Thread by @live2beingu

#AMC #GME Good evening everyone and welcome to the recap with your girl L2B. I hope that you all have had a wonderful day so far.
Alright without further delay let’s get started. I’ve mentioned before in the chat rooms and groups on twitter that the SR-NSCC-2021- 801, 002, and

the 802 are somehow intertwined. Tonight, we’re going to go through each rule and I’m going to talk about how they all fit together in the big picture format if you will. I hope you guys have time, as I’ll do my best to make this as short as possible but keep in mind these rules

are complex and lengthy.

As many of you know, I tend to go back and fully read the rules and try to help us all navigate the murky waters and their applicability to us. We know that a major theme amongst all these rules are Member defaults and liquidity shortfalls.

Just about every single rule that we’ve read about or talked about is pointing in that direction and the 801 is no different in that regard. Well, L2B why do you say the 801 and not the 002 or the 802 rules. It’s because those rules are mentioned and reside within the 801.

I’ll show you why but first let’s get into the 801 then I’ll go into the 002, and finally the 802. As we go through the beginning of the 801 or any rule the NSCC is looking to be able to deal with its risk management strategy and is making changes based on what could possibly be

better in the long run for the company given the type of activity that is out there on the market.
The whole purpose of the 801 Rule is to change the following things:
1) Calculate and collect Supplementary Liquidity Deposits daily rather than in advance for the monthly

expiration of stock options.
2) Establish an intraday Supplemental Liquidity Obligation that would apply on any business Day as needed (originally for options but this has been expanded in this rule to securities and all activities)
3) Implementing an alternative pro rata

calculation of Members’ SLD obligations
4)Simplify and improve the description of the calculation, collection, and treatment of the SLD.

Now in order to understand the changes we have to look at the rule as it stands before the changes. Currently the Rule 4(A) calculates the

supplemental liquidity deposit monthly and the applicability here to for was only in regard to options expiration activity. The NSCC would calculate the SLD based on a Special activity lookback period of 24 months. The calculations are used to determine what the largest liquidity

need is that exceeded its liquidity resources and who out of its members represented the largest liquidity exposure to NSCC. One they’ve figure out the amounts they would then allocate the special activity peak liquidity need in proportion to the exposure they (members)

presented to the NSCC on the day of the lookback period. On a business day between the calculated dates if there is an increase in liquidity the NSCC can do the following:
1. Call for a Special Activity Liquidity Call
2. Cash deposit to Clearing fund known as a prefund

deposit – that gets made when the special activity peak liquidity exposure during that period may be greater than the amount in the lookback period (24 months). Okay L2B I get what the rule did now what? How is this changing?

Well, they are going to calculate and collect, the

supplemental liquidity deposits every day rather than only in connection with the monthly expiration of stock options. Mhmmmm I wonder why? Lmao…. well we all can see what is going on in the market and we know why…hedge funds have shorted stock as well as over leveraged

themselves in the process. The NSCC is saying that they have a bigger threat from the shorting of securities than they do from the options market. In calculating it at daily rate, the NSCC would be able to mitigate or limit the liquidity or default risks from members who may

create a liquidity need that is greater than the NSCC’s resources.
How would they calculate it? Well, the NSCC will determine the daily liquidity need for each supplemental liquidity provider on the actual business day by using the simplified calculation. Their goal would

be if this calculation exceeds the sum of NSCC’s qualifying liquid resources available to the NSCC on that day. (Intraday Supplemental Liquidity Obligation - Qualifying liquid resources = Supplementary liquid deposits). Then it’s members would have to ante up or add more cash

to meet the necessary funding requirements. Side Note: What are the qualifying liquid resources - Cash deposits to the NSCC clearing fund i.e. (Minimum Required Fund Deposits SR-NSCC-2021-005), proceeds of the issuance and private placement of short-term, unsecured notes in

the form of commercial paper and extendable notes as well as term debt. Cash that would be obtained by drawing on NSCC’s committed 364-day credit facility with a consortium of banks. (SR-NSCC-2021-802).

What is the intraday Liquidity Calculation: the NSCC to calculate and

collect the additional SLD on an intraday basis rather than monthly. To calculate the intraday supplemental Liquidity Call you would take the NSCC’s liquidity need recalculated to account for both the actual settlement activity submitted to NSCC over the course of the business

day and projected activity in stock options that is expected to be submitted to the NSCC and the Qualifying liquid resources. So hopefully you start to see how these rules begin to play into each other.

How else could they calculate this? NSCC is also thinking that in the

event 2 or more SLP (supplemental liquidity providers or members of the NSCC) have a Supplemental Liquidity Obligation (SLO) of more than $2 billion. Having this option would allow the NSCC to collect only the largest Supplemental Liquidity Obligation rather than collect it

doing so they would allocate the SLO amongst everyone as that in turn would be the SLO for each member on that day. The notice that would be received by members would state as such what each member will pay as the supplementary liquidity deposit. This is important because

it would help to alleviate some liquidity pressures from SLPs. Okay L2B I get the 801. What in the bloody hell does the 002 have to do with anything? I’m going to explain it. Before I do let me mention one last thing about the 801 rule. This rule was past on May 4th, 2021.

So everything that should’ve been amended and put into place was already done so well before now i.e. each of the above points were already completed and in effect last month.
Now let me explain to you how the 002 works. If you looked at SR-NSCC-2021-801.

Ran out of room looks like I'll have to add a part 2. I'll see you in a flash. @threadreaderapp unroll #Memes #stonks