Exhibit 35 (Dkt. 568-35, S.D. Fla.)
Summary
Exhibit 35 (Document 568-35) in Case 1:21-md-02989-CMA, entered on the FLSD docket June 8, 2023, is a 27-page printout, made 1/29/2021 from the DTCC portal and stamped RHMDL00011594 to RHMDL00011619, of the DTCC NSCC Risk Margin Component Guide with a publication date of July 10, 2020. An important notice states that the guide is for informational purposes only and that the NSCC Rules govern in any discrepancy. The guide describes the components of a Member's Required Deposit, including a volatility component designed to capture market price risk at a 99th percentile level of confidence through a parametric Value-at-Risk model, which usually comprises the largest portion, and states that NSCC may impose a premium charge when a Member's Required Fund Deposit exceeds its excess net capital.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
- Date
- 2023-06-08
Cite this document
“Exhibit 35 (Dkt. 568-35).”
Original at archive.org, dated 2023-06-08. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2023-06-08-covid-era-misc-0def7bb5-1/
, SHA-256 0def7bb5110a104faff9ff29c91b6344b421db64ea1d8015c19113f9b9f5189b.Full text
Case 1:21-md-02989-CMA Document 568-35 Entered on FLSD Docket 06/08/2023 Page 1 of
27
Exhibit 35
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rtal. web.app.dtcc.org/tlux/Page/N
568-35 Enteredsec_ Risk_Margin_
on FLSD Component_ Guide
Docket 06/08/2023 Page 2 of
27
DTCC
NSCC RISK MARGIN COMPONENT GUIDE
PUBLICATION DATE: JULY 10, 2020
Important Notice
This document and the information described herein is provided as a convenience to NSCC
Members and is for informational purposes only. This document should not be regarded as a
definitive or exhaustive description of NSCC's dearing fund methodology or risk-management
framework; nor should it be regarded as a substitute for the NSCC Rules and Procedures
("Rules"), Vvhich governs in all respects the relationship between NSCC and its Members.
Members should refer to the NSCC Rules for a complete statement of NSCC procedures, rights,
obligations, and requirements.
Notwithstanding anything stated herein, NSCC retains all discretion and rights set forth in the
NSCC Rules. Nothing in this document shall be deemed to impose any obligations on NSCC
that are not set forth in the NSCC Rules, and in the case of any discrepancy between this
document and the NSCC Rules, the NSCC Rules shall govern.
This document may be amended at any time without prior notice and the risk-management
practices described herein may be changed at any time without update to this document.
ADVANCING FINANCIAL MARKETS. TOGETHER-'
DTCC Public (White)
https://portal .web.app.dtcc.org/tlux/Page/N SCC_Risk_ Margin_Component_ Guide 1/26
RHMDL00011594
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rtal. web.app.dtcc.org/tlux/Page/N
568-35 Enteredsec_ Risk_Margin_
on FLSD Component_ Guide
Docket 06/08/2023 Page 3 of
27
Table of Contents
Introduction ................................................................................................................................ 3
1 Volatility Component ........................................................................................................... 3
1.1 Overview of Methodology ............................................................................................... 3
1.2 In-Scope Products and Process ..................................................................................... 3
1.2.1 Equity Margining ..................................................................................................... 4
1.2.2 Fixed Income Margining .......................................................................................... 4
1.3 Equity Volatility Component Calculations........................................................................ 4
1.3.1 VaR Charge ............................................................................................................ 4
1.3.2 Illiquid Equity and IPO Haircut Volatility Charge ...................................................... 9
1.4 Fixed Income Volatility Component Calcullations ........................................................... 10
1.4.1 Calculation Methodology for Corporate Bonds .......................................................10
1.4.2 Calculation Methodology for Municipal Bonds ........................................................10
1.4.3 Calculation Methodology for Other Fixed Income Securities .................................. 11
1.5 Family-Issued Securities Volatility Component Calculation ............................................ 11
2 Mark to Market Component........................... ..................................................................... 12
2.1.1 Start of Day Mark to Market Charge ....................................................................... 12
2.1.2 lntraday Mark to Market Charge ...... . ..................................................................... 12
3 Special Charge ................................................................................................................... 12
4 CNS Fails Charge Component............................................................................................ 12
5 Margin Requirement Differential ("MRD") Component ........................................................ 13
6 Coverage Component ("CC") Charge ........... ..................................................................... 14
7 Illiquid Charge Component ................................................................................................ 16
8 Other Transactions Charge ................................................................................................. 17
9 Mutual Fund Transactions Charge ..................................................................................... 17
10 Excess Capital Premium ("CF Premium") Charge ..............................................................17
11 Backtesting Charge ........................................................................................................... 18
12 Bank Holiday Charge ......................................................................................................... 19
13 Appendices ........................................................................................................................19
Page 2 of 26
DTCC Public (White)
https://portal .web.app.dtcc.org/tlux/Page/N SCC_Risk_ Margin_Component_ Guide 2/26
RHMDL00011595
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rtal. Enteredsec_
web.app.dtcc.org/tlux/Page/N
568-35 Risk_Margin_
on FLSD Component_ Guide
Docket 06/08/2023 Page 4 of
27
Introduction
On a daily basis NSCC calculates a Clearing Fund requirement for each Member based upon
their unsettled and pending transactions, using the prior day's securities closing market price.
The formula uses a risk-based methodology and includes a number of components.
Some of these components are described in this document, including the volatility charges, mark
to-market charges, fail charges (for CNS transactions), a charge for Family-Issued Securities to
mitigate wrong way risk, a charge for Illiquid Positions, a charge to mitigate day over day margin
differentials. a coverage component, and a Backtesting Charge. In addition. NSCC may impose
a premium charge when a Member's Required Fund Deposit exceeds its excess net capital.
Not all required components to the Clearing Fund or other Clearing Fund deposit requirements
are described in this document; NSCC may require additional deposits to a Member's Clearing
Fund, as described in the NSCC Rules.
1 Volatility Component
1.1 Overview of Methodology
The volatility component of each Member's Required Deposit is designed to measure market
price volatility and is calculated for Members' Net Unsettled Positions. The volatility component
is designed to capture the market price risk associated with each Member's portfolio at a 99th
percentile level of confidence.
The volatility component applicable to most Net Unsettled Positions is calculated utilizing a
parametric Value-at-Risk ("VaR") model and is referred to as the VaR Charge. Net Unsettled
Positions in certain securities are excluded from this calculation and are instead charged a
haircut-based charge as the volatility component.
The volatility component usually comprises the largest portion of a Member's Required Deposit.
The volatility component is described in Procedure XV, l(A)(1)(a) and l(A)(2)(a) of the NSCC
Rules.
