FIXED INCOME CLEARING CORPORATION GOVERNMENT

FIXED INCOME CLEARING CORPORATION

GOVERNMENT SECURITIES DIVISION RULEBOOK

EFFECTIVE AS OF JUNE 21, 2024

TABLE OF CONTENTS

RULE 1 – DEFINITIONS .............................................................................................................. 6

RULE 2 – MEMBERS.................................................................................................................. 75

RULE 2A – INITIAL MEMBERSHIP REQUIREMENTS ......................................................... 76

RULE 3 – ONGOING MEMBERSHIP REQUIREMENTS ....................................................... 87

RULE 3A – SPONSORING MEMBERS AND SPONSORED MEMBERS ............................ 101

RULE 3B – CENTRALLY CLEARED INSTITUTIONAL TRIPARTY SERVICE............... 122

RULE 4 – CLEARING FUND AND LOSS ALLOCATION .................................................... 142

RULE 5 – COMPARISON SYSTEM ........................................................................................ 157

RULE 6A – BILATERAL COMPARISON ............................................................................... 160

RULE 6B – DEMAND COMPARISON .................................................................................... 162

RULE 6C – LOCKED-IN COMPARISON ............................................................................... 165

RULE 7 – REPO TRANSACTIONS ......................................................................................... 170

RULE 8 – EXECUTING FIRM TRADES ................................................................................. 171

RULE 9 – YIELD TO PRICE CONVERSION .......................................................................... 173

RULE 10 – ENHANCED COMPARISON PROCESSES PRESUMED MATCH DATA ...... 175

RULE 11 – NETTING SYSTEM ............................................................................................... 178

RULE 11A – RESERVED.......................................................................................................... 185

RULE 12 – SECURITIES SETTLEMENT ................................................................................ 186

RULE 13 – FUNDS-ONLY SETTLEMENT ............................................................................. 193

RULE 14 – FORWARD TRADES............................................................................................. 205

RULE 15 – SPECIAL PROVISIONS FOR CERTAIN NETTING MEMBERS ...................... 206

RULE 16 – NETTING OF LOCKED-IN TRADES .................................................................. 207

RULE 17 – NETTING AND SETTLEMENT OF NETTING-ELIGIBLE AUCTION

PURCHASES ............................................................................................................................. 208

RULE 18 – SPECIAL PROVISIONS FOR REPO TRANSACTIONS ..................................... 210

RULE 19 – SPECIAL PROVISIONS FOR BROKERED REPO TRANSACTIONS ............. 213

RULE 20 – SPECIAL PROVISIONS FOR GCF REPO TRANSACTIONS ............................ 215

RULE 21 – RESTRICTIONS ON ACCESS TO SERVICES .................................................... 221

RULE 21A – WIND-DOWN OF A NETTING MEMBER ....................................................... 224

RULE 22 – INSOLVENCY OF A MEMBER ........................................................................... 226

RULE 22A – PROCEDURES FOR WHEN THE CORPORATION CEASES TO ACT ........ 228

RULE 22B – CORPORATION DEFAULT ............................................................................... 236

RULE 22C – INTERPRETATION IN RELATION TO THE FEDERAL DEPOSIT

INSURANCE CORPORATION IMPROVEMENT ACT OF 1991 .......................................... 238

RULE 22D – WIND-DOWN OF THE CORPORATION ......................................................... 239

RULE 23 – FINE PAYMENTS .................................................................................................. 249

RULE 24 – CHARGES FOR SERVICES RENDERED ........................................................... 250

RULE 25 – BILLS RENDERED ................................................................................................ 251

RULE 26 – RESERVED ............................................................................................................ 252

RULE 27 – ADMISSION TO PREMISES OF THE CORPORATION, POWERS OF

ATTORNEY, ETC. .................................................................................................................... 253

RULE 28 – FORMS.................................................................................................................... 254

RULE 29 – RELEASE OF CLEARING DATA ........................................................................ 255

RULE 30 – LISTS TO BE MAINTAINED ............................................................................... 256

RULE 31 – RESERVED ............................................................................................................ 257

RULE 32 – SIGNATURES ........................................................................................................ 258

RULE 33 – PROCEDURES ....................................................................................................... 259

RULE 34 – INSURANCE .......................................................................................................... 260

RULE 35 – FINANCIAL REPORTS ......................................................................................... 261

RULE 36 – RULE CHANGES ................................................................................................... 262

RULE 37 – HEARING PROCEDURES .................................................................................... 263

RULE 38 – GOVERNING LAW AND CAPTIONS ................................................................. 266

RULE 39 – LIMITATIONS OF LIABILITY ............................................................................ 267

RULE 40 – GENERAL PROVISIONS ...................................................................................... 269

RULE 41 – CROSS GUARANTY AGREEMENTS ................................................................. 270

RULE 42 – SUSPENSION OF RULES ..................................................................................... 272

RULE 43 – CROSS-MARGINING ARRANGEMENTS .......................................................... 273

RULE 44 – ACTION BY THE CORPORATION ..................................................................... 276

RULE 45 – NOTICES ................................................................................................................ 277

RULE 46 – INTERPRETATION OF TERMS ........................................................................... 278

RULE 47 – INTERPRETATION OF RULES ........................................................................... 279

RULE 48 – DISCIPLINARY PROCEEDINGS ......................................................................... 280

RULE 49 – DTCC SHAREHOLDERS AGREEMENT ............................................................ 282

RULE 50 – MARKET DISRUPTION AND FORCE MAJEURE ............................................ 284

RULE 50A – SYSTEMS DISCONNECT: THREAT OF SIGNIFICANT IMPACT TO THE

CORPORATION’S SYSTEMS ................................................................................................. 287

SCHEDULE OF TIMEFRAMES ............................................................................................... 289

SCHEDULE OF GCF REPO TIMEFRAMES ........................................................................... 291

SCHEDULE OF SPONSORED GC TRADE TIMEFRAMES ................................................ 292

SCHEDULE FOR THE DELETION OF TRADE DATA ......................................................... 293

SCHEDULE OF REQUIRED MATCH DATA ......................................................................... 294

SCHEDULE OF REQUIRED DATA SUBMISSION ITEMS .................................................. 295

SCHEDULE OF REQUIRED AND ACCEPTED DATA SUBMISSION ITEMS FOR A

SUBSTITUTION OF EXISTING SECURITIES COLLATERAL .......................................... 296

SCHEDULE OF REQUIRED AND ACCEPTED DATA SUBMISSION ITEMS FOR A

SUBSTITUTION FOR NEW SECURITIES COLLATERAL .................................................. 297

SCHEDULE OF REQUIRED AND OTHER DATA SUBMISSION ITEMS FOR GCF REPO

TRANSACTIONS ...................................................................................................................... 298

SCHEDULE OF MONEY TOLERANCES ............................................................................... 300

SCHEDULE OF GC COMPARABLE SECURITIES ............................................................... 301

FEE STRUCTURE ..................................................................................................................... 304

FINE SCHEDULES.................................................................................................................... 314

CROSS-MARGINING AGREEMENTS ................................................................................... 318

BOARD STATEMENTS OF POLICY ...................................................................................... 319

INTERPRETIVE GUIDANCE WITH RESPECT TO WATCH LIST CONSEQUENCES .... 320

INTERPRETIVE GUIDANCE WITH RESPECT TO SETTLEMENT FINALITY ............... 322

BY-LAWS AND RESTATED CERTIFICATE OF INCORPORATION ................................. 325

RULE 1 – DEFINITIONS

Unless the context requires otherwise, the terms defined in this Rule shall, for all purposes

of these Rules, have the meanings herein specified.

Account

The term “Account” means any account maintained by a Member.

Accrued Repo Interest-to-Date

The term “Accrued Repo Interest-to-Date” means, on a particular Business Day, as regards

an outstanding Repo Transaction, the product of: (1) the original Contract Value of the

Start Leg, (2) the Contract Repo Rate, and (3) the number of days between the next

Scheduled Settlement Date and the Start Leg Date, divided by 360.

Acknowledgement Cutoff Time

The term “Acknowledgement Cutoff Time” shall have the meaning given to that term in

Section 5(b) of Rule 13.

Actual Deposit

The term “Actual Deposit” shall have the meaning given that term in Section 4 of Rule 4.

Actual Settlement Date

The term “Actual Settlement Date” means the Business Day on which a Net Settlement

Position is settled.

Affected Member

The term “Affected Member” has the meaning assigned in Section 2a(b)(i)(E) of Rule 22A.

Affected Netting/CCIT Member

The term “Affected Netting/CCIT Member” shall have the meaning given to such term in

Section 3b of Rule 20.

Affiliate

The term “Affiliate” shall have the meaning given that word in SEC Rule 405, promulgated

under the authority of the Securities Act of 1933.

All products and services provided by the Corporation referenced in these Rules are either registered trademarks

or servicemarks of, or trademarks or servicemarks of, The Depository Trust & Clearing Corporation or its

affiliates. Other names of companies, products or services appearing in these Rules are the trademarks or

servicemarks of their respective owners.

Aggregate Regular Amount

The term “Aggregate Regular Amount” means the total dollar amount determined by the

Corporation as a sufficient threshold to capture the majority of all Netting Members’

observed Liquidity Needs.

Aggregate Supplemental Amount

The term “Aggregate Supplemental Amount” means the difference between the Aggregate

Total Amount minus the Aggregate Regular Amount.

Aggregate Total Amount

The term “Aggregate Total Amount” means the sum of the Corporation’s Historical Cover

1 Liquidity Requirement plus the Liquidity Buffer for a given Look-Back Period.

Applicant Questionnaire

The term “Applicant Questionnaire” means the questionnaire required by these Rules to be

completed and delivered to the Corporation by an applicant, as applicable, to become a

Member, including a CCIT Member, as applicable.

Appropriate Regulatory Agency

The term “Appropriate Regulatory Agency” shall have the meaning given that term in

Section 3(a)(34)(C) of the Exchange Act.

As-Of Trade

The term “As-Of Trade” means a trade, including an Eligible Conversion Trade, involving

Eligible Securities, the data on which is submitted by Members to the Corporation for

comparison on or after the Scheduled Settlement Date for such trade.

Auction Purchase

The term “Auction Purchase” with respect to Treasury Department auctions means an

Eligible Treasury Security or the Eligible Treasury Securities purchased at auction from

the Treasury Department by a Netting Member. The sum of all awards made to a Member,

as the result of an auction, at a single price and from a single Federal Reserve Bank shall

constitute a separate Auction Purchase.

Average Auction Price

The term “Average Auction Price” with respect to Treasury Department auctions means,

on a CUSIP Number-by-CUSIP Number basis, the par-weighted average price at which

Auction Purchases of Netting Members that have been submitted to the Corporation by a

Federal Reserve Bank were made at a particular auction.

Average RFD

The term “Average RFD” shall have the meaning given that term in Section 7 of Rule 4.

Backtesting Charge

The term “Backtesting Charge” means an additional charge that may be added to a Netting

Member’s VaR Charge to mitigate exposures to the Corporation caused by settlement risks

that may not be adequately captured by the Corporation’s portfolio volatility model. The

Corporation may assess this charge on a Netting Member’s start of the day portfolio (the

“Regular Backtesting Charge”) and/or its intraday portfolios (the “Intraday Backtesting

Charge”), as needed, to enable the Corporation to achieve its backtesting coverage target.

The Regular Backtesting Charge and the Intraday Backtesting Charge may apply to Netting

Members that have 12-month trailing backtesting coverage below the 99 percent

backtesting coverage target, excluding deficiencies attributable to Blackout Period

exposures. The Regular Backtesting Charge and the Intraday Backtesting Charge, as

applicable, shall generally be equal to the Netting Member’s third largest deficiency that

occurred during the previous 12 months. Deficiencies attributable to Blackout Period

exposures would be included only during the Blackout Period. The Corporation may in its

discretion adjust such charge if the Corporation determines that circumstances particular

to a Netting Member’s settlement activity and/or market price volatility warrant a different

approach to determining or applying such charge in a manner consistent with achieving the

Corporation’s backtesting coverage target.

Bank Netting Member

The term “Bank Netting Member” shall have the meaning given that term in Section 3 of

Rule 2A.

Bilateral Comparison

The term “Bilateral Comparison” means the comparison of a trade by the matching by the

Corporation, pursuant to these Rules, of data submitted by two Members.

Bilateral Transaction

The term “Bilateral Transaction” means any transaction, including a Repo Transaction, the

data on which has been submitted to the Corporation by two Members, and is not a

Brokered Transaction.

Blackout Period

The term “Blackout Period” means, with respect to the Blackout Period Exposure Charge,

the period between the last business day of the prior month and the date during the current

month upon which a government-sponsored entity that issues mortgage-backed securities

publishes its updated Pool Factors.

Blackout Period Exposure Adjustment

The term “Blackout Period Exposure Adjustment” means an additional charge or a

reduction that may be added to a GCF Counterparty’s VaR Charge to mitigate exposures

to the Corporation that may arise due to potential overvaluation of mortgage-backed

securities pledged to collateralize GCF Repo Transactions during the Blackout Period. The

Blackout Period Exposure Adjustment shall apply to GCF Counterparties that are exposed

to potential overvaluation of mortgage-backed securities pledged as collateral during the

Blackout Period. The Blackout Period Exposure Adjustment shall be based on a projected

average pay-down rate of the applicable mortgage-backed securities. The Corporation may

in its discretion adjust or waive such adjustment if the Corporation determines that

circumstances particular to the GCF Counterparty’s use of mortgage-backed security

pledges or to the mortgage-backed securities so pledged warrant a different approach to

determining or applying such adjustment in a manner consistent with achieving the

Corporation’s backtesting coverage target.

Board or Board of Directors

The terms “Board” or “Board of Directors” mean the Board of Directors of Fixed Income

Clearing Corporation or a committee thereof acting under delegated authority.

Broker

The term “Broker” means a Member that is a Registered Broker or Registered Government

Securities Broker and that is regularly engaged in the business of effecting transactions in

Eligible Securities for the account of other Members.

Broker Account

The term “Broker Account” means an Account maintained for an Inter-Dealer Broker

Netting Member or a Segregated Repo Account of a Non-IDB Repo Broker.

Brokered Repo Transaction

The term “Brokered Repo Transaction” means a Repo Transaction, including a GCF Repo

Transaction, a party to which is a Repo Broker.

Brokered Transaction

The term “Brokered Transaction” means any transaction, including a Repo Transaction,

calling for the delivery of an Eligible Netting Security, or the posting of cash or an Eligible

Netting Security as collateral, the data on which has been submitted to the Corporation by

Members, to which transaction (i) an Inter-Dealer Broker, or (ii) a Non-IDB Repo Broker

with respect to activity in its Segregated Repo Account, is a party. The mere fact that an

Inter-Dealer Broker, or a Non-IDB Repo Broker with respect to activity in its Segregated

Repo Account, has submitted data to the Corporation on a transaction is not, solely of itself,

determinative of whether such Broker is a party to the transaction.

Business Day

The term “Business Day” means any day on which the Corporation is open for business

except that, for purposes of Rule 11, Rule 12, and Rule 13, “Business Day” means any day

on which both the Corporation and the Federal Reserve Bank of New York are open for

business.

Category 1 Sponsoring Member

The term “Category 1 Sponsoring Member” shall have the meaning given that term in

Section 2(a) of Rule 3A.

Category 2 Sponsoring Member

The term “Category 2 Sponsoring Member” shall have the meaning given that term in

Section 2(a) of Rule 3A.

CCIT™

The term “CCIT” means Centrally Cleared Institutional Triparty.

CCIT Account

The term “CCIT Account” shall have the meaning assigned to it in Section 9(b) of Rule

3B.

CCIT Daily Repo Interest

The term “CCIT Daily Repo Interest” means the interest amount that is collected from or

paid to a Netting Member, as applicable, and collected from or paid to a CCIT Member, as

applicable, on a daily basis resulting from a CCIT Transaction.

CCIT Member Termination Date

The term “CCIT Member Termination Date” shall have the meaning given that term in

Section 6 of Rule 3B.

CCIT Member Voluntary Termination Notice

The term “CCIT Member Voluntary Termination Notice” shall have the meaning given

that term in Section 6 of Rule 3B.

CCIT MRA Account

The term “CCIT MRA Account” shall have the meaning assigned to it in Section 9(b) of

Rule 3B.

CCIT is a trademark of The Depository Trust & Clearing Corporation.

CCIT Transaction

The term “CCIT Transaction” means a transaction that is processed by the Corporation in

the CCIT Service. Because the CCIT Service leverages the infrastructure and processes of

the GCF Repo Service, a CCIT Transaction must be: (i) in a Generic CUSIP Number

approved for the GCF Repo Service and (ii) between a CCIT Member and a Netting

Member who participates in the GCF Repo Service where the CCIT Member is the cash

lender in the transaction.

CCLF®

The term “CCLF” means the Corporation’s “Capped Contingency Liquidity Facility®” as

more fully described in Section 2a of Rule 22A.

CCLF Event

The term “CCLF Event” means an event declared by the Corporation once it has ceased to

act for a Netting Member pursuant to Rule 22A and determines, in its sole discretion, that

it does not have sufficient liquidity to satisfy the obligations of such Netting Member.

CCLF MRA

The term “CCLF MRA” has the meaning assigned in Section 2a(a) of Rule 22A.

CCLF MRA Termination Date

The term “CCLF MRA Termination Date” has the meaning assigned in Section 2a(a)(L)

of Rule 22A.

CCLF Transaction

The term “CCLF Transaction” refers to a repurchase transaction entered into subject to the

CCLF MRA.

Centrally Cleared Institutional Triparty Member or CCIT Member

The terms “Centrally Cleared Institutional Triparty Member” and “CCIT Member” mean

a legal entity other than a Registered Investment Company approved to participate in the

Corporation’s CCIT Service as a cash lender.

Centrally Cleared Institutional Triparty Service or CCIT Service

The terms “Centrally Cleared Institutional Triparty Service” and “CCIT Service” mean the

service offered by the Corporation to clear institutional triparty repurchase agreement

transactions, as more fully described in Rule 3B.

CET1 Capital

The term “CET1 Capital” means an entity’s common equity tier 1 capital, calculated in

accordance with such entity’s regulatory and/or statutory requirements.

CFTC

The term “CFTC” means the Commodity Futures Trading Commission.

CFTC-Recognized Clearing Organization

The term “CFTC-Recognized Clearing Organization” means a clearing organization that

is affiliated with, or designated by, a contracts market or markets trading specific futures

products, and is under the oversight of the Commodity Futures Trading Commission.

Clearance Difference Amount

The term “Clearance Difference Amount” means the absolute value of the dollar difference

between the Settlement Value of a Deliver Obligation or a Receive Obligation and the

actual value at which such Deliver Obligation or Receive Obligation was settled, by the

delivery or receipt of Eligible Netting Securities. Notwithstanding the above, the term

“Clearance Difference Amount” shall not apply to GCF Repo Transactions and CCIT

Transactions.

Clearing Agency

The term “Clearing Agency” shall have the meaning given it in Section 3(a)(23) of the

Exchange Act.

Clearing Agent Bank

The term “Clearing Agent Bank” means a member of the Federal Reserve System that is

regularly engaged in the business of providing clearing services in Eligible Securities for

Members and that has agreed to provide the Corporation, upon request, under mutually

agreeable terms, with clearing services.

Clearing Fund

The term “Clearing Fund” means the Clearing Fund established by the Corporation

pursuant to these Rules, which shall be comprised of the aggregate of all Required Fund

Deposits and all other deposits, including Cross-Guaranty Repayment Deposits, to the

Clearing Fund.

Clearing Fund Cash

The term “Clearing Fund Cash” shall have the meaning given that term in Section 3a of

Rule 4.

Clearing Organization

The term “Clearing Organization” means a Clearing Agency, Derivatives Clearing

Organization, Multilateral Clearing Agency, Registered Clearing Agency, CFTC

Recognized Clearing Organization, FCO and/or Self-Regulatory Organization, and any

other organization performing a similar function, whether or not regulated by the SEC or

the CFTC, in which the Member is a member or participant.

