposed Rule Change as originally published in
any substantive manner, nor does Amendment No. 2 affect any rights or
obligations of NSCC or its members. Instead, Amendment No. 2 provides
the Commission with information necessary to evaluate whether the
Proposed Rule Change is consistent with the Act. Accordingly, the
Commission finds good cause, pursuant to Section 19(b)(2)(C)(iii) of
the Act,\76\ to approve the Proposed Rule Change, as modified by
Amendment Nos. 1 and 2, prior to the thirtieth day after the date of
publication of notice of Amendment No. 2 in the Federal Register.
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    \75\ 15 U.S.C. 78s(b)(2)(C)(iii).
    \76\ Id.
---------------------------------------------------------------------------

V. Conclusion

    On the basis of the foregoing, the Commission finds that the
Proposed Rule Change, as modified by

Amendment Nos. 1 and 2, is consistent with the requirements of the Act
and in particular with the requirements of Section 17A of the Act \77\
and the rules and regulations promulgated thereunder.
---------------------------------------------------------------------------

    \77\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\78\ that Proposed Rule Change SR-NSCC-2020-016, as modified by
Amendment Nos. 1 and 2, be, and hereby is, approved on an accelerated
basis.\79\
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    \78\ 15 U.S.C. 78s(b)(2).
    \79\ In approving the proposed rule change, the Commission
considered the proposals' impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f). See also supra note 43 and
accompanying text.
    \80\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\80\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23138 Filed 10-19-20; 8:45 am]
BILLING CODE 8011-01-P