1.2 In-Scope Products and Process
Securities that are eligible to be cleared at NSCC can generally be classified into tvilo broad
categories: equity and fixed income instruments. Equity securities can be considered either liquid
or illiquid, which include, for example, IPOs. Fixed income securities can include, for example,
corporate bonds, municipal bonds and other types of securities that are non-corporate/non
municipal securities. Examples are unit investment trusts, preferred stock, or other fixed income
securities that are amenable to generally accepted statistical analysis only in a complex manner.
Generally, liquid equity securities are subject to the VaR Charge, which uses a parametric VaR
approach with a number of flooring mechanisms which each targets specific risk drivers; and both
illiquid equity securities as well as fixed income securities are subject to a haircut-based volatility
charge.
Page 3 of 26
DTCC Public (White)
https://portal .web.app.dtcc.org/tlux/Page/N SCC_Risk_ Margin_Component_ Guide 3/26
RHMDL00011596
Case 1:21-md-02989-CMA https://po
1/29/2021 Document rtal. web.app.dtcc.org/tlux/Page/N
568-35 Enteredsec_ Risk_Margin_
on FLSD Component_ Guide
Docket 06/08/2023 Page 5 of
27
1.2.1 Equity Margining
All equities, other than those that are "Illiquid Securities", as defined in the NSCC Rules are
classified as liquid securities. In general, these securities include securities that are traded on
the national securities exchanges with its first available price more than 30 business dates ago in
the FAME historical price file over the past 153 business days. These securities are subject to
the VaR Charge, which utilizes a parametric method with additional components of a Volatility
Floor, Gap Risk, and Margin Floor.
In general, other equity securities traded on a national securities exchange that does not meet
the available pricing criteria is classified as an Initial Public Offering ("IPO"). Securities for which
there is no price data from the FAME historical price file for the day are generally considered
Illiquid Securities. Securities that are not listed on a national securities exchange and are traded
in over-the-counter marketplaces will also be defined as Illiquid Securities. A haircut-based charge
is applied as the volatility component for both the IPO and equities that are considered Illiquid
Securities.
1.2.2 Fixed Income Margining
There are generally three categories of fixed income securities that are eligible to be cleared at
NSCC: (1) corporate bonds. (2) municipal bonds, and (3) other fixed income securities (non
corporate/non-municipal securities. A haircut-based volatility charge applied to all fixed income
securities. Specific haircut rates depend on the category of the security.
The haircut rates for corporate bonds are derived from the maturity/credit rating category into
which that bond is classified. There are currently 36 maturity/credit rating categories. For
municipal bonds, the haircut rates depend on bond maturity, credit rating and the bond's sector.
All other non-corporate/non-municipal bond fixed income securities are subject to a single haircut
rate.
Under the NSCC Rules, NSCC may exclude other securities from the application of the VaR
Charge and instead apply a haircut-based volatility charge.
1.3 Equity Volatility Component Calculations
1.3.1 VaR Charge
NSCC uses a parametric VaR methodology to calculate the VaR Charge. Parametric VaR is
assessed by simultaneously calculating four separate VaR types - (i} an exponentially-weighted
moving average ('EWMA') volatility estimation, (ii) an evenly-weighted volatility estimation, (iii) a
gap risk measure, and (iv) a portfolio margin floor. The highest resultant value among all of the
parametric VaR calculations becomes the surviving parametric VaR that is applied to the start-of
day liquid equity position.
Parametric VaR Calculation
The parametric VaR for a given Member's liquid security portfolio, VaRp , is calculated as follows:
VaR p = frat -tail x 2.327 x -./3 x JVai-iance(P)
Page 4 of 26
DTCC Public (White)
https://portal .web.app.dtcc.org/tlux/Page/N SCC_Risk_ Margin_Component_ Guide 4/26
RHMDL00011597
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rtal. web.app.dtcc.org/tlux/Page/N
568-35 Enteredsec_ Risk_Margin_
on FLSD Component_ Guide
Docket 06/08/2023 Page 6 of
27
where 2.327 represents the 99th percentile of the Normal distribution, {3 is a time scaling factor
for the 3-day risk horizon, and ftat-tait is an adjustment factor from Normal distribution to
corresponding Student's t distribution.
Note that the variance is calculated with a decay factor and a lookback period, as follows:
where
,t decay factor
w: look-back window size for EVVMA decay factor
ri (k): the 1-day return of the ith equity in the portfolio on the kth day counting
backward, based on FAME corporate action adjusted historical prices
v;: the position value of the ith equity in the portfolio
and
Iii.'·
w-1
0=
k=O
The core parametric VaR is the larger of the base VaR and the Volatility Floor, where
1. the base VaR is calculated with A= 0.97 and w = 152
2. the Volatility Floor is calculated with A = 1 and w = 252
Gap Risk
The gap risk measure is designed to ensure that NSCC collects enough margin to cover the
idiosyncratic price movement of the most concentrated position in the guaranteed portfolio.
First, a concentration threshold is determined by conducting portfolio-level backtesting over a
look-back period of not less than the previous 12 months. 1
1 This concentration threshold is 10.0% as of the publication date of this document; this threshold
may change from time to time.
Page 5 of 26
DTCC Public (White)
https://portal .web.app.dtcc.org/tlux/Page/N SCC_Risk_ Margin_Component_ Guide 5/26
RHMDL00011598
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rtal. web.app.dtcc.org/tlux/Page/N
568-35 Enteredsec_ Risk_Margin_
on FLSD Component_ Guide
Docket 06/08/2023 Page 7 of
27
Second, if the absolute value of the largest non-index position in the portfolio exceeds the
concentration level, the charge is determined by taking the gross market value of the concentrated
position and multiplying by a percent. 2
NSCC defines the gap risk as follows:3
mIMVd
gap risk(c,9) = 9 x mIMVd (where
I. II[ MVi I > c)
where
c = concentration level, which is the % threshold of the top non-ETF concentrated
position in the portfolio, beyond which GalP Risk would be assessed for the portfolio.
9 = gap size, which is the haircut applied to the top concentrated position in the
portfolio.
MV; = market value of position i.
Margin Floor
To address the remaining idiosyncratic and other risk factors in the portfolio not accounted for in
the other VaR calculations, NSCC utilizes a portfolio-level margin floor, parameterized as a
combined margin haircut on the value of net directional market exposure and the value of
balanced market exposures, respectively. These margin haircuts are equivalent to the reciprocal
of the directional or balanced Leverage Ratios.
First, the net directional market value of the portfolio is calculated by taking the absolute difference
between the market value of the long net unsett:led positions and the market value of the short
net unsettled positions in the portfolio and then multiplying that amount by a percentage.4
2 NSCC determines such percent empirically as no less than the larger of the 1st and 99th
percentiles of three-day returns of a set of CUSIPs that are subject to the volatility component,
giving equal rank to each to determine which has the highest movement over that three-day
period. NSCC uses a look-back period of not less than ten years that includes a one-year stress
period. If the one-year stress period overlaps with the look-back period, only the non-overlapping
period is combined with the look-back period. The result is then be rounded up to the nearest
whole percentage. Currently, as of the publication date of this document, the calculation uses
16%, and this is subject to change.