Close of Business

The term “Close of Business” means, with respect to a Business Day and as the context

requires, 5:00 p.m. or the Corporation’s deadline for final input of trade data by Members

as noted on the Schedule of Timeframes on such Business Day, unless otherwise

determined by the Corporation as the result of delay in the close of Fedwire.

Collateral Allocation Entitlement

The term “Collateral Allocation Entitlement” means the entitlement of a Netting Member

to have the Corporation allocate securities or cash for its benefit to secure such Member’s

GCF Net Funds Lender Position.

Collateral Allocation Obligation

The term “Collateral Allocation Obligation” means the obligation of a Netting Member to

allocate securities or cash for the benefit of the Corporation to secure such Member’s GCF

Net Funds Borrower Position.

Collateral Mark

The term “Collateral Mark” means, on a particular Business Day, as regards any Forward

Trade other than a Forward-Starting Repo Transaction during its Forward-Starting Period,

the absolute value of the difference between the Contract Value of the Forward Trade and

the Market Value of the Forward Trade. If the Contract Value is greater than the Market

Value, then this difference shall be a positive value for a Member with a Net Short Position,

and a negative value for a Member with Net Long Position. If the Market Value is greater

than the Contract Value, then this difference shall be a positive value for a Member with a

Net Long Position, and a negative value for a Member with a Net Short Position. The

Collateral Mark for a Forward-Starting Repo Transaction during its Forward-Starting

Period shall be Zero. The term “Collateral Mark” means, as regards a Forward Net

Settlement Position, the sum of all of the Collateral Marks on each of the Forward Trades

that compose such Forward Net Settlement Position. Notwithstanding the above, the term

“Collateral Mark” shall not apply to GCF Repo Transactions and CCIT Transactions.

Collected/Paid Amount

The term “Collected/Paid Amount” means, with regard to the calculation of Funds-Only

Settlement Amounts, the aggregate Settlement Amount either received by the Corporation

from a Member or paid by the Corporation to a Member since the end of the processing

cycle immediately prior to the processing cycle during which the Collected/Paid Amount

is calculated.

Commodity Exchange Act

The term “Commodity Exchange Act” means the Commodity Exchange Act, as amended.

Comparable Securities

The term “Comparable Securities” means, with respect to a security or securities that are

represented by a particular Generic CUSIP Number, any other security or securities that

are represented by the same Generic CUSIP Number.

Compared Trade

The term “Compared Trade” means a trade, including a Repo Transaction, the data on

which has been compared or deemed compared in the Comparison System pursuant to

these Rules, as the result of any one of the following methods: (1) Bilateral Comparison,

which requires the matching by the Corporation of data submitted by two Members, (2)

Demand Comparison, which requires that data to be submitted to the Corporation by a

Demand Trade Source, or (3) Locked-In Comparison, which requires the data to be

submitted to the Corporation by a Locked-In Trade Source.

Comparison System

The term “Comparison System” means the (1) system of services provided by the

Corporation to Persons that are Members thereof, and (2) operations carried out by the

Corporation in the course of providing such services, as provided for in Rules 5 through

10.

Comparison-Only Member

The term “Comparison-Only Member” means a Member that is a Member only of the

Comparison System.

Contract Repo Rate

The term “Contract Repo Rate” means, as regards a Repo Transaction, the contractual

interest rate on which the amount of interest owed by the Repo Party to the Reverse Repo

Party at the close of the Repo Transaction is based, as established by the original parties to

the Repo Transaction.

Contract Value

The term “Contract Value” means, as regards a trade other than a Repo Transaction, the

dollar value at which the trade is entered into. The term “Contract Value” means, as regards

a Start or End Leg, the dollar value at which such Leg is to be settled on the Scheduled

Settlement Date. For a GCF Repo Transaction or a CCIT Transaction, the Contract Value

of the Start Leg is the principal value, and the Contract Value of the End Leg is the principal

value plus accrued interest.

Controlling Management

The term “Controlling Management” shall mean the Chief Executive Officer, the Chief

Financial Officer, and the Chief Operations Officer, or their equivalents, of an applicant or

Member or such other individuals or entities with direct or indirect control over the

applicant or Member; provided that with respect to a Registered Investment Company

Netting Member or an applicant to become a Registered Investment Company Netting

Member, the term “Controlling Management” shall include the investment manager.

Conversion Trade

The term “Conversion Trade” means an Eligible Conversion Trade the data on which has

been compared by the Corporation pursuant to Rule 9 and listed on a Report made available

to Members.

Corporate Contribution

The term “Corporate Contribution” shall have the meaning given that term in Section 7a

of Rule 4.

Corporation

The term “Corporation” means Fixed Income Clearing Corporation, the owner of the

Government Securities Division. Where these Rules refer to action taken by “the

Corporation,” the term should be understood to mean the management of Fixed Income

Clearing Corporation, unless otherwise specified.

Coupon Adjustment Payment

The term “Coupon Adjustment Payment” means the coupon payments due and owing on

each Eligible Netting Security that comprises a Coupon-Eligible End Leg, Fail Deliver

Obligation or Fail Receive Obligation. Notwithstanding the above, the term “Coupon

Adjustment Payment” shall not apply to GCF Repo Transactions and CCIT Transactions.

Coupon-Eligible End Leg

The term “Coupon-Eligible End Leg” means an End Leg on a coupon payment date for the

Eligible Netting Securities that comprise it, where such coupon payment date falls after the

Start Leg related to the same Repo Transaction from which such End Leg arises has settled

and on or before the Scheduled Settlement Date of the End Leg. Notwithstanding the

above, the term “Coupon-Eligible End Leg” shall not apply to GCF Repo Transactions and

CCIT Transactions.

Covered Affiliate

The term “Covered Affiliate” means an Affiliate of a Netting Member that: (1) is not itself

a Netting Member; (2) is not a Foreign Person; and (3) is a Broker, Dealer, bank, trust

company, and/or Futures Commission Merchant.

Credit Clearance Difference Amount

The term “Credit Clearance Difference Amount” means, on a particular Business Day, the

absolute value of the dollar difference between the Settlement Value of a Deliver

Obligation or a Receive Obligation and the actual value at which such Deliver Obligation

or Receive Obligation was settled, by the delivery or receipt of Eligible Netting Securities.

Notwithstanding the above, the term “Credit Clearance Difference Amount” shall not apply

to GCF Repo Transactions and CCIT Transactions.

Credit Coupon Adjustment Payment

The term “Credit Coupon Adjustment Payment” means, on a particular Business Day, a

Coupon Adjustment Payment that a Netting Member is entitled to collect from the

Corporation, involving a Member in a Net Long Position with regard to a Coupon-Eligible

End Leg, Fail Deliver Obligation or Fail Receive Obligation.

Credit Delivery Differential Adjustment Payment

The term “Credit Delivery Differential Adjustment Payment” means, on a particular

Business Day, a Delivery Differential Adjustment Payment, involving a Deliver Obligation

where the Settlement Value is less than the System Value, or a Receive Obligation where

the Settlement Value is greater than the System Value, that the Corporation is obligated to

make to a Netting Member.

Credit Fail Mark Adjustment Payment

The term “Credit Fail Mark Adjustment Payment” means, on a Particular Business Day, a

Fail Mark Adjustment Payment that a Netting Member is entitled to collect from the

Corporation, involving either: (1) a Fail Deliver Obligation where the Settlement Value of

such Obligation has decreased from the immediately previous Business Day, or, (2) a Fail

Receive Obligation where the Settlement Value of Such Obligation has increased from the

immediately previous Business Day.

Credit Forward Mark Adjustment Payment

The term “Credit Forward Mark Adjustment Payment” means, on a particular Business

Day, a Forward Mark Adjustment Payment that is a positive number, and that a Netting

Member is entitled to collect from the Corporation.

Credit GCF Forward Mark

The term “Credit GCF Forward Mark” means, on a particular Business Day, a GCF

Forward Mark that is a positive number, and that a Netting Member is entitled to collect

from the Corporation.

Credit GCF Forward Mark Adjustment Payment

The term “Credit GCF Forward Mark Adjustment Payment” means, on a particular

Business Day, a GCF Forward Mark Adjustment Payment that is a positive value, and that

a Netting Member is entitled to collect from the Corporation.

Credit GCF Interest Adjustment Payment

The term “Credit GCF Interest Adjustment Payment” means, on a particular Business Day,

a GCF Interest Adjustment Payment on an associated Debit GCF Forward Mark

Adjustment Payment made on the previous Business Day, which GCF Interest Adjustment

Payment a Netting Member is entitled to collect from the Corporation.

Credit GCF Transaction Adjustment Payment

The term “Credit GCF Transaction Adjustment Payment” means, on a particular Business

Day, as regards the total repo interest accrued on GCF Repo Transactions and CCIT

Transactions, as applicable, the GCF Transaction Adjustment Payment that a Netting

Member is entitled to collect from the Corporation.

Credit Interest Adjustment Payment

The term “Credit Interest Adjustment Payment” means, on a particular Business Day, an

Interest Adjustment Payment on an associated Debit Forward Mark Adjustment Payment

made on the previous Business Day, which Interest Adjustment Payment a Netting Member

is entitled to collect from the Corporation.

Credit Interest Rate Mark

The term “Credit Interest Rate Mark” means, on a particular Business Day, an Interest Rate

Mark that is a positive number, and that a Netting Member is entitled to collect from the

Corporation.

Credit Redemption Adjustment Payment

The term “Credit Redemption Adjustment Payment” means on a particular Business Day,

a Redemption Adjustment Payment that a Netting Member is entitled to collect from the

Corporation, involving either (1) a Net Settlement Position in an Eligible Netting Security

on the last Business Day before or on the maturity date for such security or (2) a Repo

Transaction where the Scheduled Settlement Date of the End Leg is on the maturity date,

after the maturity date or on the last Business Day before the maturity date and the maturity

date is not a Business Day.

Credit Risk Rating Matrix

The term “Credit Risk Rating Matrix” means a matrix of credit ratings of Members

specified in Section 12 of Rule 3. The matrix is developed by the Corporation to evaluate

the credit risk such Members pose to the Corporation and its Members and is based on

factors determined to be relevant by the Corporation from time to time, which factors are

designed to collectively reflect the financial and operational condition of a Member. These

factors include (i) quantitative factors, such as capital, assets, earnings, and liquidity, and

(ii) qualitative factors, such as management quality, market position/environment, and

capital and liquidity risk management.

Credit Transaction Adjustment Payment

The term “Credit Transaction Adjustment Payment” means, on a particular Business Day

as regards a Net Settlement Position, a Transaction Adjustment Payment that a Netting

Member is entitled to collect from the Corporation, involving either: (1) a Net Long

Position where the aggregate of the Contract Values of the trades that comprise such Net

Long Position is less than the Aggregate of the Market Values of such trades, or (2) a Net

Short Position where the aggregate of the Contract Values of the trades that comprise such

Net Short Position is greater than the Market Values of such trades.

Cross-Guaranty Agreement

The term “Cross-Guaranty Agreement” shall mean any netting contract, limited cross-

guaranty, or other similar agreement between the Corporation and (i) any clearing agency

registered under Section 17A(b) of the Securities Exchange Act of 1934, (ii) any

organization performing clearing functions for a contract market designated pursuant to the

Commodity Exchange Act or (iii) any other domestic or foreign clearinghouse, clearing

association, clearing corporation or similar organization. The term “Cross-Guaranty

Agreement” shall not include Cross-Margining Agreements.

Cross-Guaranty Beneficiary Member

The term “Cross-Guaranty Beneficiary Member” shall have the meaning given to such

term in Section 3 of Rule 41.

Cross-Guaranty Counterparty

The term “Cross-Guaranty Counterparty” means any party, other than the Corporation, to

a Cross-Guaranty Agreement.

Cross-Guaranty Defaulting Member

The term “Cross-Guaranty Defaulting Member” means a defaulting Member on account

of which the Corporation makes or receives a Cross-Guaranty Payment.

Cross-Guaranty Payment

The term “Cross-Guaranty Payment” means any payment, other than a Cross-Guaranty

Repayment, that the Corporation makes or receives pursuant to a Cross-Guaranty

Agreement.

Cross-Guaranty Repayment

The term “Cross-Guaranty Repayment” means (i) any amount of a Cross-Guaranty

Payment received by the Corporation that the Corporation (A) repays to a Cross-Guaranty

Counterparty pursuant to a Cross-Guaranty Agreement or (B) pays over to a Cross-

Guaranty Defaulting Member or its legal representative pursuant to a court order or

judgment or (ii) any amount of a Cross-Guaranty Payment made by the Corporation that

the Corporation receives back from a Cross-Guaranty Counterparty pursuant to a Cross-

Guaranty Agreement.

Cross-Guaranty Repayment Deposit

The term “Cross-Guaranty Repayment Deposit” means the deposit to the Clearing Fund

required to be made by a Cross-Guaranty Beneficiary Member pursuant to Section 4 of

Rule 41.

Cross-Margining Affiliate

The term “Cross-Margining Affiliate” means an affiliate of a Cross-Margining Participant

that is a member of an FCO and has agreed: (i) to have its positions and margin at the FCO

margined together with Eligible Positions of the Cross-Margining Participant at the

Corporation in accordance with the applicable Cross-Margining Agreement, and/or (ii) if

permitted by the applicable Cross-Margining Agreement, to have the positions and margin

of Market Professionals cleared by the Cross-Margining Affiliate at the FCO margined

together with Eligible Positions of the Market Professional customers of the Cross-

Margining Participant at the Corporation.

Cross-Margining Agreement

The term “Cross-Margining Agreement” means an agreement between the Corporation and

a particular FCO pursuant to which a Cross-Margining Participant, at the discretion of the

Corporation and in accordance with the provisions of Rule 43, may elect to have its

Required Fund Deposit in respect of Eligible Positions at FICC and its (or its Cross-

Margining Affiliate’s, if applicable) margin requirements in respect of Eligible Positions

at such FCO calculated by taking into consideration the net risk of such Eligible Positions

at each of the clearing organizations. A Cross-Margining Agreement may include

provisions for the cross-margining by a Netting Member of Eligible Positions held in the

accounts of Market Professionals.

Cross-Margining Arrangement

The term “Cross-Margining Arrangement” means the arrangement established between the

Corporation and one or more FCOs pursuant to Cross-Margining Agreements and Rule 43.

Cross-Margining Beneficiary Participant

The term “Cross-Margining Beneficiary Participant” shall have the meaning given to such

term in Section 5 of Rule 43.

Cross-Margining Guaranty

The term “Cross-Margining Guaranty” means a guaranty by an FCO of the obligations of

a Cross-Margining Participant to the Corporation or, as the context requires, a guaranty by

the Corporation of the obligations of a Cross-Margining Participant or its Cross-Margining

Affiliate to an FCO.

Cross-Margining Participant

The term “Cross-Margining Participant” means a Netting Member that is authorized by the

Corporation to, and does, participate in the Cross-Margining Arrangement between the

Corporation and one or more FCOs pursuant to a Cross-Margining Agreement.

Cross-Margining Payment

The term “Cross-Margining Payment” means any payment, other than a Cross-Margining

Repayment, that the Corporation makes or receives pursuant to a Cross-Margining

Guaranty.

Cross-Margining Repayment

The term “Cross-Margining Repayment” means (i) any amount of a Cross-Margining

Payment received by the Corporation that the Corporation (A) repays to an FCO pursuant

to a Cross-Margining Agreement or (B) pays over to a Defaulting Member or its legal

representative pursuant to a court order or judgment or (ii) any amount of a Cross-

Margining Payment the Corporation receives back from an FCO pursuant to a Cross-

Margining Agreement.

Cross-Margining Repayment Deposit

The term “Cross-Margining Repayment Deposit” means the deposit to the Clearing Fund

required to be made by a Cross-Margining Beneficiary Participant pursuant to Section 6 of

Rule 43.

Current Haircut

The term “Current Haircut” means, as regards any Sponsored Member Trade, the Market

Value of the Sponsored Member Trade, as of the time of the Corporation’s determination

of the relevant Funds-Only Settlement Amount, minus the Contract Value of the End Leg

of the Sponsored Member Trade.

Current Net Settlement Positions

The term “Current Net Settlement Positions” means those Net Settlement Positions that are

scheduled to settle on the Business Day with respect to which the calculation is made.

CUSIP Number

The term “CUSIP Number” means the Committee on Uniform Securities Identification

Procedures identifying number for an Eligible Security or an Eligible Netting Security.

The term CUSIP Number includes, as the context may indicate, either a Generic CUSIP

Number or a Specific CUSIP Number, or both.

Cybersecurity Confirmation

The term “Cybersecurity Confirmation” means a written document provided to the

Corporation by all Members, Sponsoring Members and CCIT Members (for purposes of

this definition, collectively referred to as “Members”) and applicants for such membership

that confirms the existence of an information system cybersecurity program and includes

the representations listed below.

Each Cybersecurity Confirmation shall (1) be on a form provided by the Corporation;

(2) be signed by a designated senior executive of the Member or applicant who is

authorized to attest to these matters; and (3) include the following representations, made

with respect to the two years prior to the date of the Cybersecurity Confirmation:

1. The Member or applicant has defined and maintains a comprehensive cybersecurity

program and framework that considers potential cyber threats that impact their

organization and protects the confidentiality, integrity and availability requirements of

their systems and information.

2. The Member or applicant has implemented and maintains a written enterprise

cybersecurity policy or policies approved by senior management or the organization’s

board of directors, and the organization’s cybersecurity framework is in alignment with

standard industry best practices and guidelines, as indicated on the form of

Cybersecurity Confirmation.

3. If using a third party service provider or service bureau(s) to connect or transact

business or to manage the connection with the Corporation, the Member or applicant

has an appropriate program to (a) evaluate the cyber risks and impact of these third-

parties, and (b) review the third-party assurance reports.

4. The cybersecurity program and framework protect the segment of the Member’s or

applicant’s system that connects to and/or interacts with the Corporation.

5. The Member or applicant has in place an established process to remediate cyber issues

identified to fulfill the Member’s or applicant’s regulatory and/or statutory

requirements.

6. The cybersecurity program’s and framework’s risk processes are updated periodically

based on a risk assessment or changes to technology, business, threat ecosystem, and/or

regulatory environment.

7. A comprehensive review of the Member’s or applicant’s cybersecurity program and

framework has been conducted by one of the following:

• The Member or applicant, if that organization has filed and maintains a current

Certification of Compliance with the Superintendent of the New York State

Department of Financial Services pursuant to 23 NYCRR 500;

• A regulator who assesses the program against a designated cybersecurity

framework or industry standard, including those that are listed on the form of the

Cybersecurity Confirmation and in an Important Notice issued by the Corporation

from time to time;

• An independent external entity with cybersecurity domain expertise, including

those that are listed on the form of the Cybersecurity Confirmation and in an

Important Notice issued by the Corporation from time to time; and

• An independent internal audit function reporting directly to the board of directors

or designated board of directors committee of the Member or applicant, such that

the findings of that review are shared with these governance bodies.

Dealer

The term “Dealer” means a Member that is a Registered Dealer or Registered Government

Securities Dealer.

Dealer Account

The term “Dealer Account” means an Account maintained by a Netting Member that is

not a Broker Account.

Dealer Netting Member

The term “Dealer Netting Member” shall have the meaning given that term in Section 3

of Rule 2A.

Debit Clearance Difference Amount

The term “Debit Clearance Difference Amount” means, on a particular Business Day, the

absolute value of the dollar difference between the Settlement Value of a Deliver

Obligation or a Receive Obligation and the actual value at which such Deliver Obligation

or Receive Obligation was settled, by the delivery or receipt of Eligible Netting Securities.

Notwithstanding the above, the term “Debit Clearance Difference Amount” shall not apply

to GCF Repo Transactions and CCIT Transactions.

Debit Coupon Adjustment Payment

The term “Debit Coupon Adjustment Payment” means, on a particular Business Day, a

Coupon Adjustment Payment that a Netting Member is obligated to make to the

Corporation, involving a Member in a Net Short Position with regard to a Coupon-Eligible

End Leg, Fail Deliver Obligation or Fail Receive Obligation.

