8011-01p
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100486; File No. SR-NSCC-2024-004]
Self-Regulatory Organizations; National Securities Clearing Corporation; Order
Approving Proposed Rule Change to Decommission the DTCC Limit Monitoring Risk
Management Tool
July 10, 2024.
I.

INTRODUCTION
On May 16, 2024, The National Securities Clearing Corporation (“NSCC”) filed with the

Securities and Exchange Commission (“Commission”) proposed rule change SR-NSCC-2024004, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)1 and Rule
19b-4 thereunder (the “Proposed Rule Change”).2 The Proposed Rule Change was published for
comment in the Federal Register on June 4, 2024.3 The Commission has received no comments
on the Proposed Rule Change. For the reasons discussed below, the Commission is approving the
Proposed Rule Change.
II.

BACKGROUND
DTCC Limit Monitoring is a risk management tool currently made available to all NSCC

Members. Limit Monitoring is a voluntary tool that is intended to supplement, and not replace, a
Member’s internal risk management systems, procedures, or use of other available industry
tools.4 Limit Monitoring enables Members to monitor trading activity on an intraday basis for
their organizations and/or correspondent firms using post-trade data by allowing Members to

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

17 CFR 240.19b-4.

See Securities Exchange Act Release No. 100237 (May 29, 2024), 89 FR 48019 (Jun. 4,
2024) (File No. SR-NSCC-2024-004) (“Notice of Filing”).

See id. at 48019.

establish pre-set limits to monitor trading activity and to receive notifications when these pre-set
limits are being approached and reached.5 NSCC does not require Members to take any
particular action based on the output of Limit Monitoring, and any response by Members to a
Limit Monitoring alert is performed away from NSCC.6
NSCC states that DTCC Limit Monitoring was created as part of a broader industry-wide
effort to develop tools and strategies to mitigate and address trading risks associated with
complex, interconnected, and automated market technology.7 NSCC further states that, since the
implementation of Limit Monitoring in 2014, U.S. equity exchanges have implemented certain
optional risk management tools including, but not limited to, credit limits, single order limits,
and kill switch functionality, which provide additional risk management tools for Members to
supplement their internal controls.8 NSCC also states that broker-dealers have also continued to
enhance their own internal risk management systems.9
III.

DESCRIPTION OF THE PROPOSED RULE CHANGE
The Proposed Rule Change would decommission the Limit Monitoring tool. NSCC states

that the technology platform to maintain the data infrastructure for Limit Monitoring will soon
need to be replaced, which would require the investment of significant resources to continue to
offer Limit Monitoring.10 NSCC conducted outreach to evaluate its Members’ use of Limit
Monitoring. The outreach indicated that a majority of Members either do not use Limit

See NSCC Rules and Procedures, Rule 54, available at https://www.dtcc.com/legal/rulesand-procedures.aspx.

See Notice of Filing, supra note 3, at 48019.

See id.

See id.

See id.

See id.

Monitoring or do not rely on it extensively to manage their risks.11 Members that do not use or
make only limited use of Limit Monitoring primarily rely on other industry or in-house tools to
monitor and evaluate risks.12 NSCC conducted follow up outreach with those Members that do
currently use Limit Monitoring, identifying no Members that raised significant concerns or
objections to the decommissioning of Limit Monitoring.13 Therefore, NSCC has determined that
it would no longer offer the Limit Monitoring tool, given the significant investment needed to
continue to offer Limit Monitoring, the evolution in industry-wide risk control tools and
processes since the implementation of Limit Monitoring in 2014, and the limited usage of Limit
Monitoring by Members.14
To implement the Proposed Rule Change, NSCC would remove Rule 54 and Procedure
XVII from their Rules.15 NSCC would also remove associated defined terms from Rule 1.16
Finally, NSCC would remove Section 2(i) of Rule 58 concerning the limitations on NSCC’s
liability for the completeness or accuracy of LM Trade Date Data, LM Member-provided Data,
LM Transaction Data, or other information or data which it receives from Members or third
parties and which is utilized in DTCC Limit Monitoring, or for any errors, omissions or delays
which may occur in the transmission of such data or information.
IV.

DISCUSSION AND COMMISSION FINDINGS

See id.

See id.

See id.

See id.

See supra note 5.

“LM Member-provided Data,” “LM Trade Date Data,” “LM Transaction Data,” “RP
Member-provided Data,” “RP Trade Date Data,” and “RP Transaction Data.”

Section 19(b)(2)(C) of the Act17 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 rules and regulations thereunder applicable to such
organization. After carefully considering the Proposed Rule Change, 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 Section 17A(b)(3)(F)18 of the Act.
Section 17A(b)(3)(F) of the Act requires that the rules of a clearing agency, such as
NSCC, be designed to, among other things, promote the prompt and accurate clearance and
settlement of securities transactions and, in general, to protect investors and the public interest.19
The Commission believes that the Proposed Rule Change is consistent with Section 17A(b)(3)(F)
of the Act for the reasons stated below.
As described in Part II above, Limit Monitoring is a voluntary tool intended to
supplement a Member’s internal risk management processes and use of other available tools.
Although the tool was created in response to an industry-wide need due to trading risks
associated with new market technologies in 2014, there now is a broader range of options
available to Members to help manage these risks. Limit Monitoring is not a widely used risk
management tool, and those who do use it did not raise significant concerns about its
elimination. Given that NSCC would need to invest significant resources to continue to offer
Limit Monitoring to its Members, decommissioning the Limit Monitoring tool should allow
NSCC to determine where to allocate the resources that would have been used on updating the
Limit Monitoring technology to better react to the changing needs of market participants who

15 U.S.C. 78s(b)(2)(C).

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

Id.

rely on NSCC’s central role in the securities market. This ability to allocate resources should, in
turn, help NSCC to continue to promote the prompt and accurate clearance and settlement of
securities transactions by NSCC, consistent with the requirements of Section 17A(b)(3)(F) of the
Exchange Act.20
Accordingly, and for the reasons stated above, the proposed changes are consistent with
Section 17A(b)(3)(F).
V.

CONCLUSION
Based on the foregoing, the Commission finds that the Proposed Rule Change is

consistent with the requirements of the Act and in particular with the requirements of Section
17A of the Act21 and the rules and regulations promulgated thereunder.
IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the Act22 that proposed
rule changes SR-NSCC-2024-004 be, and hereby are, APPROVED.23
For the Commission, by the Division of Trading and Markets, pursuant to delegated
authority.24
Vanessa A. Countryman,
Secretary.

[FR Doc. 2024-15500 Filed: 7/15/2024 8:45 am; Publication Date: 7/16/2024]

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

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

15 U.S.C. 78s(b)(2).

In approving the Proposed Rule Change, the Commission considered its impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

17 CFR 200.30-3(a)(12).