3 While positions in ETPs are generally excluded from the calculation of the Gap Risk measure,
NSCC does maintain a list of ETPs that will be subject to Gap Risk measure.
4 NSCC determines the applicable percentage by examining the annual historical volatility levels of
benchmark indices over a historical look-back period.
Page 6 of 26
DTCC Public (White)
https://portal .web.app.dtcc.org/tlux/Page/N SCC_Risk_Margin_Component_ Guide 6/26
RHMDL00011599
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rtal. web.app.dtcc.org/tlux/Page/N
568-35 Enteredsec_ Risk_Margin_
on FLSD Component_ Guide
Docket 06/08/2023 Page 8 of
27
Second, NSCC calculates the balanced market value of the portfolio by taking the lowest absolute
market value of long net unsettled positions and short net unsettled positions in the portfolio and
then multiplying that value by a percentage.5
More specifically,
where
HCa 6: haircut rate on directional market value
HCb : haircut rate on balanced market value
GM Vd : directional gross market value, IIGMV10n9 I-IGMVshort ll
GMVb : balanced gross market value, min(IGMV10,,9 I, IGMVshort l)
Final Parametric VaR
NSCC takes the highest result of the calculation of the core parametric VaR, the Gap Risk
measure and the margin floor as the final parametric VaR Charge.
NSCC calculates the Parametric VaR at the individual Account level and sums up to the Member
level.
Missing Security Return Backfiling
In calculating the VaR Charge, if the price return cannot be computed for a security due to
inaccurate or incomplete data, the following procedure is followed:
• Calculate the front weighted correlations of this CUSIP with the list of indexing CUSIPs in
the table below as follows:
Step 1: Exclude any index ETF CUSIPs with less than n days of price history from FAME.
where n is the length of the estimation window.
Step 2: Calculate 1-day log returns for each CUSIP as well as the index ETF for each
historical business day
(Eqn. 1.3.1.1)
where Pr represents the historical price on business date t.
5 NSCC determines the applicable percentage to be an amount that covers the transaction costs
and other re levant risks associated with the positions in the portfolio.
6 Haircuts are equivalent to the reciprocal of Leverage Ratios (LV).
Page 7 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/tlux/Page/N SCC_Risk_Margin_Component_ Guide 7/26
RHMDL00011600
Case 1:21-md-02989-CMA https://po
1/29/2021 Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_ FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 9 of
27
Step 3: For each CUSIP and index ETF pair (i, /), calculate the correlation:
1. Calculate the front-weighted mean of each CUSIP and index ETF pair
(Eqn. 1 .3.1.2)
(Eqn. 1 .3.1.3)
where i represents CUSIP and/ represents index ETF, T0 stands for date of the
calculation, and N is the nunnber of days between the earliest date when a return was
calculation in step 2 and T0 -- 1 for CUSIP. And h'o -k is the indicator function and
[,. - . =
fO, when 11.ro-k is missing
10 k h, (Eqn. 1.3.1.4)
otherwise
As any missing return will ha,ve no contribution to the mean calculation, any missing
return in the mean calculation can be simply filled with zero. 0 is default to the same
decay factor as the VaR Charge. Please note that the same indicator function is used in
both (Eqn. 1.3.1.2) and (Eqn. 1.3.1.3).
2. Calculate the front-weighted standard deviation and covariance
(Eqn. 1.3.1.5)
l
O ) )2
0 k-1
a,(70) =
'°N [ ( •
v:-N k-1 "-,kaal 10 -k X
..,.( 1
X 11,T0-k - 11 ..,. (Eqn. 1.3.1.6)
k=1 1ro-kx 9
1
CJ;• 1 (T0 ) = IN _ 1 f.r. -k >( e -l x (r,-r.
T
' o - k. -r,( 0 )) x (r, • ro -k -fi(T0 )) (Eqn. 1.3.1.7)
k
k 1 L-
1<=1 lro-kx O - ._ o
where r,(T0 ) and fi(T0 ) are calculated in (Eqn. 1.3.1.2) and (Eqn. 1.3.1.3) separately,
and l70_k is specified in (Eqn. 1.3.1.4). As mentioned, that there is no impact on the
variance or covariance, the missing return can be simply filled with zero. a1 (T0 ) is
calculated differently for difforent ri series when having less than n returns. The r,.ro-k
terms in a1 (7'.0 ) calculation must matchr;•r. -k .. In other word, IrO -k· is determined by if r;is
' 0 I
missing and shared across Eqn. 1.3.1.5, Eqn. 1.3.1.6 and Eqn. 1.3.1. 7 above.
3. Calculate the correlation
(Eqn. 1.3.1.8)
where i represents the i-th CUSIP, j represents the }-th index ETF.
Page 8 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_Margin_Component_ Guide 8/26
RHMDL00011601
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rtal. web.app.dtcc.org/tlux/Page/N
568-35 Entered on sec_FLSD
Risk_Margin_ Component_ Guide
Docket 06/08/2023 Page 10 of
27
Type of
CUSIP CUSIP SYMBOL DESCRIPTION
46090E103 Liquid QQQ PowerShares QQQ Trust, Series 1 (ETF)
SPDR Dow Jones Industrial Average
78467X109 Liquid DIA
ETF
78462F103 Liquid SPY Sf!>D S&P 500 Eil=
81369Y605 Liquid XLF Financial Select Sector SPDR (ETF)
81369Y506 Liquid XLE Energy Select Sector SPDR (ETF)
464287655 Liquid IV\,M iShares Russell 2000 Index (ETF)
78462F103 IPO & illiquid SPY SPDR S&P 500 ETF
• Select the index ETF CUSIP with the maximum correlation. i.e. ma.x (abs(con·elations))
• If this indexing CUSIP has a correlation value greater or equal to the value of the
CutoffCorrelation parameter, then replace the missing return with the return of the index
times the SIGN of the correlation between the index and the individual CUSIP. The initial
value of the CutoffCorrelation is set to 0.3.
• If this indexing CUSIP has a correlation value of less than the value of CutoffCorrelation
parameter, then replace the missing return with a zero.
• This can be expressed as:
if max(abs(correlation)) >= CutOffCorrelation
then if correlation>=0, then replace it with indexing-CUSIP-return
else re place it with (-1 * indexing-CUSIP-return)
else replace it with 0
1.3.2 Illiquid Equity and IPO Haircut Volatility Charge
NSCC excludes IPO equities and equities that are Illiquid Securities from the VaR Charge and
instead charges a flat percentage of not less than 10.0%. The current haircut rates are shown in
the table in Appendix A, and are subject to change from time to time.