Debit Delivery Differential Adjustment Payment

The term “Debit Delivery Differential Adjustment Payment” means, on a particular

Business Day, a Delivery Differential Adjustment Payment, involving a Deliver Obligation

where the Settlement Value is greater than the System Value, or a Receive Obligation

where the Settlement Value is less than the System Value, that a Netting Member is

obligated to make to the Corporation.

Debit Fail Mark Adjustment Payment

The term “Debit Fail Mark Adjustment Payment” means, on a particular Business Day, a

Fail Mark Adjustment Payment that a Netting Member is obligated to make to the

Corporation, involving either: (1) a Fail Deliver Obligation where the Settlement Value of

such Obligation has increased from the immediately previous Business Day, or, (2) a Fail

Receive Obligation where the Settlement Value of such Obligation has decreased from the

immediately previous Business Day.

Debit Forward Mark Adjustment Payment

The term “Debit Forward Mark Adjustment Payment” means, on a particular Business

Day, a Forward Mark Adjustment Payment that is a negative number, and that a Netting

Member is obligated to make to the Corporation.

Debit GCF Forward Mark

The term “Debit GCF Forward Mark” means, on a particular Business Day, a GCF Forward

Mark that is a negative number, and that a Netting Member is obligated to pay to the

Corporation.

Debit GCF Forward Mark Adjustment Payment

The term “Debit GCF Forward Mark Adjustment Payment” means, on a particular Business

Day, a GCF Forward Mark Adjustment Payment that is a negative value, and that a Netting

Member is obligated to pay the Corporation.

Debit GCF Interest Adjustment Payment

The term “Debit GCF Interest Adjustment Payment” means, on a particular Business Day,

a GCF Interest Adjustment Payment on an associated Credit GCF Forward Mark

Adjustment Payment made on the previous Business Day, which GCF Interest Adjustment

Payment a Netting Member is obligated to make to the Corporation.

Debit GCF Transaction Adjustment Payment

The term “Debit GCF Transaction Adjustment Payment” means, on a particular Business

Day, as regards the total repo interest accrued on GCF Repo Transactions and CCIT

Transactions, as applicable, the GCF Transaction Adjustment Payment that a Netting

Member is obligated to pay to the Corporation.

Debit Interest Adjustment Payment

The term “Debit Interest Adjustment Payment” means, on a particular Business Day, an

Interest Adjustment Payment on an associated Credit Forward Mark Adjustment Payment

made on the previous Business Day, which Interest Adjustment Payment a Netting Member

is obligated to make to the Corporation.

Debit Interest Rate Mark

The term “Debit Interest Rate Mark” means, on a particular Business Day, an Interest Rate

Mark that is a negative number, and that a Netting Member is obligated to pay to the

Corporation.

Debit Redemption Adjustment Payment

The term “Debit Redemption Adjustment Payment” means, on a particular Business Day,

a Redemption Adjustment Payment that a Netting Member is obligated to make to the

Corporation, involving either (1) a Net Settlement Position in an Eligible Netting Security

on the last Business Day before or on the maturity date for such security or (2) a Repo

Transaction where the Scheduled Settlement Date of the End Leg is on the maturity date,

after the maturity date or on the last Business Day before the maturity date and the maturity

date is not a Business Day.

Debit Transaction Adjustment Payment

The term “Debit Transaction Adjustment Payment” means, on a particular Business Day

as regards a Net Settlement Position, a Transaction Adjustment Payment that a Netting

Member is obligated to make to the Corporation, involving either: (1) a Net Long Position

where the aggregate of the Contract Values of the trades that comprise such Net Long

Position is greater than the aggregate of the Market Values of such trades, or (2) a Net

Short Position where the aggregate of the Contract values of the trades that comprise such

Net Short Position is less than the Market Values of such trades.

Declared Non-Default Loss Event

The term “Declared Non-Default Loss Event” shall have the meaning given that term in

Section 7 of Rule 4.

Defaulting Member

The term “Defaulting Member” means a Netting Member that is treated by the Corporation

as insolvent pursuant to Rule 22 or with respect to which it has ceased to act pursuant to

Rule 22A.

Defaulting Member Event

The term “Defaulting Member Event” shall have the meaning given that term in Section 7

of Rule 4.

Deliver Obligation

The term “Deliver Obligation” means a Netting Member’s obligation to deliver Eligible

Netting Securities to the Corporation at the appropriate Settlement Value (i) in satisfaction

of all or a part of a Net Short Position, (ii) in satisfaction of a Same-Day Settling Trade or

(iii) to implement a collateral substitution in connection with a Repo Transaction with a

Right of Substitution.

Deliver Scaling Factor

The term “Deliver Scaling Factor” means the percentage established by the Corporation

which shall be used to calculate a Netting Member’s Individual Regular Amount.

Delivery Differential Adjustment

The term “Delivery Differential Adjustment” means, for a Deliver Obligation or a Receive

Obligation established by the Corporation on a particular Business Day, the dollar

adjustment made by the Corporation (which may be zero) to System Value in order to

determine the Settlement Value for the Delivery Obligation or Receive Obligation. The

Corporation may establish varying Delivery Differential Adjustment amounts for different

Deliver Obligations and/or Receive Obligations of one or more Members involving

Eligible Netting Securities with the same CUSIP Number.

Delivery Differential Adjustment Payment

The term “Delivery Differential Adjustment Payment” means the absolute value of the

dollar difference between the System Value and the Settlement Value of a Netting

Member’s Deliver Obligation or a Receive Obligation. Notwithstanding the above, the

term “Delivery Differential Adjustment Payment” shall not apply to GCF Repo

Transactions and CCIT Transactions.

Demand Comparison

The term “Demand Comparison” means the comparison of a Demand Trade by the receipt

by the Corporation of data from a Demand Trade Source.

Demand Trade

The term “Demand Trade” means a trade, involving Eligible Securities, that is deemed a

Compared Trade once the data on such trade are received by the Corporation from a single,

designated source and meet the requirements for submission of data on a Demand Trade

pursuant to these Rules, without the necessity of matching the data regarding the trade with

data provided by each Member that is or is acting on behalf of an original counterparty to

the trade. The data regarding a Demand Trade must be provided to the Corporation by a

Demand Trade Source.

Demand Trade Source

The term “Demand Trade Source” means a source of data on Demand Trades that the

Corporation has so designated, subject to such terms and conditions as to which the

Demand Trade Source and the Corporation may agree.

Derivatives Clearing Organization

The terms “Derivatives Clearing Organization” shall have the meaning given it in Section

1a(9) of the Commodity Exchange Act.

Designated Examining Authority

The term “Designated Examining Authority” shall mean (1) in the case of a Broker or

Dealer, as applicable, that belongs to only one Self-Regulatory Organization, such

Self-Regulatory Organization, and (2) in the case of a Broker or Dealer, as applicable, that

belongs to more than one Self-Regulatory Organization, the Self-Regulatory Organization

designated by the SEC pursuant to Section 17(d) of the Exchange Act as the entity with

responsibility for examining such Broker or Dealer.

Designee

The term “Designee” means a service provider designated by a Member either orally or in

writing to provide the Corporation with instructions on behalf of the Member.

Direct Affected Member

The term “Direct Affected Member” has the meaning assigned in Section 2a(b)(i)(B) of

Rule 22A.

DK Notice

The term “DK Notice” means a notification that is sent to the Corporation to: (i) cause a

Demand Trade to become uncompared, or (ii) serve as a request for cancellation of a

Locked-In Trade to a Locked-In Trade Source. DK Notices must be sent pursuant to

communications links, formats, timeframes, and deadlines established by the Corporation

for such purpose.

DTC

The term “DTC” means The Depository Trust Company.

DTC Settling Bank

The term “DTC Settling Bank” means an entity that qualifies as a settling bank under

DTC’s rules and has been approved as such by DTC.

DTCC

The term “DTCC” means The Depository Trust & Clearing Corporation.

DTCC Confidential Information

The term “DTCC Confidential Information” shall mean all non-public information

provided by DTCC and/or the Corporation that (i) is marked or otherwise identified in

writing prior to disclosure to the recipient as confidential, (ii) is designated by DTCC or

the Corporation as confidential, or (iii) the recipient knows or, under the circumstances

surrounding disclosure, ought to reasonably know is confidential.

Eligible Conversion Trade

The term “Eligible Conversion Trade” means a Yield Comparison Trade that the

Corporation, based on the type of Eligible Security involved, has designated, either on a

product-by-product basis or on a CUSIP-by-CUSIP basis, as eligible for comparison

pursuant to Rule 9.

Eligible Clearing Fund Agency Security

The term “Eligible Clearing Fund Agency Security” means a direct obligation of those U.S.

agencies or government sponsored enterprises as the Corporation may designate from time

to time, and that satisfies such criteria set forth in notices issued by the Corporation from

time to time.

Eligible Clearing Fund Security

The term “Eligible Clearing Fund Security” means unmatured bonds which are either an

Eligible Clearing Fund Agency Security, an Eligible Clearing Fund Mortgage-Backed

Security or an Eligible Clearing Fund Treasury Security.

Eligible Clearing Fund Mortgage-Backed Security

The term “Eligible Clearing Fund Mortgage-Backed Security” means a mortgage-backed

pass through obligation issued by those U.S. agencies or government sponsored enterprises

as the Corporation may designate from time to time, and that satisfies such criteria set forth

in notices issued by the Corporation from time to time.

Eligible Clearing Fund Treasury Security

The term “Eligible Clearing Fund Treasury Security” means a direct obligation of the U.S.

government that satisfies the criteria set forth in notices issued by the Corporation from

time to time.

Eligible Letter of Credit

The term “Eligible Letter of Credit” means a letter of credit that:

(i) contains the unqualified commitment of such issuer to pay a specified sum of money

upon demand (properly drawn under the letter of credit);

(ii) is irrevocable; and

(iii) is in a form, and contains such other terms and conditions, as may be required by the

Corporation.

Eligible Netting Security

The term “Eligible Netting Security” means an Eligible Security that the Corporation has

designated as eligible for netting. Notwithstanding the previous sentence, a GCF Repo

Security shall only be deemed to be an Eligible Netting Security in connection with GCF

Repo Transactions. Without limiting the generality of the foregoing, a GCF Repo Security

shall not be an Eligible Netting Security: (i) for comparison, netting and/or settlement in

connection with any transaction other than a GCF Repo Transaction, and (ii) shall not be

eligible for Clearing Fund purposes unless it falls into the definition of an Eligible Clearing

Fund Security

Eligible Position

The term “Eligible Position” means a position in certain Eligible Netting Securities netted

by the Corporation, or certain Government securities futures contracts or interest rate

futures contracts cleared by an FCO, as identified in a Cross-Margining Agreement as

eligible for cross-margining treatment.

Eligible Security

The term “Eligible Security” means a security issued or guaranteed by the United States, a

U.S. government agency or instrumentality, a U.S. government-sponsored corporation, or

any other security approved by the Board from time to time, or one or more categories of

such securities as represented by a Generic CUSIP Number, that the Corporation has listed

on the Eligible Securities master file maintained by it pursuant to Rule 30. Notwithstanding

the previous sentence, a GCF Repo Security shall be deemed to be an Eligible Security

only in connection with a GCF Repo Transaction and a GC Repo Security shall be deemed

to be an Eligible Security only in connection with a Sponsored GC Trade. A security of an

issuer that is listed on the Office of Foreign Assets Control (“OFAC”) list of specially

designated nationals distributed by the U.S. Department of the Treasury, or of an issuer

that is incorporated in a country that is on the OFAC list of countries subject to

comprehensive sanctions, shall not be an “Eligible Security”.

Eligible Treasury Security

The term “Eligible Treasury Security” means an unmatured, marketable debt security in

book-entry form that is a direct obligation of the United States Government.

End Leg

The term “End Leg” means, as regards a Repo Transaction other than a GCF Repo

Transaction (or CCIT Transaction as applicable) or a Sponsored GC Trade, the concluding

settlement aspects of the transaction, involving the retransfer of the underlying Eligible

Netting Securities by the Netting Member that is, or is submitting data on behalf of, the

funds lender (if netting eligible, through satisfaction of the applicable Deliver Obligation

generated by the Corporation) and the taking back of such Eligible Securities by the Netting

Member that is, or is submitting data on behalf of, the funds borrower (if netting eligible,

through satisfaction of the applicable Receive Obligation generated by the Corporation).

The term “End Leg” means, as regards a GCF Repo Transaction (or CCIT Transaction as

applicable), the concluding settlement aspects of the GCF Repo Transaction or CCIT

Transaction, as applicable, involving the retransfer of the underlying Eligible Netting

Securities by the Netting Member that is in the GCF Net Funds Lender Position and the

taking back of such Eligible Netting Securities by the Netting Member that is in the GCF

Net Funds Borrower Position. The term “End Leg” means, as regards a Sponsored GC

Trade, the concluding settlement aspects of the transaction, involving the retransfer of the

Purchased GC Repo Securities by the GC Funds Lender and the taking back of such

Purchased GC Repo Securities by the GC Funds Borrower.

EOD Clearing Fund Cash

The term “EOD Clearing Fund Cash” shall have the meaning given to such term in Section

3 of Rule 20.

Event Period

The term “Event Period” shall have the meaning given that term in Section 7 of Rule 4.

Excess Adjusted Net Capital

The term “Excess Adjusted Net Capital” means, as of a particular date, the amount equal

to the difference between the adjusted net capital of a Futures Commission Merchant and

the minimum adjusted net capital that such Futures Commission Merchant must have to

comply with the requirements of 17 C.F.R. Section 1.17(a)(1) or (a)(2), or any successor

regulations.

Excess Capital Differential

The term “Excess Capital Differential” means the amount by which a Netting Member’s

VaR Charge exceeds its Netting Member Capital.

Excess Capital Ratio

The term “Excess Capital Ratio” means the quotient, rounded to the nearest two decimal

places, resulting from dividing the amount of a Netting Member’s VaR Charge by the

amount of its Netting Member Capital that it maintains.

Excess Clearing Fund Deposit

The term “Excess Clearing Fund Deposit” shall have the meaning given that term in

Section 10 of Rule 4.

Excess Liquid Capital

The term “Excess Liquid Capital” means, as of a particular date, the amount equal to the

difference between the Liquid Capital of a Government Securities Broker or Government

Securities Dealer and the minimum Liquid Capital that such Government Securities Broker

or Government Securities Dealer must have to comply with the requirements of 17 C.F.R.

Section 402.2(a), (b) and (c), or any successor rule or regulation thereto.

Excess Net Capital

The term “Excess Net Capital” means, as of a particular date, the amount equal to the

difference between the Net Capital of a broker or dealer and the minimum Net Capital such

broker or dealer must have to comply with the requirements of SEC Rule 15c3-1(a), or any

successor rule or regulation thereto.

Exchange Act

The term “Exchange Act” means the Securities Exchange Act of 1934, as amended.

Executing Firm

The term “Executing Firm” means a Non-Member on whose behalf data on trades that it

has engaged in have been submitted to the Corporation by a Submitting Member pursuant

to these Rules.

Existing Securities Collateral

The term “Existing Securities Collateral” means, as regards an outstanding Repo

Transaction with a Right of Substitution, the Eligible Netting Securities or cash that have

been transferred by the Repo Party to the Reverse Repo Party as collateral in connection

with the Repo Transaction, which Eligible Netting Securities or cash have not yet been

transferred by the Reverse Repo Party back to the Repo Party as the result of a substitution

of collateral or otherwise.

Fail Deliver Obligation

The term “Fail Deliver Obligation” means a Deliver Obligation that does not settle on its

original Scheduled Settlement Date.

Fail Mark Adjustment Payment

The term “Fail Mark Adjustment Payment” means the absolute value of the dollar

difference between the current Settlement Value of a Fail Deliver Obligation or a Fail

Receive Obligation on the current Business Day, and the previous Settlement Value of such

Deliver Obligation or Receive Obligation. Notwithstanding the above, the term “Fail Mark

Adjustment Payment” shall not apply to GCF Repo Transactions and CCIT Transactions.

Fail Receive Obligation

The term “Fail Receive Obligation” means a Receive Obligation that does not settle on its

original Scheduled Settlement Date.

Fannie Mae

The term “Fannie Mae” means the Federal National Mortgage Association.

FATCA

The term “FATCA” means (i) the provisions of sections 1471 through 1474 of the Internal

Revenue Code of 1986, as amended, (the “Code”) that were implemented as part of The

Foreign Account Tax Compliance Act (or any amendment thereto or successor sections

thereof), and the related Treasury Regulations or other official interpretations thereof, as

in effect from time to time, and (ii) the provisions of any intergovernmental agreement to

implement The Foreign Account Tax Compliance Act as in effect from time to time

between the United States and the jurisdiction of the FFI Member’s (or applicant’s)

residency.

FATCA Certification

The term “FATCA Certification” means an executed copy of the relevant tax form required

by the Internal Revenue Service under FATCA, as in effect from time to time, that each

Member (or applicant to become such) shall provide from time to time to the Corporation

as set forth under these Rules.

FATCA Compliance Date

The term “FATCA Compliance Date” shall mean, as applicable, either (i) January 1, 2014,

with respect to any FFI Member approved for membership by the Corporation on January

1, 2014 or thereafter (or, if the commencement of all FATCA withholding with respect to

such FFI Members is delayed beyond January 1, 2014 under FATCA, two calendar months

plus one day before such delayed effective date), or (ii) May 1, 2014, with respect to any

FFI Member approved for membership by the Corporation at any time prior to January 1,

2014 (or, if the commencement of all FATCA withholding with respect to such FFI

Members is delayed beyond July 1, 2014 under FATCA, two calendar months plus one

day before such delayed effective date).

FATCA Compliant

The term “FATCA Compliant” or “FATCA Compliance” means, with respect to an FFI

Member, that such FFI Member has qualified under such procedures promulgated by the

Internal Revenue Service as are in effect from time to time to establish exemption from

withholding under FATCA such that the Corporation will not be required to withhold under

FATCA either (i) on “gross proceeds from the sale or other disposition of any property of

a type which can produce interest or dividends from sources within the United States”

within the meaning of Code section 1473(1)(A)(ii), as may be amended or re-codified from

time to time, or (ii) on interest, dividends, etc. from sources within the United States within

the meaning of Code section 1473(1)(A)(i), as may be amended or re-codified from time

to time, in each case, paid to such FFI Member.

FCO

The term “FCO” means a clearing organization for a board of trade designated as a contract

market under Section 5 of the Commodity Exchange Act that has entered into a Cross-

Margining Agreement with the Corporation.

Federal Deposit Insurance Corporation Improvement Act

The term “Federal Deposit Insurance Corporation Improvement Act” means the Federal

Deposit Insurance Corporation Improvement Act of 1991, as amended.

Federal Funds Rate

The term “Federal Funds Rate” means, for each Business Day, the rate reported as such in

a publicly available source. If there is a dispute as to the Federal Funds Rate for a particular

Business Day, it shall be settled by reference to the rate set forth in H. 15(519) for such

Business Day opposite the caption “Federal funds (effective).” For this purpose, “H.

15(519)” means the weekly statistical release designated as such, or any successor

publication, published by the Board of Governors of the Federal Reserve System.

Fedwire

The term “Fedwire” means the Federal Reserve Wire Transfer System for securities

movements or for funds-only movements, as the context requires.

FFI Member

The term “FFI Member” means any Person that is treated as a non-U.S. entity for U.S.

federal income tax purposes. For the avoidance of doubt, FFI Member includes any

Member that is a U.S. branch of an entity that is treated as a non-U.S. entity for U.S. federal

income tax purposes.

Final Price Date

The term “Final Price Date” means, as regards an Eligible Security, the Business Day on

which begins the first processing cycle for the Corporation during which the coupon rate

for such Eligible Security is known by the Corporation.

Financed Securities

The term “Financed Securities” has the meaning assigned in Section 2a(b)(i)(C) of Rule

22A.

Financing Amount

The term “Financing Amount” has the meaning assigned in Section 2a(b)(i)(B) of Rule

22A.

