NATIONAL SECURITIES CLEARING CORPORATION

1 NATIONAL SECURITIES CLEARING CORPORATION RULES & PROCEDURES Effective January 24, 2022 i TABLE OF CONTENTS NATIONAL SECURITIES CLEARING CORPORATION RULES .. 1 RULE 1. DEFINITIONS AND DESCRIPTIONS .. 1 RULE 2. MEMBERS AND LIMITED MEMBERS .. 22 RULE 2A. INITIAL MEMBERSHIP REQUIREMENTS .. 26 RULE 2B. ONGOING MEMBERSHIP REQUIREMENTS AND MONITORING .. 33 RULE 3. LISTS TO BE MAINTAINED .. 41 RULE 4. CLEARING FUND .. 44 RULE 4A. SUPPLEMENTAL LIQUIDITY DEPOSITS .. 53 RULE 5. GENERAL PROVISIONS .. 58 RULE 6. (RULE NUMBER RESERVED FOR FUTURE USE) .. 60 RULE 7. COMPARISON AND TRADE RECORDING OPERATION (INCLUDING SPECIAL REPRESENTATIVE/INDEX RECEIPT AGENT).

2 61 RULE 8. BALANCE ORDER AND FOREIGN SECURITY SYSTEMS .. 66 RULE 9. ENVELOPE settlement 67 RULE 10. FAILURE TO DELIVER ON SECURITY BALANCE ORDERS .. 73 RULE 11. CNS SYSTEM .. 74 RULE 12. settlement .. 80 RULE 13. EXCEPTION PROCESSING .. 85 RULE 14. TRANSFER TAXES .. 86 RULE 15. ASSURANCES OF FINANCIAL RESPONSIBILITY AND OPERATIONAL CAPABILITY .. 87 RULE 16. (RULE NUMBER RESERVED FOR FUTURE USE) .. 89 RULE 17. FINE PAYMENTS .. 90 RULE 18. PROCEDURES FOR WHEN THE CORPORATION CEASES TO ACT .. 91 ii RULE 19. MISCELLANEOUS RIGHTS OF THE CORPORATION .. 97 RULE 20. INSOLVENCY .. 98 RULE 21.

3 HONEST BROKER .. 99 RULE 22. SUSPENSION OF RULES .. 100 RULE 23. ACTION BY THE CORPORATION .. 101 RULE 24. CHARGES FOR SERVICES RENDERED .. 102 RULE 25. CROSS-GUARANTY OBLIGATION .. 103 RULE 26. BILLS RENDERED .. 104 RULE 27. ADMISSION TO PREMISES OF THE CORPORATION POWERS OF ATTORNEY, ETC.. 105 RULE 28. FORMS .. 106 RULE 29. QUALIFIED SECURITIES DEPOSITORIES .. 107 RULE 30. (RULE NUMBER RESERVED FOR FUTURE USE) .. 108 RULE 31. (RULE NUMBER RESERVED FOR FUTURE USE) .. 109 RULE 32. SIGNATURES .. 110 RULE 33. PROCEDURES .. 111 RULE 34. INSURANCE .. 112 RULE 35. FINANCIAL REPORTS.

4 113 RULE 36. RULE CHANGES .. 114 RULE 37. HEARING PROCEDURES .. 115 RULE 38. GOVERNING LAW AND CAPTIONS .. 119 RULE 39. RELIANCE ON INSTRUCTIONS .. 120 RULE 40. WIND-DOWN OF A MEMBER, FUND MEMBER OR INSURANCE CARRIER/RETIREMENT SERVICES MEMBER .. 121 RULE 41. CORPORATION DEFAULT .. 123 RULE 42. WIND-DOWN OF THE CORPORATION .. 127 iii RULE 43. (RULE NUMBER RESERVED FOR FUTURE USE) .. 137 RULE 44. DELIVERIES PURSUANT TO BALANCE ORDERS .. 138 RULE 45. NOTICES .. 140 RULE 46. RESTRICTIONS ON ACCESS TO SERVICES .. 141 RULE 47. INTERPRETATION OF RULES .. 143 RULE 48. DISCIPLINARY PROCEEDINGS.

5 144 RULE 49. RELEASE OF CLEARING DATA AND CLEARING FUND DATA .. 145 RULE 50. AUTOMATED CUSTOMER ACCOUNT TRANSFER SERVICE .. 146 RULE 51. OBLIGATION WAREHOUSE .. 156 RULE 52. MUTUAL FUND SERVICES .. 158 A. Fund/SERV .. 158 B. Networking .. 169 C. DTCC Payment aXis .. 171 D. Mutual Fund Profile Service .. 172 RULE 53. ALTERNATIVE INVESTMENT PRODUCT SERVICES AND MEMBERS .. 175 RULE 54. DTCC LIMIT MONITORING RISK MANAGEMENT TOOL .. 186 RULE 55. SETTLING BANKS AND AIP SETTLING BANKS .. 188 RULE 56. (RULE NUMBER RESERVED FOR FUTURE USE) .. 193 RULE 57. INSURANCE & RETIREMENT SERVICES.