For IPOs, NSCC currently uses a haircut of 15%. Mathematically,
chr9(lPO) = 0.15 x ( I
vis /PO
lvl)
Page 9 of 26
DTCC Public (White)
https://portal .web.app.dtcc.org/tlux/Page/N SCC_Risk_Margin_Component_ Guide 9/26
RHMDL00011602
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rtal. 568-35
web.app.dtcc.org/tlux/Page/N
Entered on sec_FLSD
Risk_Margin_Component_Guide
Docket 06/08/2023 Page 11 of
27
For Illiquid Securities, NSCC currently uses a haircut of 20%. Mathematically,
chrg(llliquid )= 0.2 x ( L lvl)
"is Illiquid
NSCC calculates the haircut charges on Illiquid Securities and IPO equities at the individual
Account level and sums up to the Member level.
1.4 Fixed Income Volatil ity Component Calculations
NSCC calculates the haircut-based volatility charge on fixed income securities at the individual
Account level and sums up to the Member level.
1.4.1 Calculation Methodology for Corporate Bonds
Corporate bonds are categorized into 36 buckets by Illiquid Security Group Code according to
their time to maturity and credit rating. In order to capture the idiosyncratic risk and illiquidity of
different bonds within each category, percentiles greater than 99.0% are chosen for haircut
calibration. In addition, NSCC uses a 10-year look-back window plus a calendar year of stress
period in the haircut rate calibration. For the days that the stress period overlaps the look-back
window, the data used for calibration is 10 years plus the non-overlapping days in the stress
period. The corporate bond haircut is recalibrated quarterly. Please see Appendix B for a detailed
breakdown of the indices and parameters that ar-e currently utilized, as of the publication date of
this document.
The total volatility charge for positions in corporate bonds is equal to the sum of charges for
each category, as described below:
36
chrg(corporate bonds)= L(hr1ong(i) x lv1 0119(i)I + h1shortCO X lvshort(i)I),
i=I
where v1011 9 (i) and Vshon CO are respectively the total market values in USD of long and short
positions in bucket i..
1.4.2 Calculation Methodology for Municipal Bonds
For each Member, the volatility charge for positions in municipal bonds are calculated at the
CUSIP-level. Municipal bonds are grouped according to credit rating, remaining time to maturity
and separately categorized by municipal sector.
NSCC assesses a percentage haircut rate for each group based on (1) the historical returns of
applicable benchmark indices, such as tenor-based indices (i.e., based on time to maturity),
municipal bond sector-based indices, and high-yield indices; (2) a pre-determined look-back
period no shorter than 10 years, plus a calendar year of stress period in the haircut rate calibration;
and (3) a pre-determined calibration percentile, no less than 99%. The municipal bond haircut
rate is recalibrated quarterly.
The charge for a Member is obtained by aggregating the CUSIP-level charge contributions:
Page 10 of 26
DTCC Public (White)
https://portal .web.app.dtcc.org/tlux/Page/N SCC_Risk_Margin_Component_Guide 10/26
RHMDL00011603
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rtal. web.app.dtcc.org/tlux/Page/N
568-35 Entered on sec_FLSD
Risk_Margin_ Component_ Guide
Docket 06/08/2023 Page 12 of
27
Muni Bond Chr9 = _L muni borids b ln part.portfolio
hrc(b) x ABS(USD PositionAmount(b))
The haircut rate hrcO for a municipal bond is first determined by the remaining time to maturity
measured in months, as of the most recent EOD prior to the process date, as shown in the table
listed in Appendix C.
If the maturity date is unavailable, the haircut rate is set to that of longest tenor category.
For municipal bonds that are rated BBB+ or lower, or are not rated, the applicable haircut rate is
derived from the maximum of the applicable tenor-based index, municipal bond sector-based
indices and a high-yield index.
Current sectors include: (1) Utilities; (2) Government: (3) Healthcare; (4) Land Backed; (5)
Transportation; (6) Tobacco; (7) Higher Education; and (8) Housing.
1.4.3 Calculation Methodology for Other Fixed Income Securities
All fixed-income securities that are not classified as corporate bonds or municipal bonds are
subject to a single, fixed haircut rate. The haircut rate is currently set to 2% as of the publication
date and is subject to change.
The total volatility charge is calculated as follows:
Non Corp/Non Muni Chr9 = 0.02 x' lvl
Lat! Non-Corporate/Non-Mtmicipa.l /Jonds
where v represents the market value for the corresponding non-corporate/non-municipal bond.
1.5 Family-Issued Securities Volatility Component Calculation
NSCC assesses a haircut-based volatility charge of no less than 80.0% on positions held in a
Member's Family-Issued Securities (or "FIS", as defined in the NSCC Rules). The Family-issued
Securities Charge is calculated to mitigate specific wrong-way risk to securities issued by
Members or their affiliates.
NSCC removes all long Net Unsettled Positions in FIS from the VaR Charge calculation and
assesses a haircut-based volatility charge on these positions based on the asset class of the
security.
Fixed Income Equity
Family-Issued Securities Family-Issued Securities
Long Positions 80.0% haircut 100.0% haircut
Short Positions Not subject to this separate Not subject to this separate
volatility charge. volatility charge.
Page 11 of 26
DTCC Public (White)
https://portal .web.app.dtcc.org/tlux/Page/N SCC_Risk_ Margin_Component_ Guide 11/26
RHMDL00011604
Case 1:21-md-02989-CMA
1/29/2021 https://po
Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 13 of
27
2 Mark to Market Component
2.1.1 Start of Day Mark to MarkE!t Charge
The mark-to-market ("MTM") compo,nent measures the unrealized profit or loss using the contract
price versus the current market pricEi (that is, the price for a security determined daily for purposes
of the CNS system; generally that is the prior day's closing price). The MTM component is
described in Procedure XV, l(A)(1)(Ib) and (c) and l(A)(2)(b) of the NSCC Rules.
The MTM charge is assessed on each Member's rolling two-day portfolio net of unsettled
positions, including positions that fail in NSCC's Continuous Net Settlement system. The charge
is calculated by taking the differenoe between the contract value of each position in the portfolio
and the market value based on the prior day's closing market price.
CUSIP MTM credits and debits are first aggregated at the linked family account level. The main
account MTM is equal to the sum of the MTM debits across link accounts, separated into three
transaction types: regular way, whe,n-issued, and Institutional Delivery Net ("ID Net"). The MTM
debits calculated for regular way, ..-men-issued, and ID Net transactions are summed to a total
MTM charge.
MTM credits do not offset the total MTM charge; in the event the Member has an MTM credit
when aggregated at the main accoLint level, the MTM charge will be zero.
2.1.2 lntraday Mark to Market Charge
NSCC may require an additional llntraday MTM charge should NSCC deem it necessary or
appropriate, for example, during times of extreme market volatility. The intraday MTM charge is
described in Procedure XV, Section 1(8)(5) of the NSCC Rules.
lntraday market moves and positions are tracked in fifteen-minute intervals and an additional
MTM charge may be collected if the difference between most recent mark-to-market price of a
Member's Net Unsettled Positions and the most recent observed market price exceeds a
predetermined threshold.