Financing Mark

The term “Financing Mark” means, on a particular Business Day, as regards a Repo

Transaction, the product of the Market Value of the Repo Transaction multiplied by System

Repo Rate established by the Corporation for such Repo Transaction, and then multiplied

by a fraction, the numerator of which is the number of calendar days from the current

Business Day until the Scheduled Settlement Date for the Repo Transaction and the

denominator of which is 360. If a Repo Transaction other than a Forward-Starting Repo

Transaction during its Forward-Starting Period comprises a Net Short Position of the

Member, then the Financing Mark shall be a negative value. If a Repo Transaction other

than a Forward-Starting Repo Transaction during its Forward-Starting Period comprises a

Net Long Position of the Member, then the Financing Mark shall be a positive value. The

Financing Mark for a Forward-Starting Repo Transaction during its Forward-Starting

Period, and for any trade other than a Repo Transaction, shall be zero. The term “Financing

Mark” means, as regards a Forward Net Settlement Position, the sum of all the Financing

Marks on each of the Forward Trades that compose such Forward Net Settlement Position.

Notwithstanding the above, the term “Financing Mark” shall not apply to GCF Repo

Transactions and CCIT Transactions.

FOMC

The term “FOMC” means the Federal Open Market Committee as described on the website

of the FRB.

Foreign Member

The term “Foreign Member” (also referred to as “Non-U.S. Member” or “Non-domestic

Member”) means a Foreign Person that is a Member. A foreign Bank Netting Member that

participates in the Corporation through a branch or agency located in the U.S. which is

regulated by a U.S. and/or state regulatory authority shall not be deemed to be a Foreign

Member for purposes of the Corporation’s Rules and procedures.

Foreign Netting Member

The term “Foreign Netting Member” (also referred to as “Non-U.S. Netting Member” or

“Non-domestic Netting Member”) shall have the meaning given that term in Section 3 of

Rule 2A.

Foreign Person

The term “Foreign Person” (also referred to as “Non-U.S. Person” or “Non-domestic

Person”) means a Person that is organized or established under the laws of a country other

than the United States and does not include a foreign Bank Netting Member which is not

deemed to be a Foreign Member pursuant to the definition of that term.

Former Sponsored Members

The term “Former Sponsored Members” shall have the meaning given that term in

Section 2 of Rule 3A.

Forward Mark Adjustment Payment

The term “Forward Mark Adjustment Payment” means, on a particular Business Day, as

regards a Member’s Forward Net Settlement Position, the sum of the Collateral Mark

applicable to such Forward Net Settlement Position, the Financing Mark applicable to such

Forward Net Settlement Position, and the Interest Rate Mark applicable to such Forward

Net Settlement Position. Notwithstanding the above, as regards an outstanding Repo

Transaction where a request for substitution has been made but New Securities Collateral

has not been received by the Corporation, the term “Forward Mark Adjustment Payment”

means “Forward Unallocated Sub Mark”. Notwithstanding the above, the term “Forward

Mark Adjustment Payment” shall refer to the GC Interest Rate Mark with respect to

Sponsored GC Trades. Notwithstanding the above, the term “Forward Mark Adjustment

Payment” shall not apply to GCF Repo Transactions and CCIT Transactions.

Forward Net Settlement Position

The term “Forward Net Settlement Position” means, with respect to Forward Trades

involving an Eligible Netting Security with a distinct CUSIP number, the amount of such

Securities that the Netting Member will, on the Scheduled Settlement Date for such

Forward Trades, be obligated, pursuant to Rule 12, to either receive from the Corporation

or to deliver to the Corporation, where such Scheduled Settlement Date is one or more

Business Days in the future. For purposes of this definition, the Start and End Legs of a

Repo Transaction shall constitute separate Forward Net Settlement Positions.

Forward Period

The term “Forward Period” means, with regard to Forward Net Settlement Positions, the

time period from the comparison on a final price and settlement value basis of the data on

the Forward Trades that comprise such Forward Net Settlement Positions until the

processing cycle immediately prior to the Scheduled Settlement Date for such Forward Net

Settlement Positions.

Forward-Settling Start Leg

The term “Forward-Settling Start Leg” means, on a particular Business Day, a Start Leg

that is one or more Business Days prior to its Scheduled Settlement Date.

Forward-Starting Period

The term “Forward-Starting Period” means, as regards a Forward-Starting Repo

Transaction, including a GCF Repo Transaction and a CCIT Transaction, the period of

time between the Business Day on which the Transaction is compared by the Corporation

pursuant to these Rules and the Scheduled Settlement Date for the Start Leg of the

Transaction.

Forward-Starting Repo Transaction

The term “Forward-Starting Repo Transaction” means a Repo Transaction, including a

GCF Repo Transaction and a CCIT Transaction, that is scheduled to start one or more

Business Days after the date it is submitted to the Corporation.

Forward Trade

The term “Forward Trade” means a trade, including an Eligible Conversion Trade, whose

Scheduled Settlement Date is one or more Business Days after the date it is submitted to

the Corporation. For purposes of this definition, if the trade is a Repo Transaction, the

Start and End Legs of the Transaction should be considered as separate trades.

Forward Unallocated Sub Mark

The term “Forward Unallocated Sub Mark” means, on a particular Business Day, as regards

an outstanding Repo Transaction, the sum of: (1) the Accrued Repo Interest-to-Date

applicable to such transaction and (2) the Repo Interest Rate Differential applicable to such

transaction.

FRB

The term “FRB” means the Board of Governors of the Federal Reserve System and each

Federal Reserve Bank, as appropriate.

Freddie Mac

The term “Freddie Mac” means the Federal Home Loan Mortgage Corporation.

Full-Sized Trade

The term “Full-Sized Trade” means a trade that is submitted to the Corporation in the full-

size dollar amount in which it was executed as opposed to being submitted in an equivalent

amount of $50 million pieces and a single tail.

Funds-Only Settlement Amount

The term “Funds-Only Settlement Amount” means the net dollar amount of a Netting

Member’s obligation, calculated pursuant to Rule 13, either to make a funds-only payment

to the Corporation or to receive a funds-only payment from the Corporation.

Funds-Only Settlement Payments Procedures Agreement

The term “Funds-Only Settlement Payments Procedures Agreement” means an agreement

among the Corporation, a Netting Member and a depository institution that provides for

the payment and collection of Funds-Only Settlement Amounts by the depository

institution on behalf of the Corporation and the Netting Member.

Funds-Only Settling Bank Member

The term “Funds-Only Settling Bank Member” means a bank, trust company or other entity

specified in Section 4 of Rule 13 which has qualified pursuant to the provisions of Rule 13

and which is a party to an effective “Appointment of Funds-Only Settling Bank and Funds-

Only Settling Bank Agreement” whereby the Funds-Only Settling Bank undertakes to

perform funds-only settlement services for the Netting Member which also is a party

thereto. The term “Funds-Only Settling Bank Member” shall be used interchangeably with

the term “Funds-Only Settling Bank”

Futures Commission Merchant

The term “Futures Commission Merchant” shall have the meaning set forth in the

definitions section of the Commodity Exchange Act, except that no entity shall be deemed

to be a Futures Commission Merchant for purposes of these Rules unless it is registered as

such with the CFTC.

Futures Commission Merchant Netting Member

The term “Futures Commission Merchant Netting Member” shall have the meaning given

that term in Section 3 of Rule 2A.

GC Collateral Return Entitlement

The term “GC Collateral Return Entitlement” means the entitlement of a Sponsoring

Member or Sponsored Member, as applicable, to receive the Purchased GC Repo Securities

in exchange for cash at the End Leg of a Sponsored GC Trade.

GC Collateral Return Obligation

The term “GC Collateral Return Obligation” means the obligation of a Sponsoring Member

or Sponsored Member, as applicable, to deliver the Purchased GC Repo Securities in

exchange for cash at the End Leg of a Sponsored GC Trade.

GC Comparable Securities

The term “GC Comparable Securities” means, in relation to a Sponsored GC Trade, any

GC Repo Securities that are represented by the same Generic CUSIP Number as the GC

Repo Securities that were transferred in the Start Leg of the Sponsored GC Trade, as set

forth in the Schedule of GC Comparable Securities.

GC Daily Repo Interest

The term “GC Daily Repo Interest” means the daily interest amount that is payable under

a Sponsored GC Trade.

GC Funds Borrower

The term “GC Funds Borrower” means a Sponsoring Member or Sponsored Member, as

applicable, that has a GC Collateral Return Entitlement and associated cash payment

obligation.

GC Funds Lender

The term “GC Funds Lender” means a Sponsoring Member or Sponsored Member, as

applicable, that has a GC Collateral Return Obligation and associated cash payment

entitlement.

GC Interest Rate Mark

The term “GC Interest Rate Mark” means, on a particular Business Day as regards any

Sponsored GC Trade where the End Leg is not scheduled to settle on that day, the product

of the principal value of the Sponsored GC Trade on the Scheduled Settlement Date for its

End Leg multiplied by a factor equal to the absolute difference between the System Repo

Rate established by the Corporation for such Sponsored GC Trade and its Contract Repo

Rate, and then multiplied by a fraction, the numerator of which is the number of calendar

days from the current day until the Scheduled Settlement Date for the End Leg of the

Sponsored GC Trade and the denominator of which is 360. If the Sponsored GC Trade’s

Contract Repo Rate is greater than its System Repo Rate, then the GC Interest Rate Mark

shall be a positive value for the GC Funds Lender, and a negative value for the GC Funds

Borrower. If the Sponsored GC Trade’s Contract Repo Rate is less than its System Repo

Rate, then the GC Interest Rate Mark shall be a positive value for the GC Funds Borrower,

and a negative value for the GC Funds Lender.

GC Repo Security

The term “GC Repo Security” means an Eligible Security that is only eligible for

submission to the Corporation in connection with the comparison and Novation of

Sponsored Members under these Rules.

Sponsoring Member Omnibus Account

The term “Sponsoring Member Omnibus Account” shall mean an Account maintained by

a Sponsoring Member that contains the activity of its Sponsored Members that is submitted

to the Corporation. A Sponsoring Member may elect to establish one or more Sponsoring

Member Omnibus Accounts. Each Sponsoring Member Omnibus Account may contain

all types of Sponsored Member Trades. The Sponsoring Member Omnibus Account shall

be separate from the Accounts associated with the Sponsoring Member’s activity as a

Netting Member except as contemplated by Sections 10, 11 and 12 of Rule 3A and under

the Sponsoring Member Guaranty.

Sponsoring Member Omnibus Account Required Fund Deposit

The term “Sponsoring Member Omnibus Account Required Fund Deposit” shall have the

meaning given to that term in Section 10 of Rule 3A.

Sponsoring Member Termination Date

The term “Sponsoring Member Termination Date” shall have the meaning given that term

in Section 2 of Rule 3A.

Sponsoring Member Voluntary Termination Notice

The term “Sponsoring Member Voluntary Termination Notice” shall have the meaning

given that term in Section 2 of Rule 3A.

Start Leg

The term “Start Leg” means, as regards a Repo Transaction other than a GCF Repo

Transaction (or CCIT Transaction as applicable) or a Sponsored GC Trade, the initial

settlement aspects of the Transaction, involving the transfer of the underlying Eligible

Netting Securities by the Netting Member that is, or is submitting data on behalf of, the

funds borrower (through satisfaction of the applicable Deliver Obligation generated by the

Corporation) and the taking in of such Eligible Securities by the Netting Member that is,

or is submitting data on behalf of, the funds lender (if netting eligible, through satisfaction

of the applicable Receive Obligation generated by the Corporation). The term “Start Leg”

means, as regards a GCF Repo Transaction (or CCIT Transaction as applicable), the initial

settlement aspects of the GCF Repo Transaction (or CCIT Transaction as applicable),

involving the transfer of the underlying Eligible Netting Securities by the Netting Member

that is in the GCF Net Funds Borrower Position and the taking in of such Eligible Netting

Securities by the Netting Member that is in the GCF Net Funds Lender Position. The term

“Start Leg” means, as regards a Sponsored GC Trade, the initial settlement aspects of the

Transaction, involving the transfer of GC Repo Securities by the Sponsoring Member or

Sponsored Member, as applicable, that is the GC Funds Borrower and the taking in of such

GC Repo Securities by the Sponsoring Member or Sponsored Member, as applicable, that

is the GC Funds Lender.

Statutory Disqualification

The term “Statutory Disqualification” shall have the meaning given that term in Section

3(a)(39) of the Exchange Act.

Submitting Member

The term “Submitting Member” means a Member of the Comparison System, other than a

Repo Broker, that has submitted to the Corporation pursuant to these Rules data on trades

of an Executing Firm.

System Price

The term “System Price” means the uniform price (expressed in dollars per unit of par

value), not including accrued interest, established by the Corporation on each Business

Day, based on current market information, for each Eligible Netting Security with a

separate CUSIP Number. Notwithstanding the above, the System Price for the Generic

CUSIP Number that underlies a GCF Net Settlement Position shall be equal to principal

value.

System Repo Rate

The term “System Repo Rate” means the uniform rate established by the Corporation on

each Business Day, based on current market information, for each Repo Transaction,

involving an Eligible Netting Security. The System Repo Rate for a Repo Transaction

shall be established by the Corporation based on factors such as: (1) the length of time

until Schedule Settlement Date for the End Leg of the Repo Transaction, (2) whether the

underlying collateral is general or specific in nature, and (3) the market demand for such

collateral.

System Value

The term “System Value” means, as regards a Deliver Obligation (with the exception of

compared Same-Day Settling Trades settled with the Corporation), a Receive Obligation

(with the exception of compared Same-Day Settling Trades settled with the Corporation),

a Net Settlement Position, Existing Securities Collateral, or New Securities Collateral, the

amount in dollars equal to the par value of each Eligible Netting Security that comprises

such Deliver Obligation, Receive Obligation, Net Settlement Position, Existing Securities

Collateral, or New Securities Collateral, as applicable, multiplied by its System Price, plus

interest that has accrued with regard to each such Eligible Netting Security up to the

Business Day for which such dollar amount is calculated. The System Value of a Net

Settlement Position that has remained unsettled on the maturity date for the Eligible Netting

Securities that comprise such Net Settlement Position shall be the Redemption Value of

such Securities.

Term GCF Repo Transaction

The term “Term GCF Repo Transaction” means, on any particular Business Day, a GCF

Repo Transaction for which settlement of the End Leg is scheduled to occur two or more

Business Days after the scheduled settlement of the Start Leg.

Term Repo Transaction

The term “Term Repo Transaction” means, on any particular Business Day, a Repo

Transaction for which settlement of the End Leg is scheduled to occur two or more

Business Days after the scheduled settlement of the Start Leg.

Termination Date

The term “Termination Date” shall have the meaning given that term in Section 13 of

Rule 3.

Tier 1 RBC Ratio

The term “Tier 1 RBC Ratio” means the ratio of an entity’s tier 1 capital to its total risk-

weighted assets, calculated in accordance with such entity’s regulatory and/or statutory

requirements.

Tier One Netting Member

The term “Tier One Member” means a Netting Member whose membership category has

been designated as such by the Corporation pursuant to Rule 2A for loss allocation

purposes.

Tier Two Member

The term “Tier Two Member” means a Netting Member whose membership category has

been designated as such by the Corporation pursuant to Rule 2A for loss allocation

purposes or a CCIT Member.

TMPG

The term “TMPG” means the Treasury Market Practices Group as described on the website

of the Federal Reserve Bank of New York.

Total Invoice Amount

The term “Total Invoice Amount” means the aggregate amount of Invoice Amounts

required to be paid to the Corporation by a Netting Member on a given Business Day.

Transaction Adjustment Payment

The term “Transaction Adjustment Payment” means the absolute value of the dollar

difference between the Contract Values and the Market Values of the trades that comprise

a Net Settlement Position that is scheduled to settle on the current Business Day.

Notwithstanding the above, the term “Transaction Adjustment Payment” shall not apply to

GCF Repo Transactions and CCIT Transactions.

Transactions

The term “Transactions” means Brokered Transactions and Bilateral Transactions.

Treasury Department

The term “Treasury Department” means the United States Department of the Treasury.

UMBS

The term “UMBS” means a single-class mortgage-backed security backed by fixed-rate

mortgage loans on one to four unit (single-family) properties issued by either Fannie Mae

or Freddie Mac which has the same characteristics (such as payment delay, pooling

prefixes and minimum pool submission amounts) regardless of whether Fannie Mae or

Freddie Mac is the issuer.

Unadjusted GSD Margin Portfolio Amount

The term “Unadjusted GSD Margin Portfolio Amount” means, with respect to each Margin

Portfolio, the amount greater than zero determined by the Corporation in accordance with

the provisions of Rule 4.

VaR Charge

The term “VaR Charge” means, with respect to each Margin Portfolio, a calculation of the

volatility of specified Net Unsettled Positions of a Netting Member as of the time of such

calculation. Such volatility calculations shall be made in accordance with any generally

accepted portfolio volatility model, including, but not limited to, any margining formula

employed by any other clearing agency registered under Section 17A of the Securities

Exchange Act of 1934. Such calculation shall be made utilizing such assumptions

(including confidence levels) and based on such observable market data as the Corporation

deems reasonable, and shall cover such range and assessment of volatility as the

Corporation from time to time deems appropriate. To the extent that the primary source of

such market data becomes unavailable for an extended period of time, the Corporation shall

utilize the Margin Proxy as an alternative volatility calculation. In its assessment of

volatility, the Corporation shall calculate an additional bid-ask spread risk charge measured

by multiplying the gross market value of each Net Unsettled Position by a basis point

charge, where the applicable basis point charge shall be reviewed at least annually and shall

be based on the following risk groups: (a) mortgage pool transactions; (b) TIPS; (c) U.S.

agency bonds; and (d) U.S. Treasury securities, which shall be further categorized by

maturity – those maturing in (i) less than five years, (ii) equal to or more than five years

and less than ten years, and (iii) equal to or more than ten years.

If the volatility calculation is lower than an amount designated by the Corporation (the

“VaR Floor”) then the VaR Floor will be utilized as such Netting Member’s VaR Charge.

Such VaR Floor will be determined by multiplying the absolute value of the sum of Net

Long Positions and Net Short Positions of Eligible Securities, grouped by product and

remaining maturity, by a percentage designated by the Corporation from time to time for

such group. For U.S. Treasury and agency securities, such percentage shall be a fraction,

no less than 10%, of the historical minimum volatility of a benchmark fixed income index

for such group by product and remaining maturity. For mortgage-backed securities, such

percentage shall be a fixed percentage that is no less than 0.05%.

Voluntary Termination Notice

The term “Voluntary Termination Notice” shall have the meaning given that term in

Section 13 of Rule 3.

Watch List

The term “Watch List” means, at any time and from time to time, the list of Members

whose credit ratings derived from the Credit Risk Rating Matrix are 6 or 7, as well as

Members that, based on the Corporation’s consideration of relevant factors, including those

set forth in Section 12(d) of Rule 3, are deemed by the Corporation to pose a heightened

risk to the Corporation and its Members.

Well Capitalized

The term “Well Capitalized” shall have the meaning given that term in the capital adequacy

rules and regulations of the Federal Deposit Insurance Corporation.

When Issued Transaction

The term “When Issued Transaction” means any trade of an Eligible Treasury Security, the

trade data on which has been submitted to the Corporation prior to the Issue Date.

Yield Comparison Trade

The term “Yield Comparison Trade” means a trade involving Eligible Securities the data

on which have been submitted by Members to the Corporation on a yield basis but have

not yet been compared on a final money basis pursuant to Rule 5 or Rule 9.

Zero

The term “Zero” means an Eligible Netting Security with a maturity at issuance of more

than one year that makes no periodic interest payments and, instead, is sold at a discount

from its face value.

Being placed on the Watch List may result in Clearing Fund-related consequences as well as other consequences

under the Rules. Please refer to the Interpretive Guidance with Respect to Watch List Consequences in this

rulebook.

RULE 2 – MEMBERS

(a) The Corporation shall make its services, or certain of its services, available to

Persons which (i) apply for membership to the Corporation for the use of its services, (ii) meet the

eligibility, qualifications and standards specified in these Rules, (iii) are approved by the

Corporation or the Board, as applicable, and (iv) if required, have contributed to the Clearing Fund

as provided in Rule 4.