6 194 RULE 58. LIMITATIONS ON LIABILITY .. 200 RULE 59. ACCOUNT INFORMATION TRANSMISSION SERVICE .. 202 RULE 60. MARKET DISRUPTION AND FORCE MAJEURE .. 203 RULE 60A. SYSTEMS DISCONNECT: THREAT OF SIGNIFICANT IMPACT TO THE CORPORATION S SYSTEMS .. 206 RULE 61. INTERNATIONAL LINKS .. 209 RULE 62. GLOBAL CLEARANCE NETWORK SERVICE .. 210 RULE 63. SRO REGULATORY REPORTING .. 211 iv RULE 64. DTCC SHAREHOLDERS AGREEMENT .. 212 RULE 65. ID NET SERVICE .. 214 NATIONAL SECURITIES CLEARING CORPORATION PROCEDURES .. 217 PROCEDURE I. INTRODUCTION .. 217 PROCEDURE II. TRADE COMPARISON AND RECORDING SERVICE.

7 218 A. Introduction .. 218 B. Equity and Listed Debt SECURITIES -- Locked-In Trade Input .. 218 C. Debt SECURITIES .. 219 D. When-Issued and When-Distributed SECURITIES .. 225 E. Special Trades .. 229 F. Index Receipts .. 229 G. Reports and Output .. 231 H. Consolidated Trade Summaries .. 232 PROCEDURE OBLIGATION WAREHOUSE .. 234 A. Introduction .. 234 B. OW Comparison .. 235 C. Obligation Warehouse Storage, Tracking, Maintenance and settlement .. 236 D. Reconfirmation and Pricing .. 238 E. Pair Off .. 240 F. Notifications and Reports .. 240 G. Non-Guaranteed Service .. 241 H. Applicability of Marketplace Rules.

8 241 PROCEDURE III. TRADE RECORDING SERVICE (INTERFACE WITH QUALIFIED CLEARING AGENCIES) .. 242 A. Introduction .. 242 B. settlement of Option Exercises and Assignments and settlement of Stock Futures Reaching Maturity .. 242 PROCEDURE IV. SPECIAL REPRESENTATIVE SERVICE .. 244 A. Introduction .. 244 B. Institutional CLEARING Service .. 244 C. Correspondent CLEARING Service .. 245 D. Qualified Special Representatives .. 246 E. Automated Special Representative Facility .. 246 PROCEDURE V. BALANCE ORDER ACCOUNTING OPERATION .. 247 A. Introduction .. 247 B. Trade-for-Trade Balance Orders .. 247 C.

9 Net Balance Orders .. 247 D. Balance Order Contracts .. 248 E. Consolidated Trade Summaries .. 248 F. Obligation Warehouse .. 248 PROCEDURE VI. FOREIGN SECURITY ACCOUNTING OPERATION .. 249 A. Introduction .. 249 v B. Trade-for-Trade Foreign Security Receive and Deliver Instructions .. 249 C. Netted Member-to-Member Receive and Deliver Instructions .. 249 PROCEDURE VII. CNS ACCOUNTING OPERATION .. 250 A. Introduction .. 250 B. Consolidated Trade Summary .. 250 C. Receipt and Delivery of SECURITIES .. 251 D. Controlling Deliveries to CNS .. 253 E. Influencing Receipts from CNS .. 256 F. Computation of CNS Money settlement .

10 258 G. CNS Dividend Accounting .. 260 H. Miscellaneous CNS Activity .. 262 I. CNS Sub-Accounting .. 268 J. Recording of CNS Buy-Ins .. 269 PROCEDURE VIII. MONEY settlement SERVICE .. 272 A. settlement Statement .. 272 B. Money 272 C. Final settlement Statement .. 272 D. Settling Bank Procedures .. 273 PROCEDURE IX. SPECIAL SERVICES .. 281 A. CLEARING Centers .. 281 B. Sponsored Accounts .. 281 PROCEDURE X. EXECUTION OF BUY-INS .. 282 PROCEDURE XI. FEES - SEE ADDENDUM A .. 284 PROCEDURE XII. TIME SCHEDULE .. 285 PROCEDURE XIII. DEFINITIONS .. 286 PROCEDURE XIV. FORMS, MEDIA AND TECHNICAL SPECIFICATIONS.