The current threshold is 80% of the Member's volatility charge and may be reduced if NSCC
determines that a reduction of the tlhreshold is appropriate to mitigate risk during volatile market
conditions.
3 Special Charge
NSCC may require an additional payment, or Special Charge, from Members in view of price
fluctuations in or volatility or lack of liiquidity of any security. NSCC shall make such determination
based on the Member, the security 1type and concentration, CRRM or third-party credit ratings, or
other factors. The Special Charge is described in Procedure XV, Section l(A)(1)(d) and l(A)(2)(c)
of the NSCC Rules.
4 CNS Fails Charge Componenit
NSCC may be exposed to market risk when a Member fails to pay net settlement proceeds as a
result of the non-delivery of securities by settlement date as well as when a Member fails in the
delivery of securities on settlement date. To mitigate NSCC's exposure to CNS fails positions,
Page 12 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_Margin_Component_ Guide 12/26
RHMDL00011605
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 14 of
27
which could be correlated to a M,ember's credit-worthiness, NSCC assesses the CNS Fails
Charge. The CNS Fails Charge is described in Procedure XV, Section l(A)(1)(e) of the NSCC
Rules.
The CNS Fails Charge is calculat,ed by multiplying the current market value of a Member's
aggregate CNS Fails Positions by a percent based on the Member's rating on the Credit Risk
Rating Matrix ("CRRM"), as describ1ad below:
Member's CRRM Rating CNS Fails Charge Haircut Rate
5.0% of the Member's aggregate CNS fails
1-4
positions
10.0% of the Member's aggregate CNS fails
5-6
positions
20.0% of the Member's aggregate CNS fails
7
positions
The Credit Risk Rating Matrix is described in Rule 2B, Section 4 of the NSCC Rules.
5 Margin Requirement Differential ("MRD") Component
NSCC may be exposed to market risk based on potential portfolio fluctuation as a Member
executes trades throughout the da1y. Pursuant to Addendum K of the NSCC Rules, NSCC's
general counterparty trade guaranty generally attaches immediately upon trade validation and
before NSCC has collected the Member's required deposit. As a result, NSCC may be exposed
to large un-margined intraday portfolio fluctuations before NSCC has collected the Member's
clearing fund requirement the following morning.
The Margin Requirement Differentiail charge ("MRD") is designed to help mitigate the risks posed
to NSCC by day-over-day fluctuations in a Member's portfolio by forecasting future changes in a
Member's portfolio based on a historical look-back at each Member's portfolio over a given time
period. The MRD charge is described in Procedure XV, Section l(A)(1)(f) and 1 (A)(2)(d) of the
NSCC Rules.
The MRD charge is calculated based on the day-over-day positive changes in the Member's start
of day7 ("SOD") volatility charge and MTM charge components, which are calculated based on
the overnight or end of day ("EOD") positions. For example, the position referred to by NSCC's
system's SOD label on 7/1/2020 refers to the EOD position on 6/30/2020.
For any given calculation date, t, thE MRD charge is calculated as follows:
1. Calculate the MRDvaR and MRD MrM sub-components.
7 Using the NSCC risk system convention.
Page 13 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_Margin_Component_ Guide 13/26
RHMDL00011606
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 15 of
27
MRDvan(t) =
Ir,;0 0 1 x rnax{VaR(t - i,SOD) - VaR(t - (i + l),SOD), O}
99 ;
L..i=O (J
(1.2.3.1.1 )
MRDMrn (t)
I?o 0 x ma,"-(CHRGM ru(t - i,SOD) - CHRGuru(t - (i + 1), SOD), OJ
i
where
► i represents the number of business days look back relative to the calculation date,
currently 100 days; For Etxample, when i = 0, VaR(t- i,SOD) represents the SOD
Volatility charge as of the calculation date; when i = 1, VaR(t - i, SOD) represents
the SOD volatility chargEi one business day before the calculation date; etc;
► 0 is equal to 0.97 as default;
► VaR(d,SOD) is the SOD volatility charge as of business dated; and
► CHRGuru(d,SOD) is the SOD MTM charge as of business dated.
2. Calculate the MRD charge by multiplying the sum of MRDvan and MRDuru sub-components
with an MRD coefficient8.
MRD(t) = Coefficient x [ MRDvan(t) + MRDMTu(t)]
The MRD charge is calculated at the Member level. There are four special treatments in this
calculation.
1. On the first day of membership, the differences VaR(t- i,SOD) - VaR(t - (i + 1),SOD) and
CHRGMru(t-i,SOD)-CHRGMru(t-(i+l),SOD) in Eqns. 1.2.3.1.1 are replaced with
zeros.
2. Apart from treatment above, if a member has less than 101 business days of MTM and
Volatility charges, the missing values VaR(t) and MTM(t) in Eqns. 1.2.3.1.1 are replaced
with zeros.
6 Coverage Component ("CC") Charge
NSCC is exposed to a Member's u1n-rnargined portfolio as a result of the timing when NSCC's
trade guaranty attaches to positions, which is immediately upon trade validation and prior to the
collection of margin. Therefore, the Coverage Component ("CC") charge is designed to mitigate
the risks associated with a Member's Required Fund Deposit being insufficient to cover projected
liquidation losses to the coverage target, currently a 99 percent confidence level, by adjusting a
8 Current, as of the time of publication of this document, the MRD coefficient is 1.5; this is subject
to change.
Page 14 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_ Margin_ Component_ Guide 14/26
RHMDL00011607
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 16 of
27
Member's Required Fund Deposit towards the target. The CC charge is described in Procedure
XV, Section l(A)(1)(g) and l(A)(2)(e}.
The CC charge supplements the MRD charge by preemptively increasing a Member's Required
Fund Deposit in an amount calculatid to forecast potential deficiencies in the margin coverage of
a Member's guaranteed portfolio.
The CC charge is calculated by comparing the simulated liquidation profit and loss of a Member's
portfolio, using the actual positions and the actual historical returns on the positions, against the
sum of each of the following Clearin!g Fund components: (i) volatility charge; (ii) MRD charge; and
(iiO illiquid charge. For a given busiiness day, NSCC determines a daily peak deficiency amount
for each Member equal to the maxiimum observed deficiency over any of the prior 10 business
days. The CC charge is equal to the front-weighted average of the peak deficiencies over the
prior 100 business days.