(b) The Corporation shall have the following membership types:

(i) Comparison-Only Members;

(ii) Netting Members;

(iii) Sponsoring Members and Sponsored Members;

(iv) CCIT Members; and

(v) Funds-Only Settling Bank Members.

With respect to item (ii) above, there shall be the following categories of Netting Members:

Bank Netting Members, Dealer Netting Members, Inter-Dealer Broker Netting Members, Futures

Commission Merchant Netting Members, Foreign Netting Members, Government Securities

Issuer Netting Members, Insurance Company Netting Members, Registered Clearing Agency

Netting Members and Registered Investment Company Netting Members.

With respect to item (iii) above, Sponsored Members and Sponsoring Members shall be

governed by Rule 3A.

With respect to item (iv) above, CCIT Members shall be governed by Rule 3B.

With respect to item (v) above, Funds-Only Settling Bank Members shall be governed by

Rule 13.

through the Corporation any contract or transaction on behalf of a Non-Member shall, so far as the

rights of the Corporation and all other Members are concerned, be liable as a principal.

RULE 2A – INITIAL MEMBERSHIP REQUIREMENTS

Section 1 – Eligibility for Membership: Comparison-Only Members

(a) A Person shall be eligible to apply to become a Comparison-Only Member if it:

(i) is a legal entity that is eligible to apply for membership in the Netting

System; or

(ii) has demonstrated to the Corporation that its business and capabilities are

such that it could reasonably expect material benefit from direct access to the Corporation’s

services.

(b) A Person may not be a Comparison-Only Member and a Netting Member at the

same time. The Corporation may require that a Person be a Comparison-Only Member for a time

period deemed necessary by the Corporation before the Person becomes eligible to apply to

become a Netting Member, if, in order to protect itself and its Members, the Corporation believes

that it is necessary to assess the operational soundness of the Person prior to permitting it to apply

to become a Netting Member. The Corporation’s determination to apply such requirement shall

be based on whether one or more of the following conditions exist: (i) the Person is a newly formed

entity with little or no operational history, (ii) the Person’s operational staff lacks significant

experience, (iii) if one or both of the prior two conditions exists, the Person has not engaged a

service bureau or correspondent clearing member with which the Corporation has a relationship,

or (iv) any other factor exists that the Corporation believes might suggest that the Person has

insufficient operational capability.

Section 2 – Membership Qualifications and Standards for Comparison-Only Members

The Corporation may approve an application to become a Comparison-Only Member by a

Person that is eligible to apply to become a Comparison-Only Member pursuant to this Rule upon

a determination that such applicant meets the following requirements:

(a) Operational Capability – The applicant must be able to satisfactorily communicate

with the Corporation, fulfill anticipated commitments to and meet the operational requirements of

the Corporation with necessary promptness and accuracy, and conform to any operational

condition and requirement that the Corporation reasonably deems necessary for its protection or

that of its Members. The applicant agrees that it must fulfill, within the timeframes established by

the Corporation, operational testing requirements (the scope of such testing to be determined by

the Corporation in its sole discretion) and related reporting requirements (such as reporting test

results to the Corporation in a manner specified by the Corporation) that may be imposed by the

Corporation to ensure the continuing operational capability of the applicant.

(b) Fees – The applicant agrees to make, and has sufficient financial ability to make,

all anticipated fee payments required to be made to the Corporation that may be set forth in these

Rules or in the Procedures.

Corporation that it is in compliance (as an applicant) with the capital requirements imposed by its

Designated Examining Authority, Appropriate Regulatory Agency, or other examining authority

or regulator, and any other Self-Regulatory Organizations or self-regulatory organizations to

which it is subject by statute, regulation or agreement.

(d) Disqualification Criteria – The Corporation must have received no substantial

information that would reasonably and adversely reflect on the applicant, or its Controlling

Management, if applicable, to such an extent that the applicant should be denied membership in

the Corporation. The Corporation, in its sole discretion, shall determine whether any of the

following criteria should be the basis for denial of the membership application:

(i) the applicant is subject to Statutory Disqualification (as defined in Section

3(a)(39) of the Exchange Act), or an order of similar effect issued by a Federal or State

banking authority, or other examining authority or regulator, including non-U.S. examining

authority or regulator;

(ii) the applicant or its Controlling Management has been responsible for (A)

making a misstatement of a material fact or omitting to state a material fact to the

Corporation, in connection with its application to become a Member or thereafter, or (B)

fraudulent acts or violation of the Securities Act of 1933, the Exchange Act, the Investment

Company Act, the Investment Advisers Act or the Government Securities Act of 1986, or

any rule or regulation promulgated thereunder;

(iii) the applicant or its Controlling Management has been convicted within the

ten years preceding the filing of the application or at any time thereafter of (A) any criminal

offense involving the purchase, sale or delivery of any security, or bribery, or perjury, or

burglary, or conspiracy to commit any offense referred to in this subparagraph (iii), (B) the

larceny, theft, robbery, embezzlement, extortion, fraudulent conversion, fraudulent

concealment, forgery or misappropriation of funds, securities or other property, (C) any

violation of Sections 1341, 1342 or 1343 of Title 18, United States Code, or (D) any other

criminal offense involving breach of fiduciary obligation, or arising out of the conduct of

business as a broker, dealer, investment company, adviser or underwriter, bank, trust

company, fiduciary, insurance company or other financial institution;

(iv) the applicant or its Controlling Management has been permanently or

temporarily enjoined or prohibited by order, judgment or decree of any court or other

governmental authority of competent jurisdiction from acting as, a broker, dealer,

investment company, advisor or underwriter, bank, trust company, fiduciary, insurance

company or other financial institution, or from engaging or in continuing any conduct or

practice in connection with any such activity, or in connection with the purchase, sale or

delivery of any security, and the enforcement of such injunction or prohibition has not been

stayed; or

(v) the applicant has been expelled or suspended from or had its participation

terminated by a national securities association or exchange registered under the Exchange

Act, a Self-Regulatory Organization or a Corporation that engages in clearance and

settlement activities or a securities depository, or has been barred or suspended from being

associated with any member of such an exchange, association, organization, Corporation,

or securities depository.

The Corporation shall retain the right to deny membership to an applicant if the

Corporation becomes aware of any factor or circumstance about the applicant or its Controlling

Management which may impact the suitability of that particular applicant as a Member of the

Corporation.

Section 3 – Eligibility for Membership: Netting Members

(a) Eligibility for each category of Netting Member shall be as follows:

(i) Bank Netting Member – A Person shall be eligible to apply to become a

Bank Netting Member if it is a bank or trust company chartered as such under the laws of

the United States, or a State thereof, or is a bank or trust company established or chartered

under the laws of a non-U.S. jurisdiction and participates in the Corporation through its

U.S. branch or agency. A bank or trust company that is admitted to membership in the

Netting System pursuant to these Rules, and whose membership in the Netting System has

not been terminated, shall be a Bank Netting Member.

(ii) Dealer Netting Member – A Person shall be eligible to apply to become a

Dealer Netting Member if it is a Dealer and is not a bank or trust company. A Dealer that

is admitted to membership in the Netting System pursuant to these Rules, and whose

membership in the Netting System has not been terminated, shall be a Dealer Netting

Member.

(iii) Futures Commission Merchant Netting Member – A Person shall be eligible

to apply to become a Futures Commission Merchant Netting Member if it is a Futures

Commission Merchant. A Futures Commission Merchant that is admitted to membership

in the Netting System pursuant to these Rules, and whose membership in the Netting

System has not been terminated, shall be a Futures Commission Merchant Netting

Member.

(iv) Inter-Dealer Broker Netting Member – A Person shall be eligible to apply

to become an Inter-Dealer Broker Netting Member if it is an Inter-Dealer Broker. An Inter-

Dealer Broker that is admitted to membership in the Netting System pursuant to these

Rules, and whose membership in the Netting System has not been terminated, shall be an

Inter-Dealer Broker Netting Member.

(v) Foreign Netting Member – A Person shall be eligible to apply to become a

Foreign Netting Member if it is a Foreign Person that the Corporation, in its sole discretion,

has determined: (i) has a home country regulator that has entered into a memorandum of

understanding with the SEC regarding the sharing or exchange of information, and (ii)

maintains a presence in the United States, either directly or through a suitable agent, that

both has available individuals fluent in English who are knowledgeable in the Foreign

Person’s business and can assist the Corporation’s representatives as necessary, and

ensures that the Foreign Person will be able to meet its data submission, settlement, and

other obligations to the Corporation as a Member in a timely manner. The Person applying

to become a Foreign Netting Member must represent and certify to the Corporation that it

is in compliance with the financial reporting and responsibility standards of its home

country and that it is regulated in its home country by a financial regulatory authority in

the areas of maintenance of relevant books and records, regular inspections and

examinations, and minimum capital standards, and make such other representations,

certifications or assurances as the Corporation deems necessary to address jurisdictional

and tax concerns. Without limiting the generality of the foregoing, the Corporation shall

require each applicant that shall be an FFI Member to certify and periodically recertify to

the Corporation that it is FATCA Compliant under such procedures as are set forth under

FATCA, unless such requirements have been explicitly waived in writing by the

Corporation, provided, however, that no such waiver will be issued if it shall cause the

Corporation to be obligated to withhold under FATCA on gross proceeds from the sale or

other disposition of any property. In addition, as part of its membership application, each

applicant that shall be an FFI Member agrees to indemnify each Indemnified Person for

any loss, liability or expense sustained by the Indemnified Person as a result of the applicant

failing to be FATCA Compliant. Except as with respect to FATCA, a foreign Bank Netting

Member that participates in the Corporation through its U.S. branch or agency shall not be

deemed a Foreign Netting Member for purposes of these Rules and the Procedures, unless

otherwise stated by the Corporation.

(vi) Government Securities Issuer Netting Member – A Person shall be eligible

to apply to become a Government Securities Issuer Netting Member if it is a Government

Securities Issuer or a Government Sponsored Enterprise. A Government Securities Issuer

or a Government Sponsored Enterprise that is admitted to membership in the Netting

System pursuant to these Rules, and whose membership in the Netting System has not been

terminated, shall be a Government Securities Issuer Netting Member.

(vii) Insurance Company Netting Member – A Person shall be eligible to apply

to become an Insurance Company Netting Member if it is an Insurance Company in good

standing with its primary regulator. An Insurance Company that is admitted to membership

in the Netting System pursuant to these Rules, and whose membership in the Netting

System has not been terminated, shall be an Insurance Company Netting Member.

(viii) Registered Clearing Agency Netting Member – A Person shall be eligible

to apply to become a Registered Clearing Agency Netting Member if it is a Registered

Clearing Agency. A Registered Clearing Agency that is admitted to membership in the

Netting System pursuant to these Rules, and whose membership in the Netting System has

not been terminated, shall be a Registered Clearing Agency Netting Member.

(ix) Registered Investment Company Netting Member – A Person shall be

eligible to apply to become a Registered Investment Company Netting Member if it is a

Registered Investment Company. A Registered Investment Company that is admitted to

membership in the Netting System pursuant to these Rules, and whose membership in the

Netting System has not been terminated, shall be a Registered Investment Company

Netting Member.

(x) The Corporation shall make its services available to Persons in such other

categories as the Corporation may from time to time determine, subject to approval of such

categories and their minimum membership standards by the SEC.

Applicants in categories (i) through (viii) above that are admitted into membership shall be

Tier One Netting Members. Applicants in category (ix) above that are admitted into membership

shall be Tier Two Members. With respect to applicants in category (x), the Corporation shall make

a determination as to whether such applicant shall be a Tier One Netting Member or Tier Two

Member.

(b) A Person may be only one category of Netting Member at a time. Notwithstanding

anything to the contrary in this Rule, if a Person qualifies for more than one category of Netting

Member, the Corporation, in its sole discretion, may determine the category of Netting Member

for which that Person will be considered.

Section 4 – Membership Qualifications and Standards for Netting Members

Subject to the limitations set forth in this Rule, the Board shall approve an application to

become a Netting Member by a Person that is eligible to apply to become a Netting Member

pursuant to this Rule upon a determination that such applicant meets the following requirements:

(a) Comparison System Admission Standards – For an applicant that is already a

Comparison-Only Member, the applicant continues to meet the requirements for becoming a

Comparison-Only Member set forth in this Rule.

(b) Financial Responsibility – The applicant shall:

(i) have sufficient financial ability to make anticipated required deposits to the

Clearing Fund as provided for in Rule 4 and anticipated Funds-Only Settlement Amounts,

and to meet all of its other obligations to the Corporation in a timely manner; and

(ii) satisfy the following minimum financial requirements:

(A) Bank Netting Member

(1) if the applicant is a bank or trust company chartered under

the laws of the United States, or a State thereof, applying to

become a Bank Netting Member, it must (i) have CET1

Capital of at least $500 million and (ii) be Well Capitalized;

and

(2) if the applicant is a bank or trust company established or

chartered under the laws of a non-U.S. jurisdiction and

applying to become a Bank Netting Member through its U.S.

branch or agency, it must (i) have CET1 Capital of at least

$500 million, (ii) comply with the minimum capital

requirements (including, but not limited to, any capital

conservation buffer, countercyclical buffer, and any

domestic systemically important bank (D-SIB) or global

systemically important bank (G-SIB) buffer, if applicable)

and capital ratios required by its home country regulator, or,

if greater, with such minimum capital requirements or

capital ratios standards promulgated by the Basel Committee

on Banking Supervision and (iii) provide an attestation for

itself, its parent bank and its parent bank holding company

(as applicable) detailing the minimum capital requirements

(including, but not limited to, any capital conservation

buffer, countercyclical buffer, and any D-SIB or G-SIB

buffer, if applicable) and capital ratios required by their

home country regulator.

(B) Dealer Netting Member – If the applicant is registered with the SEC

pursuant to Section 15 or 15C of the Exchange Act and is applying

to become a Dealer Netting Member, it must have (1) Net Worth of

at least $25 million and (2) Excess Net Capital or an equivalent to

Excess Net Capital (e.g., Excess Liquid Capital or Excess Adjusted

Net Capital), depending on what the applicant is required to report

on its regulatory filings, of at least $10 million;

applying to become a Futures Commission Merchant Netting

Member, it must have (1) Net Worth of at least $25 million and

(2) Excess Adjusted Net Capital or an equivalent to Excess Adjusted

Net Capital (e.g., Excess Net Capital or Excess Liquid Capital),

depending on what the applicant is required to report on its

regulatory filings, of at least $10 million;

(D) Inter-Dealer Broker Netting Member – If the applicant is registered

with the SEC pursuant to Section 15 or 15C of the Exchange Act

and is applying to become an Inter-Dealer Broker Netting Member,

it must have (1) Net Worth of at least $25 million and (2) Excess

Net Capital or an equivalent to Excess Net Capital (e.g., Excess

Liquid Capital or Excess Adjusted Net Capital), depending on what

the applicant is required to report on its regulatory filings, of at least

$10 million;

(E) Foreign Netting Member – If the applicant is a Foreign Person that

is applying to become a Foreign Netting Member, it must, at a

minimum, satisfy its home country regulator’s minimum financial

requirements, in addition to the following:

(1) In the case of a Foreign Person that is a broker or dealer, it

must have total equity capital of at least $25 million; and

(2) In the case of a Foreign Person that is a bank or trust

company established or chartered under the laws of a non-

U.S. jurisdiction (and not applying to become a Bank

Netting Member through a U.S. branch or agency), it must

(i) have CET1 Capital of at least $500 million, (ii) comply

with the minimum capital requirements (including, but not

limited to, any capital conservation buffer, countercyclical

buffer, and any D-SIB or G-SIB buffer, if applicable) and

capital ratios required by its home country regulator, or, if

greater, with such minimum capital requirements or capital

ratios standards promulgated by the Basel Committee on

Banking Supervision and (iii) provide an attestation for itself

and its parent bank holding company detailing the minimum

capital requirements (including, but not limited to, any

capital conservation buffer, countercyclical buffer, and any

D-SIB or G-SIB buffer, if applicable) and capital ratios

required by their home country regulator;

The Corporation may, based on information provided by or

concerning an applicant applying to become a Foreign Netting

Member, also assign minimum financial requirements for the

applicant based on (i) how closely the applicant resembles another

existing category of Netting Member and (ii) the applicant’s risk

profile, which assigned minimum financial requirements will be

promptly communicated to, and discussed with, the applicant;

(F) Government Securities Issuer Netting Member – If the applicant is

applying to become a Government Securities Issuer Netting

Member, it must have equity capital of at least $100 million.

(G) Insurance Company Netting Member – If the applicant is applying

to become an Insurance Company Netting Member, it must have:

(1) an A.M. Best (“Best”) rating of “A-” or better, (2) a rating by at

least one of the other three major rating agencies (Standard & Poor’s

(“S&P”), Moody’s, and Fitch Ratings (“Fitch”)) of at least “A-” or

“A3”, as applicable, (3) no rating by S&P, Moody’s, and Fitch of

less than “A-” or “A”, as applicable, (4) a risk-based capital ratio

(the ratio of the applicant’s adjusted capital to its risk-based capital)

of at least 200 percent, and (5) statutory capital (consisting of

adjusted policyholders’ surplus plus the applicant’s asset valuation

reserve) of no less than $500 million;

(H) Registered Investment Company Netting Member – If the applicant

is applying to become a Registered Investment Company Netting

Member, it must have minimum Net Assets of $100 million; and

(I) Other – If the applicant is not otherwise addressed in this Section

4(b)(ii), it must be in compliance with its regulator’s minimum

financial requirements. The Corporation may, based on information

provided by or concerning an applicant, also assign minimum

financial requirements for the applicant based on (i) how closely the

applicant resembles an existing category of Netting Member and

(ii) the applicant’s risk profile, which assigned minimum financial

requirements will be promptly communicated to, and discussed

with, the applicant.

The foregoing financial responsibility standards are only the minimum requirements. The

Board, based upon the level of the anticipated positions and obligations of the applicant, the

anticipated risk associated with the volume and types of transactions the applicant proposes to

process through the Corporation, and the overall financial condition of the applicant, may, in its

sole discretion, impose heightened or different financial responsibility standards on any applicant.

If an applicant does not itself satisfy the required minimum financial responsibility standards, the

Board may include for such purposes the financial resources of the parent company of the applicant

(including, in the case of an applicant that is a U.S. branch or agency, its parent bank), if the parent

company has delivered to the Corporation a guaranty, satisfactory in form and substance to the

Board, of the obligations of the applicant to the Corporation.

history of a minimum of six months or personnel with sufficient operational background and

experience to ensure, in the judgment of the Board, the ability of the firm to conduct its business.

Section 5 – Application Documents

Each applicant to become a Member shall, as required by the Corporation from time to

time, complete and deliver to the Corporation an Applicant Questionnaire in such form as may be

prescribed by the Corporation. An applicant seeking membership in the Netting System shall also

deliver to the Corporation the financial reports, other reports, opinions and other information as

the Corporation determines appropriate.

Each applicant to become a Netting Member shall obtain and provide to the Corporation a

Legal Entity Identifier.

As part of its membership application, each applicant (as determined by the Corporation

with regard to membership type) shall complete and deliver to the Corporation (1) a FATCA

Certification, and (2) a Cybersecurity Confirmation.

Each applicant must also have the successful completion of network and connectivity

testing at the current FICC standards (the scope of such testing to be determined by the Corporation

in its sole discretion).

Each applicant to become a Member must also fulfill, within the time frames established

by the Corporation, any operational testing requirements (the scope of such testing to be

determined by the Corporation in its sole discretion) and related reporting requirements (such as

reporting the test results to the Corporation in a manner specified by the Corporation) that may be

imposed by the Corporation to ensure the operational capability of the applicant.

If the Corporation determines that a legal opinion, or update thereto, submitted by an

applicant, indicates that the Corporation could be subject to Legal Risk (as defined in Section 2 of

Rule 4) with respect to such applicant, the Corporation shall have the right to take, and/or require

the applicant to take, appropriate action(s) to mitigate such Legal Risk, including, but not limited

to, requiring the applicant to post additional Clearing Fund as set forth in Section 2 of Rule 4.