The CC charge is calculated as follo'NS:
1. For any given business day t, calculate the Peak Deficiency:
Peal,Deficiency(t)
= MAX0:;;;:;;9 {-min [VaR(t-4-i,SOD)
Eqn. 1.2.3.2.1
+ Illiquid(t - 4 - i) + MRD(t - 4- - i)
+ P&l(t- 3 - i),O]}
where
► i represents the number of business days look back; For example, when i=O,
VaR(t - 4 - i,SOD) represents the SOD Volatility charge as of the business day
oft- 4; when i=1, Vc.rR(t - 4- - i,SOD) represents the SOD Volatility charge as of
the business day t- 5; and etc;
► VaR(d,SOD) is the SOD Volatility charge as of the business day d;
► Illiquid(d) is the illiquid charge as of the business day d;
► MRD(d) is the MRD charge as of the business day d; and
► P&L(d) is the 3-day liquidation profit or loss of the SOD position as of the business
day d;
2. Calculate the CC charge
i
: 0 0 x PeakDeficiency(t - i)
CC(t) = 99 gt
L..t=O
where
► i represents the number of business days look back as of the calculation day t,
For example, when ;,=0, PeakDeficiency(t - i) represents Peak Deficiency as of
the calculation day t; when i=1, Pea.kDeficiency(t - i) represents the Peak
Deficiency as of the business day before the calculation day; and etc;
► 0 is equal to 0.97 as default.
Page 15 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_Margin_Component_ Guide 15/26
RHMDL00011608
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rtal. web.app.dtcc.org/tlux/Page/N
568-35 Entered on sec_FLSD
Risk_Margin_ Component_ Guide
Docket 06/08/2023 Page 17 of
27
The CC charge is calculated at the NSCC Member level only. The P&L and relevant charges in
the above calculation are the sum of the Member's subaccounts. The following special treatment
is applied:
1. When there is less than 10 days of history for the Peak Deficiency calculation in Eqn.
1.2.3.2.1, actual number of history observations is used.
2. In case the history of peak deficiencies is shorter than 100 days for any Member, all the
missing peak deficiencies are default to zeros.
7 Illiquid Charge Component
An Illiquid Charge can be assessed on Members in view of price fluctuations in or volatility, or
lack of liquidity of any security. The Illiquid Charge is described in Procedure XV, Section
l(A)(1)(h) and l(A)(2)(f). The Illiquid Charge may be imposed based on:
• Size of the position in an Illiquid Security
• Average daily volume in the Illiquid Security in the position
• Price of the Illiquid Security in the position
• Member's rating on the CRRM
• Member's Excess Net Capital ("ENC')
Using the current CRRM rating Illiquid Charge criteria, which is set forth in Appendix E and is
subject to change, the Illiquid Charge is equal to:
(1) for buy positions in sub-penny Illiquid Securities, the aggregate shares in such positions
multiplied by $0.01, or
(2) for sell positions, the Illiquid Charge can be determined by the following:
(a) if the share quantity in the Illiquid Securities' position is less than 100 percent and
greater than or equal to 25 percent of the average daily volume ("ADV'), the calculation
shall use the lesser of the one month high price or the current market price of the Illiquid
Securities (rounded up to the next $0.50, if applicable); and
(b) if the share quantity in the Illiquid Securities' position is greater than or equal to 100
percent of the ADV, the calculation shall use the greater of the one-month high price or
the current market price of the Illiquid Securities (rounded up to the next $0.50, if
applicable).
NSCC Members can email eguityrisk@dtcc.com to obtain a flow chart detailing the applicable
Illiquid Charge calculation based on their CRRM rating and capital levels as of the date of the
request.
Page 16 of 26
DTCC Public (White)
https://portal .web.app.dtcc.org/tlux/Page/N SCC_Risk_ Margin_Component_ Guide 16/26
RHMDL00011609
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rtal. web.app.dtcc.org/tlux/Page/N
568-35 Entered on sec_FLSD
Risk_Margin_ Component_ Guide
Docket 06/08/2023 Page 18 of
27
8 Other Transactions Charge
Art additional charge for transactions other than CNS transactions is based on the 20-day rolling
average of the summed value of non-guaranteed settlement activities. This "Other Transactions"
charge is described in Procedure XV, Section l(A)(3) of the NSCC Rules.
Daily Other Transactions charges range between 2.5% and 10.0% of the net debits and credits.
Each of the current Non-CNS codes is described in Appendix D.
Currently, for Members with a CRRM rating of 1 through 6, the charge takes the greater of the
following, based on a 20-day rolling average of activity:
2.5% of the absolute value of debits+ the absolute value of credits
5.0% of the absolute value of debits
Currently, for Members with a CRRM rating of 7, the charge is calculated by taking the 20-day
rolling average of activity based on 10.0% of the absolute value of debits and the absolute value
of credits.
9 Mutual Fund Transactions Charge
An additional charge is calculated for mutual fund transactions, referred to as the Fund/Serv
charge. This charge is described in Procedure XV, Section l(A)(4) of the NSCC Rules.
The Fund/Serv charge is derived from a Member's daily settlement debits related to mutual fund
activities and is tiered as follows:
A. $5,000 if daily mutual fund services settlement debits of no more than $100,000 with
respect to any one fund Member.
B. $10,000 if daily mutual fund services s,ettlement debits of no more than $500,000 with
respect to any one fund Member.
C. $20,000 if daily mutual fund services debits of more than $500,000 with respect to any
one fund Member.
A daily monitoring 'snapshot' is performed at 12:00PM EST. When mutual fund settlement
debits are greater than or equal to $500 million, NSCC generally will confirm the amount with
the Member.
10 Excess Capital Premium ("CF Premium") Charge
NSCC may assess a CF Premium charge to mitigate risk presented by highly leveraged Members.
The charge may be imposed when a Member's applicable Required Fund Deposit (the aggregate
unadjusted Required Fund Deposit minus any Illiquid Charge, MRD charge, CC charge, and
special charges) exceeds their excess net capital ("ENC'') for broker-dealers, or equity capital for
bank Members. The CF Premium charge is described in Procedure XV, Section 1(8)(2).
Page 17 of 26
DTCC Public (White)
https://portal .web.app.dtcc.org/tlux/Page/N SCC_Risk_ Margin_Component_ Guide 17/26
RHMDL00011610
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 19 of
27
The CF Premium charge may be assessed based on the amount by which a Member's applicable
Required Fund Deposit exceeds its most recently reported regulatory capital balance (ENC or
equity capital).
If the ratio of the Required Fund Deposit over the excess capital balance (the "excess capital
ratio") exceeds 1.0, a CF Premium charge may be calculated by multiplying the excess capital
ratio by the amount by which the Reiquired Fund Deposit exceeds the excess capital balance.
When the excess capital ratio exce:eds 1.0, NSCC may calculate and assess the CF Premium
charge as part of the Member's start-of-day reciuirement.
Additional Clearing Fund
Excess Capital Ratio NSCC Action Calculation
Multiply the amount of the CFR that is
Excess Capital Ratio An excess capital in excess of the reported capital
1.0 premium may be imposed. balance by the Member's excess
capital ratio
11 Backtesting Charge
NSCC may require a Member to make an additional deposit in the form of a Backtesting Charge
to mitigate exposures that may not be adequately captured by the volatility model as needed to
achieve a 99 percent back testing coverage target. The charge may be assessed at the start of
the day or on an intraday basis, as needed. The Backtesting Charge is described in Procedure
XV, Section 1(8)(3) of the NSCC Rules.
NSCC incorporates daily backtestiing to ensure that the calculated Clearing Fund Required
Deposit is sufficient to cover the potential loss the clearing corporation may be subject to in the
event of a Member default. In order to calculate this charge, NSCC takes end-of-day, 11 :ODAM
EST, and 2:00PM EST portfolio snapshots, then compares the Member's Required Fund Deposit
to the profit and loss over a simulated three-day liquidation horizon; a deficiency occurs when a
Member's Required Fund Deposit does not sufficiently cover the simulated loss on a portfolio.
NSCC routinely calculates the rollin! 12-month coverage ratio of the Member for both the end-of
day and intraday backtests. Coverage is calculated as the percentage of non-deficiency backtest
observations out of the number of backtest observations the Member has during the period.
NSCC seeks to maintain 99.0% coverage at the Member-level.
Should the coverage ratio decline below 99.0% for either or both backtest types, NSCC may
assess a backtest charge component such that, if applied retroactively, the Member would not
have incurred enough deficiencies for the coverage ratio to decline below the 99.0% coverage
target. Typically, the amount of the, backtest charge component will be equal to the Member's
third-largest end-of-day backtest deificiency and fifth-largest intraday backtest deficiency during
the rolling twelve-month period.
NSCC may adjust the calculation and/or application of the charge in order to achieve its
backtesting coverage target.
Page 18 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_Margin_Component_ Guide 18/26
RHMDL00011611
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_
DocketComponent_ Guide
06/08/2023 Page 20 of
27
12 Bank Holiday Charge
NSCC does not collect margin or settle securities on a bank holiday, as Columbus Day and
Veterans Day, when the equities markets are open for trading, but the Board of Governors of the
Federal Reserve observes a holidav and banks are closed. To address exposure from Members'
trading activity on a bank holiday, N:SCC may require its Members to make an additional Clearing
Fund deposit (the "Bank Holiday Charge'). The Bank Holiday Charge is based on NSCC's
assessment of market conditions ait the time the charge is calculated and is assessed on the
business day immediately prior k> the bank holiday. NSCC communicates in advance to
Members, via an Important NotiC19, the day on which the charge will apply, including the
methodology 9 it will use to calculate the Bank Holiday Charge. The Bank Holiday Charge is
described in Procedure XV, Section 1(8)(4) of the NSCC Rules.
13 Appendices
The information provided in thes1e Appendices is current as of the publication date of this
document. This information may change from time to time following publication, without
notice and without updates to this document. Notwithstanding anything stated in this
document, NSCC retains any discretion provided to it in the Rules in calculating the
charges described therein.
Appendix A
Haircut Table
Asset Type IF actor Haircut Rate
Non-NASDAQ, OTC BB
N/A 20.0% of the absolute value of the position
or OTC Link
IPO NIA 15.0% of the absolute value of the position
Non-Corporate/Non-
N/A 2.0% of the absolute value of the position
Municipal Bonds
9 A methodology might include time scaling of the volatility charge or a using a stress scenario that reflects potential
market price volatility on that holiday.
Page 19 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_ Margin_ Component_ Guide 19/26
RHMDL00011612
Case 1:21-md-02989-CMA https://po
1/29/2021 Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 21 of
27
Appendix B
Corporate Bond Mapping Table
Merrill
Illiquid Security Lynch Percentile
Group Code Index Description of the Security Group (%)
1 C1A1 0-1 year/ AAA/ Aaa 99.5
2 C1A2 0-1 year/AA+/AA/AA-/1/Aa2/Aa3 99.5
3 C1A3 0-1 year/A+/A/A-/A1/A2/A3 99.5
4 C1A4 0-1 year/BBB+/BBB/BBB-/Baa 1/Baa2/Baa3 99.5
5 H0AO 0-1 year/BB & Lower 99.9
6 C1A1 1-3 years/AAA/a 99.5
7 C1A2 1-3 years/AA+/AA/AA-/Aa1/2/3 99.5
8 C1A3 1-3 years/A+/A/A-/A1/A2/A3 99.5
9 C1A4 1-3, years/BBB+/BBB/BBB-/Baa1/Baa2/Baa3 99.5
10 H0AO 1-3, years/BB & Lower 99.9
11 C2A1 3-5, years/AAA/a 99.5
12 C2A2 3-5, years/AA+/AA/AA-/Aa1/2/3 99.5
13 C2A3 3-5, years/ A+/A/ A-/A1/ A2/A3 99.5
14 C2A4 3-5' years/BBB+/BBB/BBB-/Baa1/Baa2/Baa3 99.5
15 H0AO 3-5, years/BB & Lower 99.9
16 C3A1 5-7 years/AAA/a 99.5
17 C3A2 5-7 years/AA+/AA/AA-/Aa1/2/3 99.5
18 C3A3 5-7 years/A+/A/A-/A1/A2/A3 99.5
19 C3A4 5-7 years/BBB+/BBB/BBB-/Baa 1/Baa2/Baa3 99.5
20 H0AO 5-7 years/BB & Lower 99.9
21 C4A1 7-10 years/AAA/Aaa 99.5
Page 20 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_ Margin_ Component_ Guide 20/26
RHMDL00011613
Case 1:21-md-02989-CMA https://po
1/29/2021 Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 22 of
27
Merrill
Illiquid Security Lynch Percentile
Group Code Index Description of the Security Group (%)
22 C4A2 7-10 years/AA+/AA/AA-/Aa1/Aa2/Aa3 99.5
23 C4A3 7-10 years/A+/A/A-/A1/A2/A3 99.5
24 C4A4 7-1 0 years/BBB+/BBB/BBB-/Baa 1 /Baa2/Baa3 99.5
25 H0A0 7-10 years/BB & Lower 99.9
26 C7A1 10-15 years/AAA/Aaa 99.5
27 C7A2 10-15 years/AA+/AA/AA-/Aa1/Aa2/Aa3 99.5
28 C7A3 10-15 years/A+/A/A-/A1/A2/A3 99.5
29 C7A4 10.. 15 years/BBB+/BBB/BBB-/Baa 1 /Baa2/Baa3 99.5
30 H0A0 10-15 years/BB & Lower 99.9
31 C8A1 15, years/AAA/Aaa 99.5
32 C8A2 15+ years/AA+/AA/AA-/Aa1/Aa2/Aa3 99.5
33 C8A3 15+ years/A+/A/A-/A1/A2/A3 99.5
34 C8A4 15+ years/BBB+/BBB/BBB-/Baa1 /Baa2/Baa3 99.5
35 H0A0 15, years/BB & Lower 99.9
36 H0A0 All others/Not Rated 99.9
Page 21 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_ Margin_ Component_ Guide 21/26
RHMDL00011614
Case 1:21-md-02989-CMA https://po
1/29/2021 Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 23 of
27
AppendixC
Municipal Bond Haircut Table
Market Asset Type Factor Haircut Rate
(Mnths to Mat) s 36
37<(Mnths to Mat) ::5 84
85<(Mnths to Mat) s Calibrated at 99.5% level based on
Investment tenor-based indices.