Any non-public information furnished to the Corporation pursuant to this Rule shall be

held in confidence as may be required under the laws, rules and regulations applicable to the

Corporation that relate to the confidentiality of records. Each applicant shall maintain DTCC

Confidential Information in confidence to the same extent and using the same means it uses to

protect its own confidential information, but no less than a reasonable standard of care and shall

not use DTCC Confidential Information or disclose DTCC Confidential Information to any third

party except as necessary to perform such applicant’s obligations under these Rules or as otherwise

required by applicable law. Each applicant acknowledges that a breach of its confidentiality

obligations under these Rules may result in serious and irreparable harm to the Corporation and/or

DTCC for which there is no adequate remedy at law. In the event of such a breach by the applicant,

the Corporation and/or DTCC shall be entitled to seek any temporary or permanent injunctive or

other equitable relief in addition to any monetary damages hereunder.

Section 6 – Evaluation of Applicant

An application to become any type of Member shall first be reviewed by the Corporation.

The Corporation may approve applications for Comparison-Only membership. With regard to

Netting membership, the Corporation shall recommend approval or disapproval of the application

to the Board. Except as otherwise provided in this Rule 2A or in Rule 15, Corporation or Board

approval of an application for membership shall constitute approval only of the type of

membership specifically applied for.

In evaluating a membership application, the Corporation may:

(i) contact the applicant’s Designated Examining Authority, Appropriate

Regulatory Agency, primary regulatory authority (the CFTC and the applicable self-

regulatory organization designated under the Commodity Exchange Act in the case of a

Futures Commission Merchant, and the insurance regulator in the company’s state of

domicile in the case of an Insurance Company), or other examining authority or regulator,

or any Self-Regulatory Organization or self-regulatory organization of which the applicant

is a member and request from such authority or organization any records, reports, or other

information that, in their judgment, may be relevant to the application;

(ii) examine the books, records, and operational procedures of, and inspect the

premises of, the applicant as they may be related to the business conducted through the

Corporation; and

(iii) take such other evidence or make such other inquiries as is necessary,

including sworn or unsworn testimony, to ascertain relevant facts bearing upon the

applicant’s qualifications.

The Board or the Corporation, as applicable, shall approve an application to become a

Member pursuant to this Rule only upon a determination that the applicant meets such standards

of financial responsibility and operational capability as are set forth in this Rule. In addition, with

regard to any applicant that shall be an FFI Member, such applicant must be FATCA Compliant.

Notwithstanding that an application to become a Member shall have been approved by the

Board or the Corporation, if a material change in condition of the applicant occurs which in the

judgment of the Board or the Corporation could bring into question the applicant’s ability to

perform as a Member, and such material change becomes known to the Corporation prior to the

applicant’s commencing use of the Corporation’s services, the Corporation shall have the right to

stay commencement by the applicant of use of the Corporation’s services until a reconsideration

by the Board or the Corporation of the applicant’s financial responsibility and operational

capability can be completed. As a result of such reconsideration, the Board or the Corporation

may determine to withdraw approval of an application to become a Member or condition the

approval upon the furnishing of additional information or assurances.

Notwithstanding the provisions of this Rule, the Board or the Corporation may determine,

after considering the facts and circumstances pertaining to an applicant, not to apply one or more

of the qualifications or standards set forth in these Rules. If the Board or the Corporation

determines that such qualification or standard shall not apply, it shall determine what, if any,

limitation or restriction shall be placed on such applicant. Limitations and restrictions shall bear

a reasonable relationship to the qualification or standard not applied to such applicant and may

include, but are not limited to, an increased Clearing Fund requirement or a limitation on the

applicant’s activities to be processed through the Corporation. Such determination shall only be

made if the Board or the Corporation concludes that not applying such qualification or standard,

and imposing such limitation or restriction, would not be against the best interests of the

Corporation and its Members. In making such a determination, the Board or the Corporation may

require the applicant to provide additional information or assurances. If the Board or the

Corporation imposes a limitation or restriction pursuant to this provision, the Corporation shall

promptly notify the SEC.

The Board or the Corporation may deny an application to become a Member upon the

Corporation’s determination that it does not have adequate personnel, space, data processing

capacity or other operational capability at that time to perform its services for the applicant without

impairing the ability of the Corporation to provide services for its existing Members, to assure the

prompt, accurate and orderly processing and settlement of securities transactions or to otherwise

carry out its functions; provided, however, that any such applications which are denied pursuant

to this paragraph shall be approved as promptly as the capabilities of the Corporation permit.

Upon the Board’s or the Corporation’s denial of an application to become a Member

pursuant to this Rule, the Corporation shall furnish the applicant with a concise written statement

setting forth the specific grounds under consideration upon which any such denial may be based

and shall notify the applicant of its right to request a hearing before the Board, such request to be

filed by the applicant with the Corporation pursuant to Rule 37.

Section 7 – Membership Agreement

Each Member agrees:

(a) to abide by these Rules and to be bound by all the provisions thereof;

(b) to pay to the Corporation in a timely manner the compensation provided for by

these Rules for services rendered and such costs and fines as may be imposed in accordance with

these Rules for the failure to comply therewith;

subsequent to the time such amendment takes effect as fully as though such amendment were now

a part of these Rules;

(d) to continue to be bound by these Rules, notwithstanding that it may have terminated

its membership, as to all matters and transactions occurring while it was a Member;

(e) if it is a Netting Member, to: (i) submit to the Corporation for comparison, pursuant

to Rule 5, data on all of its eligible trades with other Netting Members, (ii) deliver to the

Corporation or receive from the Corporation the securities underlying all trades that have been

reported as being netted and all monies related thereto, in accordance with these Rules, and (iii) pay

or deliver to the Corporation in a timely manner all amounts due pursuant to Rule 4 with regard to

its Required Fund Deposit and any loss or liability allocated to it;

(f) that the determination of the Board as to any questions arising with regard to any

payment, charge, fee, deposit, or fine to which it may be subject shall be final and conclusive,

except as may be otherwise provided in these Rules; and

(g) to any other terms and conditions deemed by the Corporation to be necessary in

order to protect itself and its Members, including, for a Foreign Member, all agreements, opinions

of counsel, and other legal documentation required by the Corporation.

RULE 3 – ONGOING MEMBERSHIP REQUIREMENTS

Section 1 – Requirements

The eligibility, qualifications and standards set forth in Rule 2A in respect of an applicant

shall continue to be met upon an applicant’s admission as a Member and at all times while a

Member. In addition, each Member shall comply with the ongoing requirements set forth below.

Section 2 – Reports by Netting Members

Each Netting Member shall submit to the Corporation the reports, financial or other

information set forth below and such other reports, financial and other information as the

Corporation from time to time may reasonably require. Unless specifically set forth below, the

time periods prescribed by the Corporation are set forth in the form of notices posted at the

Corporation’s Website and/or distributed by the Corporation from time to time. It shall be the

Member’s responsibility to retrieve all notices daily from the Website.

(a) a copy of the Member’s annual audited Financial Statements for each fiscal year,

certified by the Member’s independent certified public accountants and prepared in accordance

with generally accepted accounting principles;

(b) if the Member is a broker or dealer registered under Section 15 of the Exchange

Act, or a Government Securities Broker or Government Securities Dealer registered under Section

15C of the Exchange Act, (i) a copy of the Member’s Financial and Operational Combined

Uniform Single Report (“FOCUS Report”) or Report on Finances and Operations of Government

Securities Brokers and Dealers (“FOGS Report”), as the case may be, submitted to its Designated

Examining Authority, (ii) a report of the Member’s independent auditors on internal controls, and

(iii) any supplemental reports required to be filed with the SEC pursuant to Exchange Act Rule

17a-11 or 17 C.F.R. Section 405.3;

Consolidated Report of Condition and Income (“Call Report”) submitted to its Appropriate

Regulatory Agency and, to the extent not contained within such Call Reports (or to the extent that

Call Reports are not required to be filed), information containing each of the Member’s capital

levels and ratios, as such levels and ratios are required to be provided to the Member’s Appropriate

Regulatory Agency (or, if such Member’s Appropriate Regulatory Agency does not require such

information, as would be required to be provided, if such Member’s Appropriate Regulatory

Agency were the Board of Governors of the Federal Reserve System);

(d) if the Member is a Futures Commission Merchant and not a broker or dealer

registered with the SEC, (i) a copy of its CFTC Form 1-FR as filed with the CFTC (or copies of

the equivalent form filed with the CFTC pursuant to CFTC Regulation 1.10(b)(3), (ii) a copy of

the computation required by CFTC Regulation 1.18, and (iii) a copy of any supplemental reports

filed with the CFTC pursuant to Regulation 1.12 or any successor regulations;

(e) if the Member is a broker, dealer or bank established or organized under the laws

of a non-U.S. jurisdiction and subject to regulation by its home country regulator in such

jurisdiction, a copy of any reports submitted to such home country regulator;

(f) if the Member is a Foreign Netting Member other than one that is a broker, dealer

or bank subject to regulation by its home country regulator in such jurisdiction, financial

information as requested by the Corporation;

(g) if the Member does not fall within clauses (b) through (f) above, a copy of the

Member’s unaudited financial information as specified by the Corporation for each quarter; and

(h) for any Member which has satisfied the financial requirements imposed by the

Corporation pursuant to these Rules by means of a guaranty of its obligations by its parent

company (including, in the case of a Member that is a U.S. branch or agency, its parent bank),

Financial Statements and/or the reports or information of its parent company meeting the

requirements specified in subparagraphs (a) through (g) of this Section 2, as applicable.

With respect to a Member that has received from its regulators an extension of time by

which one of the above-listed reports or submissions to the regulator is otherwise due, a copy of

the extension letter or other regulatory communication granting such extension. Moreover, any

Member that has provided to the SEC any notice required pursuant to paragraph (e) of Exchange

Act Rule 15c3-1 shall notify the Corporation of the provision of such notice, and shall furnish the

Corporation with a copy of such notice, by the Close of Business on the day that it so provides

such notice to the SEC.

With respect to subsections (a) and (f) above, the Corporation may accept, in its sole

discretion, consolidated Financial Statements or financial information prepared at a parent level.

In addition to the above, Netting Members must submit to the Corporation, concurrently

with their submission to the relevant regulator or similar authority, copies of any regulatory

notifications required to be made when a Member’s capital levels or other financial requirements

fall below prescribed levels. In addition, Members must submit to the Corporation, concurrently

with their submission to the applicable regulator or similar authority, copies of such filings as

determined by the Corporation from time to time, which Members are required to file pursuant to

the Sarbanes-Oxley Act of 2002, and any amendments thereunder.

A Member that is a bank or trust company established or chartered under the laws of a non-

U.S. jurisdiction and a Bank Netting Member that is a U.S. branch or agency must (i) provide, no

less than annually and upon request by the Corporation, an attestation for itself, its parent bank

and its parent bank holding company (as applicable) detailing the minimum capital requirements

(including, but not limited to, any capital conservation buffer, countercyclical buffer, and any D-

SIB or G-SIB buffer, if applicable) and capital ratios required by their home country regulator and

(ii) promptly notify the Corporation: (a) within two Business Days of any of their capital

requirements (including, but not limited to, any capital conservation buffer, countercyclical buffer,

and any D-SIB or G-SIB buffer, if applicable) or capital ratios falling below any minimum required

by their home country regulator; and (b) within 15 calendar days of any such minimum capital

requirement or capital ratio changing.

Moreover, Foreign Netting Members and Bank Netting Members that are U.S. branches or

agencies of non-U.S. banks or trust companies must submit to the Corporation, concurrently with

their submission to the relevant regulator or similar authority, copies of any regulatory

notifications required to be made when an entity does not comply with the financial reporting and

responsibility standards set by their home country regulator. Foreign Netting Members and Bank

Netting Members that are U.S. branches or agencies of non-U.S. banks or trust companies must

also notify the Corporation in writing within 2 Business Days of becoming subject to a disciplinary

action by their home country regulator.

If the Corporation determines that a legal opinion, or update thereto, submitted by a

Member, indicates that the Corporation could be subject to Legal Risk (as defined in Section 2 of

Rule 4) with respect to such Member, the Corporation shall have the right to take, and/or require

the Member to take, appropriate action(s) to mitigate such Legal Risk, including, but not limited

to, requiring the Member to post additional Clearing Fund as set forth in Section 2 of Rule 4.

In addition to all of the above, each Member shall complete and deliver to the Corporation

a Cybersecurity Confirmation at least every two years, on a date that is set by the Corporation and

following notice that is provided no later than 180 calendar days prior to such due date.

In addition, each Member shall maintain or upgrade their network technology, or

communications technology or protocols on the systems that connect to the Corporation to the

version being required and within the time periods as provided by Important Notice posted to the

Corporation’s website.

A Netting Member must have a current Legal Entity Identifier on file with the Corporation

at all times.

The Netting Member shall indemnify the Corporation, and its employees, officers,

directors, shareholders, agents, and Members (collectively, the “LEI Indemnified Parties”), for any

and all losses, liabilities, expenses and Legal Actions suffered or incurred by the LEI Indemnified

Parties arising from a Netting Member’s failure to have its current Legal Entity Identifier on file

with the Corporation. “Legal Action” means and includes any claim, counterclaim, demand,

action, suit, countersuit, arbitration, inquiry, proceeding or investigation before any federal, state

or foreign court or other tribunal, or any investigative or regulatory agency or self-regulatory

organization.

Notwithstanding anything to the contrary in this Rule, if a Member qualifies for more than

one category of Netting System membership, the Corporation, in its sole discretion, may require

that such member provide those reports and other financial or other information required to be

provided to the Corporation by Members of any of those membership categories for which such

Member qualifies.

All information provided to the Corporation pursuant to this Section shall be in English

(and if translated into English, the translation must be a fair and accurate English translation).

A Member that fails to submit the above listed information within the timeframes required

by guidelines issued by the Corporation from time to time and in the manner requested, shall:

(i) be subject to a fine by the Corporation; and

(ii) until the required information is submitted to the Corporation, have a

Required Fund Deposit equal to the greater of either (x) the sum of the normal calculation

of its Required Fund Deposit plus $1,000,000, or (y) 125 percent of the normal calculation

of its Required Fund Deposit.

Section 3 – Financial Statements

For purposes of Rule 2A and this Rule, the term “Financial Statements” means, a balance

sheet, statement of income, statement of changes in financial position and statement of changes

in owner’s equity, in each case with accompanying notes.

Section 4 – Confidentiality

Any non-public information furnished to the Corporation pursuant to this Rule shall be

held in confidence as may be required under the laws, rules and regulations applicable to the

Corporation that relate to the confidentiality of records. Each applicant and Member shall maintain

DTCC Confidential Information in confidence to the same extent and using the same means it uses

to protect its own confidential information, but no less than a reasonable standard of care and shall

not use DTCC Confidential Information or disclose DTCC Confidential Information to any third

party except as necessary to perform such applicant’s or Member’s obligations under these Rules

or as otherwise required by applicable law. Each applicant and Member acknowledges that a

breach of its confidentiality obligations under these Rules may result in serious and irreparable

harm to the Corporation and/or DTCC for which there is no adequate remedy at law. In the event

of such a breach by the applicant or Member, the Corporation and/or DTCC shall be entitled to

seek any temporary or permanent injunctive or other equitable relief in addition to any monetary

damages hereunder.

Section 5 – Application of Membership Standards

Notwithstanding the provisions of this Rule, the Board may determine, after considering

the facts and circumstances pertaining to a Member, not to apply one or more of the qualifications

or standards set forth in these Rules. If the Board determines that such qualification or standard

shall not apply, the Committee shall determine what, if any, limitation or restriction shall be placed

on such Member. Limitations and restrictions shall bear a reasonable relationship to the

qualification or standard not applied to such Member and may include, but are not limited to, an

increased Clearing Fund requirement or a limitation on the Member’s activities processed through

the Corporation. Such determination shall only be made if the Board concludes that not applying

such qualification or standard, and imposing such limitation or restriction, would not be against

the best interests of the Corporation and its Members. In making such a determination, the Board

may require the Member to provide additional information or assurances. If the Board imposes a

limitation or restriction pursuant to this provision, the Corporation shall promptly notify the SEC.

Section 6 – Operational Testing Requirements

(a) The Corporation may, from time to time, require Members to fulfill, within the time

frames established by the Corporation, certain operational testing requirements (the scope of such

testing to be determined by the Corporation in its sole discretion) and related reporting

requirements (such as reporting the test results to the Corporation in a manner specified by the

Corporation) that may be imposed by the Corporation to ensure the continuing operational

capability of the Member. The Corporation will assess a fine or terminate the membership of any

Member that does not fulfill any such operational testing and related reporting requirements within

the time frames established by the Corporation.

(b) The Corporation has established standards for designating those Members who

shall be required to participate in annual business continuity and disaster recovery testing that the

Corporation reasonably determines are, taken as a whole, the minimum necessary for the

maintenance of fair and orderly markets in the event that business continuity and disaster recovery

plans are required to be activated. The standards shall take into account factors such as:

(1) activity-based thresholds; (2) significant operational issues of the Member during the twelve

months prior to the designation; and (3) past performance of the Member with respect to

operational testing. The specific standards adopted by the Corporation and any updates or

modifications thereto shall be published to Members and applied on a prospective basis.

Upon notification that the Member has been designated to participate in the annual business

continuity and disaster recovery testing, as described above, Members shall be required to fulfill,

within the timeframes established by the Corporation, certain testing requirements (the scope of

such testing to be determined by the Corporation in its sole discretion) and related reporting

requirements (such as reporting the test results to the Corporation in a manner specified by the

Corporation) that may be imposed by the Corporation.

Section 7 – General Continuance Standards

A Member shall promptly inform the Corporation, both orally and in writing, if it no longer

is in compliance with any of the relevant qualifications and standards for admission to membership

set forth in Rule 2 and in this Rule, including whether it is subject to any of the criteria set forth in

subsection (d) of Section 2 of Rule 2A. Notification must take place within two Business Days

from the date on which the Member first learns of its non-compliance. The Corporation shall

assess a fine against any Member who fails to so notify the Corporation. In addition, a Member

shall notify the Corporation within two Business Days of learning that an investigation or

proceeding to which it is or is becoming the subject of would cause the Member to fall out of

compliance with any of the relevant qualifications and standards for membership set forth in Rules

2, 2A and 3. Notwithstanding the previous sentence, the Member shall not be required to notify

the Corporation if doing so would cause the Member to violate an applicable law, rule or

regulation. If, with respect to any type of Member: (a) it fails to maintain the relevant standards

and qualifications for admission to membership, including but not limited to minimum capital

standards and operational testing and related reporting requirements imposed by the Corporation

from time to time; (b) it violates any Rule of the Corporation or other agreement with the

Corporation; (c) it fails to satisfy in a timely manner any obligation to the Corporation; (d) there

is a Reportable Event relating to such Member; or (e) the Corporation otherwise deems it necessary

or advisable, in order to protect the Corporation, its other Members, or its creditors or investors,

to safeguard securities and funds in the custody or control of the Corporation or for which the

Corporation is responsible, or to promote the prompt and accurate processing, clearance or

settlement of securities transactions, the Corporation will undertake appropriate action to

determine the status of the Member and its continued eligibility. In addition, the Corporation may

review the financial responsibility and operational capability of the Member to the extent provided

in these Rules and otherwise require from the Member additional reporting of its financial or

operational condition at such intervals and in such detail as the Corporation shall determine,

including, but not limited to, such information as the Corporation may request regarding the

businesses and operations of the Member and its risk management practices with respect to

services of the Corporation utilized by the Member for another Person or Persons, and shall make

a determination as to whether such Member should be placed on the Watch List by the Corporation

consistent with the provisions of Section 12 of this Rule.

Furthermore, a Netting Member must submit to the Corporation written notice of any

Reportable Event at least 90 calendar days prior to the effective date of such Reportable Event

unless the Member demonstrates that it could not have reasonably done so, and provided notice,

both orally and in writing, to FICC as soon as possible.

Beginning on the FATCA Compliance Date, each FFI Member shall inform the

Corporation, both orally and in writing, if it (i) undergoes a change in circumstance that would

affect its FATCA Certification or (ii) otherwise has reason to know that it is not, or will not be,

FATCA Compliant, in each case, within two days of knowledge thereof.

The Corporation shall assess a fine against any Netting Member who fails to so notify the

Corporation.

In addition, if the Corporation has reason to believe that a Member may fail to comply with

any of these Rules, it may require the Member to provide it, within such timeframe, in such detail,

and pursuant to such manner as the Corporation shall determine, with assurances in writing of a

credible nature that the Member shall not, in fact, violate any of these Rules. Notwithstanding the

previous sentence, each Member, or any applicant to become such, shall furnish to the Corporation

such adequate assurances of its financial responsibility and operational capability as the

Corporation may at any time or from time to time deem necessary or advisable in order to protect

the Corporation and its members, to safeguard securities and funds in the custody or control of the

Corporation and for which the Corporation is responsible, or to promote the prompt and accurate

clearance, settlement and processing of securities transactions. Upon the request of a participant

or applicant, or otherwise, the Corporation may choose to confer with the participant or applicant

before or after requiring it to furnish adequate assurances pursuant to this Rule.

Adequate assurances of financial responsibility or operational capability of a Member or

applicant to become such, as may be required by the Corporation pursuant to these Rules, may

include, but shall not be limited to, as appropriate under the context of the Member’s use of the

Corporation’s services:

(i) restrictions or modifications on the Member’s use of any or all of the

Corporation’s services (whether generally, or with respect to certain transactions);

(ii) additional reporting by the Member of its financial or operational condition

at such intervals and in such detail as the Corporation shall determine;

(iii) increased Clearing Fund deposits and/or a requirement to post its Required

Fund Deposit in proportions of cash, Eligible Netting Securities and Eligible Letters of

Credit different from those permitted under Rule 4; or

(iv) prohibitions on the Member from withdrawing Clearing Fund on deposit in

excess of its Required Fund Deposit.

In the event that a Member fails to maintain the relevant requirements of any of these Rules,

the Corporation shall, pursuant to these Rules, either cease to act for the Member or terminate its

membership in the Comparison System or in both the Comparison System and the Netting System,

unless the Member requests that such action not be taken and the Corporation determines that,

depending upon the specific circumstances and the record of the Member, it is appropriate instead

to establish for such Member a time period (hereinafter, the “Noncompliance Time Period”), which

shall be determined by the Corporation and which shall be no longer than 30 calendar days unless

otherwise determined by the Corporation, during which the Member must resume compliance with

such requirements. In the event that the Member is unable to satisfy such requirements within the

Noncompliance Time Period, the Corporation shall, pursuant to these Rules, either cease to act for

the Member or terminate its membership in the Comparison System or in both the Comparison

System and the Netting System. If the Corporation takes any action pursuant to this paragraph, it

shall promptly file with its records and with the SEC a full report of such actions, and the reasons

thereof.

Notwithstanding anything to the contrary in this Section, if the Corporation, in its sole

discretion, determines that a Netting Member’s financial condition has significantly deteriorated

during a Noncompliance Time Period, the Corporation immediately may, pursuant to these Rules,

either cease to act for the Member or terminate its membership in the Comparison System or in

both the Comparison System and the Netting System.

Section 8 – Specific Continuance Standards

In addition to the requirements set forth in Section 6 above of this Rule, the following

requirements shall apply to Members that fall out of compliance with an applicable membership

standard:

(a) If a Bank Netting Member falls below the applicable minimum financial

requirements as specified in Rule 2A or this Rule 3, it shall, for a period beginning on the day on

which it fell below such level and continuing until the later of the 90th calendar day after the date

on which (i) it returned to compliance with such standard, or (ii) the Corporation received notice

of the applicable violation, have a Required Fund Deposit equal to the greater of either: (x) the

sum of the normal calculation of its Required Fund Deposit plus $1,000,000, or (y) 125 percent of

the normal calculation of its Required Fund Deposit;

(b) If a Dealer Netting Member falls below either the minimum Net Worth level

applicable to Dealer Netting Members pursuant to this Rule or the applicable minimum regulatory

capital level, as applicable, as specified in this Rule, it shall, for a period beginning on the date on

which it fell below such level and continuing until the later of the 90th calendar day after the date

on which (i) it returned to compliance with such standard, or (ii) the Corporation received notice

of the applicable violation, have a Required Fund Deposit equal to the greater of either: (x) the

sum of its Required Fund Deposit plus $1,000,000, or (y) 125 percent of its Required Fund

Deposit;

minimum Net Worth level applicable to Futures Commission Merchant Netting Members pursuant

to this Rule or the applicable minimum regulatory capital level specified in this Rule, it shall, for

a period beginning on the date on which it fell below such level and continuing until the later of

the 90th calendar day after the date on which (i) it returned to compliance with such standard, or

(ii) the Corporation received notice of the applicable violation, have a Required Fund Deposit

equal to the greater of either: (x) the sum of its Required Fund Deposit plus $1,000,000, or (y) 125

percent of its Required Fund Deposit;

(d) If an Inter-Dealer Broker Netting Member falls below either the applicable

minimum Net Worth level or the applicable minimum regulatory capital level specified in this

Rule, it shall have, for a period beginning on the date on which it fell from compliance with either

standard and continuing until the later of the 90th calendar day after the date on which (i) it returned

to compliance with such standard, or (ii) the Corporation received notice of the applicable

violation, a Required Fund Deposit equal to the greater of either: (x) the sum of the normal

calculation of its Required Fund Deposit plus $1,000,000, or (y) 125 percent of the normal

calculation of its Required Fund Deposit;

(e) An Inter-Dealer Broker Netting Member shall: (A) limit its business to acting

exclusively as a Broker; (B) conduct all of its business in Repo Transactions with Netting

Members; and (C) conduct at least 90 percent of its business in transactions that are not Repo

Transactions, measured based on its overall dollar volume of submitted sides over the prior month,

with Netting Members. If an Inter-Dealer Broker Netting Member fails to comply with this scope-

of-business standard, then, for a period beginning on the date on which it fell out of compliance

with this standard and continuing until the date on which it returned to compliance with such

standard, such Member shall be considered by the Corporation for purposes of these Rules to be a

Dealer Netting Member. Notwithstanding anything to the contrary above, if such Inter-Dealer

Broker Netting Member continues to act exclusively as a Broker, it shall continue to be subject to

the provisions of Section 7 of Rule 4 as if it were an Inter-Dealer Broker Netting Member, until

and unless the Corporation determines, in its sole discretion, that such Member should be treated

for purposes of that Section as if it were a Dealer Netting Member and so informs such Member.

Moreover, notwithstanding anything to the contrary above, if such Inter-Dealer Broker Netting

Member does not return to compliance with its applicable scope-of-business standard within 90

calendar days from the date on which it fell below such standard, such Member shall permanently

become a Dealer Netting Member for purposes of these Rules, until and unless it applies to the

Corporation to return to its Inter-Dealer Broker Netting Member status and such application is

approved by the Board; and

(f) If a Government Securities Issuer Netting Member, Insurance Company Netting

Member, Registered Clearing Agency Netting Member, or Registered Investment Company

Netting Member falls out of compliance with any minimum admission or continuance standard

that may be set for it by the Corporation pursuant to these Rules, it shall, for a period beginning

on the date on which it fell below such standard and continuing until the later of the 90th calendar

day after the date on which (i) it returned to compliance with such standard, or (ii) the Corporation

received notice of the applicable violation, have a Required Fund Deposit equal to the greater of

either: (x) the sum of the normal calculation of its Required Fund Deposit plus $1,000,000, or

(y) 125 percent of the normal calculation of its Required Fund Deposit.

(g) If a Foreign Netting Member falls out of compliance with the minimum financial

requirements that the Corporation has determined are applicable to it pursuant to these Rules, the

consequences under this Section of such noncompliance shall be determined by the Corporation

in its sole discretion.

For purposes of applying a premium to the Required Fund Deposit of a Member that falls

below its minimum financial requirements as set forth in this Section, the Corporation shall begin

to assess such a premium on the date on which the Corporation becomes aware of the applicable

violation.

If the Corporation takes any action pursuant to this Section, it shall promptly report such

action, and the reasons thereof, to the Board, at its next regularly scheduled meeting, or sooner if

deemed appropriate by the Corporation.

Section 9 – Compliance with Laws

(i) General

In connection with their use of the Corporation’s services, Members must comply with all

applicable laws, including applicable laws relating to securities, taxation, and money laundering,

as well as sanctions administered and enforced by the Office of Foreign Assets Control (“OFAC”).

(ii) OFAC

As part of their compliance with OFAC sanctions regulations, all Members agree not to

conduct any transaction or activity through GSD which it knows to violate sanctions administered

and enforced by OFAC.

Members subject to the jurisdiction of the U.S., with the exception of Comparison-Only

Members, are required to periodically confirm that the Member has implemented a risk-based

program reasonably designed to comply with applicable OFAC sanctions regulations. Failure to

do so in the manner and timeframes set forth by the Corporation from time to time will result in a

fine.

(iii) FATCA

Beginning on the FATCA Compliance Date, each FFI Member must agree not to conduct

any transaction or activity through the Corporation if such FFI Member is not FATCA Compliant,

unless such requirement has been explicitly waived in writing by the Corporation with respect to

the specific FFI Member, provided, however, that no such waiver will be issued if it shall cause

the Corporation to be obligated to withhold under FATCA on gross proceeds from the sale or other

disposition of any property.

All FFI Members are required, as applicable under FATCA, to certify and periodically

recertify to the Corporation that they are FATCA Compliant by providing to the Corporation a

FATCA Certification. Failure to do so in the manner and timeframes set forth by the Corporation

from time to time will result in a fine, unless such requirement has been explicitly waived in writing

by the Corporation with respect to the specific FFI Member, provided, however, that no such

waiver will be issued if it shall cause the Corporation to be obligated to withhold under FATCA

on gross proceeds from the sale or other disposition of any property.

An FFI Member agrees to indemnify the Corporation, its affiliates, and each of their

respective shareholders, directors, officers, employees, agents and advisors (each, an “Indemnified

Person”) for any loss, liability or expense sustained by the Indemnified Person as a result of such

FFI Member failing to be FATCA Compliant.

Section 10 – Books and Records

The books and records of a Member and, in the case of a Registered Investment Company

Netting Member, its Controlling Management, insofar as they relate to transactions processed

through the Corporation, shall be open to the inspection of the duly authorized representatives of

the Corporation upon reasonable prior notice and during the Member’s or its Controlling

Management’s normal business hours, as applicable. The Corporation shall be furnished with all

such information about the business and transactions of the Member and, in the case of a

Registered Investment Company Netting Member, its Controlling Management, as it may require;

provided that (i) any non-public information furnished to the Corporation pursuant to this Rule

shall be held in confidence as may be required under the laws, rules and regulations applicable to

the Corporation that relate to the confidentiality of records, and (ii) if the Member ceases

membership, the Corporation shall have no right to inspect the Member’s or its Controlling

Management’s books and records, as applicable, or to require information relating to transactions

wholly subsequent to the time when the Member ceases membership.

Section 11 – Additional Accounts Requested by Members

(a) The Corporation may permit a Member to maintain one or more additional

Accounts at the request of a Member if the Corporation determines that doing so will not subject

the Corporation to material legal, financial or operational risk.

(b) The Corporation may permit a Netting Member to open additional Netting Member

Accounts for the Netting Member itself or for wholly-owned subsidiaries of the Netting Member.

its Market Professional customers. Such Account must be in furtherance of a Cross-Margining

Arrangement and must meet the requirements of the applicable Cross-Margining Agreement and

Rule 43. Such Account must meet all obligations under these Rules unless otherwise specified

herein.

(d) All other additional Netting Member Accounts requested by Netting Members for

Non-Members not otherwise permitted under these Rules shall require the approval of the Board.

Netting Members shall not be permitted to maintain additional accounts for comparison-only

activities unless they can demonstrate that doing so will not violate Section 3 of Rule 11.

(e) Additional Accounts that are opened for a Member pursuant to this Section 11 of

Rule 3 shall be opened solely for the administrative convenience of the Member or in furtherance

of the Cross-Margining Arrangements between the Corporation and an FCO, and no other person

or entity shall have any rights, obligations or liabilities with respect to any of the Member’s

Accounts with the Corporation. Only Members shall be entitled to process transactions through

the Corporation and to participate in the services offered by the Corporation for which they have

been approved. A Member that processes through the Corporation any contract or other transaction

for an entity that is a Non-Member shall, so far as the rights of the Corporation and of other

Members are concerned, be liable as principal on such transaction. A Non-Member who processes

transactions through a Member shall not possess any of the rights or benefits of a Member.

(f) The Corporation may, in its sole discretion, at any time and without prior notice

(but being obligated to give notice as soon as possible thereafter) and whether or not the Member

is in default of its obligations to the Corporation, apply Required Fund Deposits made by a Member

pursuant to its obligations under one of its Accounts, as necessary, to ensure that the Member

meets all of its obligations to the Corporation under its other Account(s), and otherwise exercise

all rights to offset and net any obligations among any or all of the Accounts, whether or not a non-

Member is deemed to have any interest in the Member’s Account(s), notwithstanding the terms of

this Rule.

(g) This section shall not apply to Repo Brokers who are required to maintain

Segregated Repo Accounts pursuant to Section 2 of Rule 19.

Section 12 – Ongoing Monitoring

(a) All Netting Members, Sponsoring Members and Funds-Only Settling Bank

Members will be monitored and reviewed by the Corporation on an ongoing and periodic basis,

which may include monitoring of news and market developments and review of financial reports

and other public information.

(b) (i) A Member that is (A) a Bank Netting Member that files the Call Report,

(B) a Dealer Netting Member or Inter-Dealer Broker Netting Member that files the FOCUS

Report or the equivalent with its regulator, or (C) a Foreign Netting Member that is a bank

or trust company and that has audited financial data that is publicly available will be

assigned a credit rating by the Corporation in accordance with the Credit Risk Rating

Matrix. Such Member’s credit rating will be reassessed each time the Member provides

the Corporation with requested information pursuant to Section 7 of Rule 3, or as may be

otherwise required under the Rules (including this Section 12 of Rule 3).

(ii) Because the factors used as part of the Credit Risk Rating Matrix may not

identify all risks that a Member specified in paragraph (b)(i) of this Section 12 may present

to the Corporation, the Corporation may, in its discretion, override such Member’s credit

rating derived from the Credit Risk Rating Matrix to downgrade the Member. This

downgrading may result in the Member being placed on the Watch List based on relevant

factors, including those set forth in paragraph (d) below. The Corporation may also take

such additional actions with regard to the Member as are permitted by the Rules.

other than those specified in paragraph (b)(i) of this Section 12 will not be assigned a credit rating

by the Credit Risk Rating Matrix but may be placed on the Watch List based on relevant factors,

including those set forth in paragraph (d) below, as the Corporation deems necessary to protect the

Corporation and its Members.

(d) The factors to be considered by the Corporation under paragraphs (b)(ii) and (c) of

this Section 12 include, but are not limited to, (i) news reports and/or regulatory observations that

raise reasonable concerns relating to the Member, (ii) reasonable concerns around the Member’s

liquidity arrangements, (iii) material changes to the Member’s organizational structure,

(iv) reasonable concerns of the Corporation about the Member’s financial stability due to particular

facts and circumstances, such as material litigation or other legal and/or regulatory risks, (v) failure

of the Member to demonstrate satisfactory financial condition or operational capability or a

reasonable concern of the Corporation regarding the Member’s ability to maintain applicable

membership standards, and (vi) failure of the Member to provide information required by the

Corporation to assess risk exposure posed by the Member’s activity (including information

requested by the Corporation pursuant to Section 7 of this Rule 3).

(e) The Corporation may require a Netting Member that has been placed on the Watch

List to make and maintain a deposit to the Clearing Fund over and above the amount determined

in accordance with the provisions of Rule 4 (which additional deposit shall constitute a portion of

the Netting Member’s Required Fund Deposit), or such higher amount as the Board may deem

necessary for the protection of the Corporation or other Members, which higher amount may

include, but is not limited to, additional payments or deposits in any form to offset potential risk

to the Corporation and its Members arising from activity submitted by such Member. The

Corporation may also retain any Excess Clearing Fund Deposits of a Netting Member that has

been placed on the Watch List as provided in Section 10 of Rule 4. Moreover, as regards a Netting

Member that has been placed on the Watch List by the Corporation, the Corporation may suspend,

during all or a portion of the time period that such Member is on the Watch List, its right under

these Rules to collect a Credit Forward Mark Adjustment Payment. Moreover, if a Netting

Member on the Watch List has a Collateral Allocation Entitlement as the result of its GCF Repo

Transaction activity, the Corporation may, in its sole discretion, maintain possession of the

securities and/or cash that comprise such Collateral Allocation Entitlement.

(f) A Member being placed on the Watch List shall result in a more thorough

monitoring of the Member’s financial condition and/or operational capability, which could

include, for example, on-site visits or additional due diligence information requests from the

Corporation. In addition, the Corporation may require a Member placed on the Watch List to make

more frequent financial disclosures, including, without limitation, interim and/or pro forma

reports. Members that are subject to placement on the Watch List are also reported to the

Corporation’s management committees and regularly reviewed by a cross-functional team

comprised of senior management of the Corporation. The Corporation may also take such

additional actions with regard to any Member (including a Member placed on the Watch List) as

are permitted by the Rules.

Section 13 – Voluntary Termination

A Member that is a Comparison-Only Member may elect to terminate such membership,

and a Netting Member may elect to terminate its membership in either the Corporation or in just

the Netting System (and to become a Comparison-Only Member), by providing the Corporation

with a written notice of such termination (hereinafter, the “Voluntary Termination Notice”). The

Member shall specify in the Voluntary Termination Notice a desired date for its withdrawal from

membership; provided, however, if the Member is terminating its membership in the Corporation,

such date shall not be prior to the scheduled final settlement date of any remaining obligation owed

by the Member to the Corporation as of the time such Voluntary Termination Notice is submitted

to the Corporation, unless otherwise approved by the Corporation.

Such termination will not be effective until accepted by the Corporation, which shall be no

later than 10 Business Days after the receipt of the Voluntary Termination Notice from such

Member. The Corporation’s acceptance shall be evidenced by a notice to Members announcing

the Member’s termination and the effective date of the termination of the Member (hereinafter the

“Termination Date”). As of the Termination Date, a Netting Member that terminates its

membership in the Netting System, or a Comparison-Only Member or Netting Member that

terminates its membership in the Corporation, shall no longer be eligible or required to submit to

the Corporation data on trades and shall no longer be eligible to have its trade data submitted by

an authorized submitter, notwithstanding any provision of Rule 5, Rules 6A through 6C, or Rule

11 to the contrary, unless the Board determines otherwise in order to ensure an orderly liquidation

of the Member’s Net Settlement Positions. If any trade is submitted to the Corporation either by

such Member or its authorized submitter that is scheduled to settle on or after the Termination

Date, such Member’s Voluntary Termination Notice will be deemed void, and the Member will

remain subject to these Rules as if it had not given such Voluntary Termination Notice.

A Member’s voluntary termination of membership shall not affect its obligations to the

Corporation, or the rights of the Corporation, with respect to transactions submitted to the

Corporation before the Termination Date. The return of the Member’s Clearing Fund deposit shall

be governed by Section 8 of Rule 4. If a Member is a Tier One Netting Member and an Event

Period were to occur after such Member has submitted its Voluntary Termination Notice but prior

to the Termination Date, in order for such Member to benefit from its Loss Allocation Cap pursuant

to Section 7 of Rule 4, the Member will need to comply with the provisions of Section 7b of Rule

4 and submit a Loss Allocation Withdrawal Notice, which notice, upon submission, shall

supersede and void any pending Voluntary Termination Notice previously submitted by the

Member.

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Section 14 – Excess Capital Premium

If a Netting Member maintains an Excess Capital Ratio greater than 1.0, then the

Corporation may require the Netting Member to make and maintain an additional deposit to the

Clearing Fund in an amount equal to the product of its Excess Capital Differential multiplied by

its Excess Capital Ratio. Any such additional deposit required by the Corporation shall be

considered included as part of the Netting Member’s Required Fund Deposit.