144
Grade
145<(Mnths to Mat) s
264
264<(Mnths to Mat)
(Mnths to Mat) s 36
Municipal
Bonds 37<(Mnths to Mat) s 84
Non- 85<(Mnths to Mat) s Calibrated at 99.9% level based on
Investment 144 tenor and sector-based indices.
Grade
145<(Mnths to Mat) s
264
264<(Mnths to Mat)
Specific During period of extraordinary
Issuer All market conditions, NSCC may
apply the highest blended rate.
Appendix D
Non-CNS Codes
Code Data Giroup Description
1 OTC Settlement OTC BROAD MONEY SETTLEMENT
2 Clearance Cash Adjustment CLEARANCE CASH ADJUSTMENT
5 ACATS ACATS INTERFACE REJECTS
8 ACATS ACATS NEXT DAY SETTLEMENT
Page 22 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_Margin_Component_ Guide 22/26
RHMDL00011615
Case 1:21-md-02989-CMA https://po
1/29/2021 Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 24 of
27
Code Data Giroup Description
11 Envelope DIVIDEND SETTLMENT SERV.
12 Envelope FUNDS ONLY SETTLEMENT
13 Envelope DSS RECLAMATIONS
1e CNS Reorganizations CNS REORG MARK - DEBIT
17 CNS Reorganizations CNS REORG MARK - CREDIT
20 ow RECAPS CASH ADJUSTMENTS
30 CDS Dividends OTC CANADIAN DIVIDENDS
31 CDS Dividends CNS CANADIAN DIVIDENDS
32 CDS Dividends DSS CANADIAN DIVIDENDS
35 OTHER OCC COLLATERAL PLEDGE
45 Fees NASDAQ BX TRAN FEES
46 Fees NASO REG-FEES
47 Fees PSA REGULATORY FEES
48 Fees NSE TRANSACTION FEES
49 Fees CSE REGULATORY FEES
50 Fees NYSE REGULATORY FEES
51 Fees AMEX REGULATORY FEES
52 Fees NASO REGULATORY FEES
53 Fees PSE REGULATORY FEES
54 ETF STAN OARD BASKETS
55 ETF CUSTOMIZED STANDARD BASKETS
68 Tax NYS TRANSFER TAX
70 Tax NYS QUARTERLY TAX
71 Tax NYS QUARTERLY TAX REFUND
Page 23 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_ Margin_ Component_ Guide 23/26
RHMDL00011616
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 25 of
27
Code Data Giroup Description
74 OTHER CLEARING FUND COUPON INT
80 Fees NSCC MONTHLY BILLING
81 Floor Broker NYSE COMMISSION BILLS
83 Fully Pid FULLY PAID DEBIT$
84 Fully Paid FULLY PAID CREDITS
85 Floor Broker AMEX COMMISSION BILLS
91 OTHER GCN CHARGES
96 OTHER OPTIONAL SETTL SERVICE
97 OTHER SUSPENSE
98 OTHER PAYMENTS (FUNDS TRANSFER)
101 OTHER RIO-OTC INTERFACE
111 Insurance INSURANCE COMMISSIONS
112 Insurance INSURANCE PREMIUMS
113 Insurance LICENSING & APPT DETAIL
181 Floor Broker NYSE COMM BILL CHARGES
185 Floor Broker AMEX COMM BILL CHARGES
198 OTHER OTC/CNS CREDITS
Page 24 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_ Margin_ Component_ Guide 24/26
RHMDL00011617
Case 1:21-md-02989-CMA https://po
1/29/2021 Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 26 of
27
Appendix E
Illiquid Charge Calculation Tables
Net Buy Illiquid Positions
OTC
CRRM Inventory
Rating %ADV EIUYQTY ENC Off$et Pricing Calculation
Per share times
1-4 N/A X > 100MM N/A N/A
$0.01
Per share times
5-7 N/A X > 10MM N/A N/A
$0.01
Net Sell Illiquid Positions
OTC
CRRM Inventory Pricing Scheme
Rating %ADV SELL QTY ENC($) Offset (See Tables Below)
1-4 25 sx < 100 X =:: 1,000,000 N/A y Lesser
1-4 100SX X =:: 1,000,000 N/A y Greater
5-6 100:;;x X::: 500,000 10MM < X y Greater
5-6 100SX X::: 100,000 10MM::: X y Greater
5-6 25 :s X < 100 X::: 500,000 10MM < X y Lesser
5-6 25:;; X < 100 X::: 100,000 10MM::: X y Lesser
7 100:;;x X::: 500,000 10MM < X N Greater
7 100SX X::: 100,000 10MM::: X N Greater
7 25 sx < 100 X::: 500,000 10MM < X N Lesser
7 25:;; X < 100 X::: 100,000 10MM::: X N Lesser
Page 25 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_Margin_Component_ Guide 25/26
RHMDL00011618
1/29/2021
Case 1:21-md-02989-CMA https://po
Document rta I. we b.app .dtcc.org/flux/Page/N
568-35 EnteredSCC on_FLSD
Risk_Margi n_Component_ Guide
Docket 06/08/2023 Page 27 of
27
Illiquid Pricing Scheme (Lesser)
Pricing Scheme ($) Charge Calculation Price Min($)
Market Price < .011 Lesser of 1 month high price and .01
Market price times 10
Market Price < .Oi Lesser of 1 month high price and .05
market price times 10
Market Price < .10 Lesser of 1 month high price and
market price times 10
Market Price < .20 Lesser of 1 month high price and
market price times 5
Market Price < 1.00 Lesser of 1 month high price and
market price times 2
Market Price > 1.00 Lesser of 1 month high price and
$.50 price increment
Illiquid Pricing Scheme (Greater)
Pricing Scheme ($) Charge Calculation Price Min ($)
Market Price < .01 Greater of 1 month high price and .01
market price times 10
Market Price < .05 Greater of 1 month high price and .05
market price times 10
Market Price < .10! Greater of 1 month high price and
market price times 10
Market Price < .201 Greater of 1 month high price and
market price times 5
Market Price < 1.0I0 Greater of 1 month high price and
market price times 2
Market Price > 1.0I0 Greater of 1 month high price and
$.50 price increment
Page 26 of 26
DTCC Public (White)
https://portal.web.app.dtcc.org/flux/Page/N SCC _Risk_ Margin_ Component_ Guide 26/26
RHMDL00011619
File and source
- File
- gov.uscourts.flsd.590042.568.35.pdf
- Size
- 1,885,938 bytes
- SHA-256
- 0def7bb5110a104faff9ff29c91b6344b421db64ea1d8015c19113f9b9f5189b
- Original
- archive.org