The Corporation also will reserve the right to: (i) collect an amount less than the Excess

Capital Premium (including no premium) based on specific circumstances (such as a Netting

Member being subject to an unexpected haircut or capital charge that does not fundamentally

change its risk profile), and (ii) return all or a portion of the Excess Capital Premium (or such

lesser amount) if it believes that the Netting Member’s risk profile does not require the

maintenance of that amount.

‡

FICC has identified the following guidelines, which are intended to be illustrative, but not limited, where the

premium will not be imposed: management will look to see whether the premium results from unusual or non-

recurring circumstances where management believes it would not be appropriate to assess the premium.

Examples of such circumstances are a member’s late submission of trade data for comparison that would

otherwise reduce the margined position if timely submitted or an unexpected haircut or capital charge that does

not fundamentally change its risk profile.

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RULE 3A – SPONSORING MEMBERS AND SPONSORED MEMBERS

Section 1 – General

The Corporation may permit the establishment of a sponsored membership relationship

between a Netting Member that is approved as a Sponsoring Member and one or more Persons

that are accepted by the Corporation as Sponsored Members of that particular Sponsoring Member.

The rights, liabilities and obligations of Sponsoring Members and Sponsored Members

shall be governed by this Rule 3A. References to a “Member” in other Rules shall not apply to

Sponsoring Members nor Sponsored Members, in their respective capacities as such, unless

specifically noted as such in this Rule 3A or in such other Rules.

A Sponsoring Member shall continue to have all of the rights, liabilities and obligations set

forth in these Rules and in any agreement between it and the Corporation pertaining to its status

as a Netting Member, and such rights, liabilities and obligations shall be separate from its rights,

liabilities and obligations as a Sponsoring Member except as contemplated under Sections 10, 11

and 12 of this Rule 3A and under the Sponsoring Member Guaranty.

Section 2 – Qualifications of Sponsoring Members, the Application Process and Continuance

Standards

(a) A Netting Member shall be eligible to apply to become a Category 1 Sponsoring

Member if it: (i) is a Bank Netting Member, (ii) has a level of equity capital of at least $5 billion,

(iii) is Well Capitalized, and (iv) has a bank holding company that is registered under the Bank

Holding Company Act of 1956, as amended, such bank holding company is also Well Capitalized.

A Netting Member that is a Tier One Netting Member, other than an Inter-Dealer Broker Netting

Member, or a Non-IDB Repo Broker with respect to activity in its Segregated Repo Account, shall

be eligible to apply to become a Category 2 Sponsoring Member. The Corporation may require

that a Person be a Netting Member for a time period deemed necessary by the Corporation before

that Person may be considered to become a Sponsoring Member.

(b) (i) Each Netting Member applicant to become a Sponsoring Member shall

complete and deliver to the Corporation an application in such form as may be prescribed

by the Corporation from time to time and any other information requested by the

Corporation. An application to become a Sponsoring Member shall first be reviewed by

the Corporation. The Corporation shall recommend approval or disapproval of the

application to the Board.

(ii) The Corporation may impose financial requirements on a Netting Member

applying to become a Category 2 Sponsoring Member that are greater than financial

requirements applicable to the applicant in its capacity as a Netting Member under Section

4(b) of Rule 2A, based upon the level of the anticipated positions and obligations of such

applicant, the anticipated risk associated with the volume and types of transactions such

applicant proposes to process through the Corporation as a Category 2 Sponsoring

Member, and the overall financial condition of such applicant. The Board shall approve

any increased financial requirements imposed by the Corporation in connection with the

102

approval of an application of a Netting Member to become a Category 2 Sponsoring

Member, and the Corporation shall thereafter regularly review such Category 2 Sponsoring

Member regarding its compliance with such increased financial requirements.

(iii) If the Board denies the application of a Netting Member to become a

Sponsoring Member, such denial shall be handled in the same way as set forth in Section

6 of Rule 2A with respect to membership applications.

(iv) Each Sponsoring Member, or any Netting Member applicant to become

such, shall also furnish to the Corporation such adequate assurances of its financial

responsibility and operational capability within the meaning of Section 7 of Rule 3 as the

Corporation may at any time or from time to time deem necessary or advisable in order to

protect the Corporation and its members, to safeguard securities and funds in the custody

or control of the Corporation and for which the Corporation is responsible, or to promote

the prompt and accurate clearance and settlement of securities transactions. The Board

shall approve any adequate assurances imposed by the Corporation in connection with the

approval of an application of a Netting Member to become a Sponsoring Member, and the

Corporation shall thereafter regularly review such Sponsoring Member regarding its

compliance with such adequate assurances, as appropriate. Any adequate assurances

imposed on a Sponsoring Member by the Corporation after its approval shall be

communicated in writing to the Sponsoring Member, and the Corporation shall thereafter

regularly review such Sponsoring Member regarding its compliance with such adequate

assurances, as appropriate.

(v) Each Sponsoring Member or Netting Member applicant must also have the

successful completion of network and connectivity testing at the current FICC standards

(the scope of such testing to be determined by the Corporation in its sole discretion).

Member shall sign and deliver to the Corporation a Sponsoring Member Agreement whereby the

Netting Member shall agree to any terms and conditions deemed by the Corporation to be

necessary in order to protect itself and its Members. Each Netting Member to become a

Sponsoring Member shall also sign and deliver to the Corporation a Sponsoring Member Guaranty

and a related legal opinion in a form satisfactory to the Corporation.

Nothing in these Rules shall prohibit a Sponsoring Member from seeking reimbursement

from a Sponsored Member for payments made by the Sponsoring Member (whether pursuant to

the Sponsoring Member Guaranty, out of Clearing Fund deposits or otherwise) with respect to

obligations as to which the Sponsored Member is a principal obligor under these Rules, or as

otherwise may be agreed by the Sponsored Member and Sponsoring Member.

(d) Each Sponsoring Member shall submit to the Corporation, within the timeframes

and in the formats required by the Corporation, the reports and information that all Netting

Members are required to submit regardless of type of Netting Member and the reports and

information required to be submitted for its respective type of Netting Member, all pursuant to

Section 2 of Rule 3. Each Sponsoring Member shall submit the Legal Entity Identifier for each of

its Sponsored Member applicants as part of the application of such Sponsored Member applicant.

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Each Sponsoring Member shall provide the Corporation with a Legal Entity Identifier for each of

its Sponsored Members such that the Corporation shall have a current Legal Entity Identifier for

each Sponsored Member at all times. The Sponsoring Member shall indemnify the Corporation,

and its employees, officers, directors, shareholders, agents, and Members (collectively, the “LEI

Indemnified Parties”), for any and all losses, liabilities, expenses and Legal Actions suffered or

incurred by the LEI Indemnified Parties arising from a Sponsoring Member’s failure to have the

current Legal Entity Identifiers of its Sponsored Members on file with the Corporation. “Legal

Action” means and includes any claim, counterclaim, demand, action, suit, countersuit, arbitration,

inquiry, proceeding or investigation before any federal, state or foreign court or other tribunal, or

any investigative or regulatory agency or self-regulatory organization.

(e) Each Member shall maintain or upgrade their network technology, or

communications technology or protocols on the systems that connect to the Corporation to the

version being required and within the time periods as provided by Important Notice posted to the

Corporation’s website.

(f) A Sponsoring Member’s books and records, insofar as they relate to the Sponsored

Member Trades submitted to the Corporation, shall be open to the inspection of the duly authorized

representatives of the Corporation to the same extent provided in Section 10 of Rule 3 for other

Members.

(g) A Sponsoring Member shall promptly inform the Corporation, in writing, if it is no

longer in compliance with the relevant standards and qualifications for applying to become a

Sponsoring Member set forth in this Rule 3A. Notification must take place immediately and in no

event later than 2 business days from the date on which the Sponsoring Member first learns of its

non-compliance. If the Sponsoring Member fails to maintain a standard, the Corporation will, if

necessary, undertake appropriate action to determine the status of the Sponsoring Member and its

continued eligibility as such. In addition, the Corporation may review the financial responsibility

and operational capability of the Sponsoring Member, and otherwise require from the Sponsoring

Member additional reports of its financial or operational condition at such intervals and in such

detail as the Corporation shall determine. In addition, if the Corporation has reason to believe that

a Sponsoring Member may fail to comply with any of the Rules applicable to Sponsoring

Members, it may require the Sponsoring Member to provide it, within such timeframe, and in such

detail, and pursuant to such manner as the Corporation shall determine, with assurances in writing

of a credible nature that the Sponsoring Member shall not, in fact, violate any of these Rules.

With respect to any of its Sponsored Members, a Sponsoring Member shall also submit to

the Corporation written notice (i) within 1 business day of becoming aware that a Sponsored

Member is no longer in compliance with the requirements of subsection (a) of Section 3 of this

Rule 3A, and (ii) at least 90 calendar days prior to the effective date of any Reportable Event

applicable to a Sponsored Member, unless the Sponsoring Member demonstrates that it could not

have reasonably done so, in which case such notice shall be provided as soon as possible.

The Corporation shall assess a fine pursuant to the applicable Fine Schedule in these Rules

against any Sponsoring Member who fails to notify the Corporation as required by this subsection

(g) of Section 2 of this Rule 3A.

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In the event that a Sponsoring Member fails to maintain the relevant requirements of the

Rules, the Sponsoring Member Agreement, or the Sponsoring Member Guaranty, the Corporation

shall have the right to cease to act for the Sponsoring Member in its capacity as a Sponsoring

Member pursuant to Section 14 of this Rule 3A, unless the Sponsoring Member requests that such

action not be taken and the Corporation determines that, depending upon the specific

circumstances and the record of the Sponsoring Member, it is appropriate instead to establish for

such Sponsoring Member a time period, which shall be determined by the Corporation and which

shall be no longer than 30 calendar days unless otherwise determined by the Corporation, during

which the Sponsoring Member must resume compliance with such requirements. In the event that

the Sponsoring Member is unable to satisfy such requirements within the time period specified by

the Corporation, the Corporation shall, pursuant to these Rules, cease to act for the Sponsoring

Member in its capacity as a Sponsoring Member pursuant to Section 14 of this Rule 3A.

(h) If a Category 1 Sponsoring Member falls below one or more of the required

minimum financial standards for being a Sponsoring Member set forth in subsection (a) above, it

shall, for the period beginning on the day on which it fell below such level and continuing until

the later of the 90

calendar day after the date on which (i) it returned to compliance with such

standard, or (ii) the Corporation received notice of the applicable violation, have a Sponsoring

Member Omnibus Account Required Fund Deposit equal to the greater of either: (x) the sum of

the normal calculation of its Sponsoring Member Omnibus Account Required Fund Deposit plus

$1,000,000, or (y) 125 percent of the normal calculation of its Sponsoring Member Omnibus

Account Required Fund Deposit. If, in the case of a Category 2 Sponsoring Member, the sum of

the VaR Charges of its Sponsoring Member Omnibus Account(s) and its Netting Member

Accounts exceeds its Netting Member Capital, the Category 2 Sponsoring Member shall not be

permitted to submit activity into its Sponsoring Member Omnibus Account(s), unless otherwise

determined by the Corporation in order to promote orderly settlement.

(i) A Sponsoring Member may voluntarily elect to terminate its status as a Sponsoring

Member, with respect to all Sponsored Members or with respect to one or more Sponsored

Members from time to time, by providing the Corporation with a written notice of such

termination (hereinafter, “Sponsoring Member Voluntary Termination Notice”). The Sponsoring

Member shall specify in the Sponsoring Member Voluntary Termination Notice a desired date for

the termination of the Sponsoring Member’s status as such with respect to the Sponsored

Member(s) as to which the Sponsoring Member has terminated such status (hereinafter, the

“Former Sponsored Members”), which date shall not be prior to the scheduled final settlement

date of any remaining obligation owed by the Sponsoring Member with respect to the Former

Sponsored Members to the Corporation as of the time such Sponsoring Member Voluntary

Termination Notice is submitted to the Corporation, unless otherwise approved by the Corporation.

No later than 10 Business Days after the receipt of the Sponsoring Member Voluntary Termination

Notice from such Sponsoring Member, the Corporation shall notify the Sponsoring Member that

such notice has been accepted and the date the termination shall be effective (hereinafter, the

“Sponsoring Member Termination Date”).

If a Sponsoring Member has terminated its status as a Sponsoring Member with respect to

all Sponsored Members, the Corporation shall post an Important Notice to all Members

announcing the termination of the Sponsoring Member’s status as a Sponsoring Member and the

Sponsoring Member Termination Date.

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As of the Sponsoring Member Termination Date, the Sponsoring Member shall no longer

be eligible to submit trades on behalf of its Former Sponsored Members and each of its Former

Sponsored Members shall cease to be a Sponsored Member unless it is the Sponsored Member of

another Sponsoring Member. If any trade is submitted to the Corporation by the Sponsoring

Member on behalf of its Former Sponsored Members that is scheduled to settle on or after the

Sponsoring Member Termination Date, such Sponsoring Member’s Sponsoring Member

Voluntary Termination Notice will be deemed void, and the Sponsoring Member will remain

subject to this Rule as if it had not given such Sponsoring Member Voluntary Termination Notice.

A Sponsoring Member’s voluntary termination of its status as such, in whole or in part,

shall not affect its obligations to the Corporation, or the rights of the Corporation, including under

the Sponsoring Member Guaranty, with respect to Sponsored Member Trades submitted to the

Corporation before the applicable Sponsoring Member Termination Date. Any Sponsored

Member Trades which have been Novated by the Corporation shall continue to be processed by

the Corporation.

(j) Any non-public information furnished to the Corporation pursuant to this Rule shall

be held in confidence as may be required under the laws, rules and regulations applicable to the

Corporation that relate to the confidentiality of records. Each Sponsoring Member shall maintain

DTCC Confidential Information in confidence to the same extent and using the same means it uses

to protect its own confidential information, but no less than a reasonable standard of care and shall

not use DTCC Confidential Information or disclose DTCC Confidential Information to any third

party except as necessary to perform such Sponsoring Member’s obligations under these Rules or

as otherwise required by applicable law. Each Sponsoring Member acknowledges that a breach

of its confidentiality obligations under these Rules may result in serious and irreparable harm to

the Corporation and/or DTCC for which there is no adequate remedy at law. In the event of such

a breach by the Sponsoring Member, the Corporation and/or DTCC shall be entitled to seek any

temporary or permanent injunctive or other equitable relief in addition to any monetary damages

hereunder.

Section 3 – Qualifications of Sponsored Members, Approval Process and Continuance Standard

(a) A Person shall be eligible to become a Sponsored Member if: (i) it is sponsored

into membership by a Sponsoring Member, and (ii) it (A) is a “qualified institutional buyer” as

defined by Rule 144A under the Securities Act of 1933, as amended, or (B) is a legal entity that,

although not organized as an entity specifically listed in paragraph (a)(1)(i)(H) of Rule 144A under

the Securities Act of 1933, as amended, satisfies the financial requirements necessary to be a

“qualified institutional buyer” as specified in that paragraph. The Corporation shall have the right

to rely on the representation provided by the Sponsoring Member regarding satisfaction of (ii).

(b) Each time that a Sponsoring Member wishes to sponsor a Person into membership,

it shall provide the Corporation with the Legal Entity Identifier of the Person and the representation

referred to in subsection (a)(ii) immediately above, as well as any additional information in such

form as may be prescribed by the Corporation. The Corporation shall approve or disapprove

Persons as Sponsored Members. If the Corporation denies the request of a Sponsoring Member to

add a Person as a Sponsored Member, such denial shall be handled in the same manner as set forth

in Section 6 of Rule 2A with respect to membership applications except that the written statement

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referred to therein shall be provided to both the Sponsoring Member and the Person seeking to

become a Sponsored Member.

Corporation a Sponsored Member Agreement whereby the Person shall agree to any terms and

conditions deemed by the Corporation to be necessary in order to protect itself and its Members.

Each Person to become a Sponsored Member that shall be an FFI Member must be FATCA

Compliant and is subject to the requirements of Section 9(iii) of Rule 3.

(d) The Corporation may, pursuant to Section 13 of this Rule 3A, cease to act for a

Sponsored Member that is no longer in compliance with the requirements of subsection (a) of this

Section 3.

(e) A Sponsored Member may voluntarily elect to terminate its membership by

providing the Corporation with a written notice of such termination (hereinafter, the “Sponsored

Member Voluntary Termination Notice”). The Sponsored Member shall specify in the Sponsored

Member Voluntary Termination Notice a desired date for the termination, which date shall not be

prior to the scheduled final settlement date of any remaining obligation owed by the Sponsored

Member to the Corporation as of the time such Sponsored Member Voluntary Termination Notice

is submitted to the Corporation, unless otherwise approved by the Corporation. No later than 10

Business Days after the receipt of the Sponsored Member Voluntary Termination Notice from

such Sponsored Member, the Corporation shall notify the Sponsored Member and all Sponsoring

Members for that Sponsored Member that such notice has been accepted and the date the

termination shall be effective (hereinafter the “Sponsoring Member Termination Date”).

The Corporation’s shall post an Important Notice to all Members announcing the

termination of the Sponsored Member’s membership with the Corporation and the effective date

of such termination (hereinafter the “Sponsored Member Termination Date”). As of the Sponsored

Member Termination Date, the relevant Sponsoring Member shall no longer be eligible to submit

trades on behalf of the Sponsored Member. If any trade is submitted to the Corporation by the

relevant Sponsoring Member on behalf of the Sponsored Member that is scheduled to settle on or

after the Sponsored Member Termination Date, such Sponsored Member’s Sponsored Member

Voluntary Termination Notice will be deemed void, and the Sponsored Member will remain

subject to this Rule as if it had not given such Sponsored Member Voluntary Termination Notice.

A Sponsored Member’s voluntary termination shall not affect its obligations to the

Corporation, or the rights of the Corporation, including under the Sponsoring Member Guaranty,

with respect to Sponsored Member Trades submitted to the Corporation before the Sponsored

Member Termination Date, and the Sponsoring Member Guaranty shall remain in effect to cover

all outstanding obligations of the Sponsored Member to the Corporation that are within the scope

of such Sponsoring Member Guaranty.

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Section 4 – Compliance with Laws

Each of the Sponsoring Members and Sponsored Members shall comply in all material

respects with all applicable laws, including applicable laws relating to securities, taxation and

money laundering, as well as global sanctions laws, in connection with the use of the Corporation’s

services.

Section 5 – Sponsored Member Trades

Sponsored Member Trades (other than Sponsored GC Trades) may be any type of

transaction eligible for submission to the Corporation for netting with the exception of Netting-

Eligible Auction Purchases, Brokered Transactions, and GCF Repo Transactions.

Rule 14 (Forward Trades) shall apply to Sponsored Member Trades (other than Sponsored

GC Trades) that are Forward Trades in the same manner in which it applies to Netting Members

with the exception that the Report on Forward Net Settlement Positions shall be issued to the

Sponsoring Member as processing agent for its Sponsored Members. The Corporation’s provision

of such Report to the Sponsoring Member shall constitute satisfaction of the Corporation’s

obligations to provide such Report to the affected Sponsored Members.

Rule 18 (Special Provisions for Repo Transactions) shall apply to Sponsored Member

Trades (other than Sponsored GC Trades) that are Repo Transactions in the same manner in which

it applies to Netting Members.

Section 6 – Trade Submission and the Comparison System

(a) The Corporation’s Schedule of Timeframes shall be applicable to Sponsored

Member Trades, other than Sponsored GC Trades to which the Corporation’s Schedule of

Sponsored GC Trade Timeframes shall be applicable.

(b) The Corporation has established standards for designating those Members who

shall be required to participate in annual business continuity and disaster recovery testing that the

Corporation reasonably determines are, taken as a whole, the minimum necessary for the

maintenance of fair and orderly markets in the event that business continuity and disaster recovery

plans are required to be activated. The standards shall take into account factors such as: (1)

activity-based thresholds; (2) significant operational issues of the Member during the twelve