Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Modify the DTC Settlement Service Guide and DTC Rules as They Relate to the DTC Net Debit Cap

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-104484; File No. SR-DTC-2025-019]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Modify the DTC Settlement Service Guide and DTC Rules as They Relate to the DTC Net Debit Cap</SUBJECT> <DATE>December 22, 2025.</DATE> Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)  <SU>1</SU> <FTREF/> and Rule 19b-4 thereunder, <SU>2</SU> <FTREF/> notice is hereby given that on December 18, 2025, The Depository Trust Company (“DTC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change  <SU>3</SU> <FTREF/> as described in Items I, II and III below, which Items have been prepared by the clearing agency. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. <FTNT> <SU>1</SU>  15 U.S.C. 78s(b)(1). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.19b-4. </FTNT> <FTNT> <SU>3</SU>  Each capitalized term not otherwise defined herein has its respective meaning as set forth in the Rules, By-Laws and Organization Certificate of DTC (“Rules”), <E T="03">available at www.dtcc.com/-/media/Files/Downloads/legal/rules/dtc_rules.pdf</E> or the DTC Settlement Service Guide, <E T="03">available at www.dtcc.com/-/media/Files/Downloads/legal/service-guides/Settlement.pdf.</E> </FTNT> <HD SOURCE="HD1">I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change</HD> The proposed rule change would (i) modify the DTC Settlement Service Guide (“Settlement Guide”)  <SU>4</SU> <FTREF/> to (a) change how DTC sets its maximum debit caps for Participants, including Unaffiliated Participants, <SU>5</SU> <FTREF/> and Affiliated Families, <SU>6</SU> <FTREF/> (b) incorporate Unaffiliated Participants into the calculation and allocation of DTC's Liquidity Fund, a component of the Required Participants Fund Deposit, and (c) make related definitional, technical and clarifying changes to the Settlement Guide; and (ii) modify the Rules to account for the Aggregate Affiliated Family Net Debit of an Affiliated Family, <SU>7</SU> <FTREF/> as applicable, all of which is described below. <FTNT> <SU>4</SU>  The Settlement Guide is a Procedure of DTC. Pursuant to the Rules, the term “Procedures” means the Procedures, service guides, and regulations of DTC adopted pursuant to Rule 27, as amended from time to time. Rule 1, Section 1, <E T="03">supra</E> note 3. Procedures are binding on DTC and each Participant in the same manner that they are bound by the Rules. Rule 27, <E T="03">supra</E> note 3. </FTNT> <FTNT> <SU>5</SU>  “Unaffiliated Participant” would be defined by this proposed rule change to mean “a Participant that is not included in an Affiliated Family.” </FTNT> <FTNT> <SU>6</SU>  “Affiliated Family” means each Participant that controls or is controlled by another Participant and each Participant that is under the common control of any Person. For purposes of this definition, “control” means the direct or indirect ownership of more than 50 percent of the voting securities or other voting interests of any Person. Rule 1, <E T="03">supra</E> note 3. </FTNT> <FTNT> <SU>7</SU>  “Aggregate Affiliated Family Net Debit” would be defined by this proposed rule change to mean “the amount by which the algebraic sum of all money debits and charges to the Accounts of an Affiliated Family exceeds the sum of all money credits thereto.” </FTNT> <HD SOURCE="HD1">II. Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> In its filing with the Commission, the clearing agency included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. <HD SOURCE="HD2">(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> <HD SOURCE="HD3">1. Purpose</HD> The proposed rule change would (i) modify the Settlement Guide to (a) change how DTC sets its maximum debit caps for Participants, including Unaffiliated Participants, and Affiliated Families, (b) incorporate Unaffiliated Participants into the calculation and allocation of DTC's Liquidity Fund, a component of the Required Participants Fund Deposit, and (c) make related definitional, technical and clarifying changes to the Settlement Guide; and (ii) modify the Rules to account for the Aggregate Affiliated Family Net Debit of an Affiliated Family, as applicable, all of which is described below. <HD SOURCE="HD3">Background</HD> Through its settlement services, DTC provides book-entry transfer and pledge of interests in Eligible Securities and end-of-day net funds settlement. DTC maintains a liquidity structure designed to facilitate its maintenance of sufficient financial resources to complete settlement each Business Day notwithstanding the failure to settle of a defaulting Participant, or Affiliated Family of Participants, with the largest settlement obligation. In this effort, the Collateral Monitor  <SU>8</SU> <FTREF/> and Net Debit Cap  <SU>9</SU> <FTREF/> risk controls are employed by DTC to help ensure that each Delivery Versus Payment (“DVP”)  <SU>10</SU> <FTREF/> obligation of a Participant that is the Receiver  <SU>11</SU> <FTREF/> can satisfy its end-of-day net settlement obligation, if any. <FTNT> <SU>8</SU>  “Collateral Monitor” of a Participant, as used with respect to its obligations to DTC, means, on any Business Day, the record maintained by DTC for the Participant which records, in the manner specified in Procedures, the algebraic sum of (i) the Net Credit or Debit Balance of the Participant and (ii) the aggregate Collateral Value of the Collateral of the Participant. Rule 1, <E T="03">supra</E> note 3. </FTNT> <FTNT> <SU>9</SU>  “Net Debit Cap” of a Participant means an amount determined by DTC in the manner specified in the Procedures; provided, however, that the maximum Net Debit Cap of the Participant shall be the least of (i) a maximum amount applicable to all Participants based on the liquidity resources of DTC, (ii) the Settling Bank Net Debit Cap applicable to such Participant, or (iii) any other amount determined by DTC, in its sole discretion. Rule 1, Section 1, <E T="03">supra</E> note 3. The aggregate Net Debit Cap of an Affiliated Family is referred to as the “Aggregate Affiliated Family Net Debit Cap.” Rule 1, <E T="03">supra</E> note 3. </FTNT> <FTNT> <SU>10</SU>  “Delivery Versus Payment” means a Delivery against a settlement debit to the Account of the Receiver, as provided in Rule 9(A) and Rule 9(B) and as specified in the Procedures. Rule 1, <E T="03">supra</E> note 3. </FTNT> <FTNT> <SU>11</SU>  “Receiver,” as used with respect to a Delivery of a Security, means the Person which receives the Security. Rule 1, <E T="03">supra</E> note 3. </FTNT> <E T="03">Collateral Monitor.</E> The Collateral Monitor is a calculation by which DTC measures the sufficiency of the Collateral in a Participant's account to cover the Participant's net settlement obligation. <SU>12</SU> <FTREF/> The Collateral Monitor prevents the completion of transactions that would cause a Participant's Net Debit Balance  <SU>13</SU> <FTREF/> to exceed the value of Collateral in its account. <SU>14</SU> <FTREF/> In other words, the settlement obligation of each Participant must be fully collateralized, based on the Collateral Monitor. This is designed so that if a Participant fails to pay for its settlement obligation, DTC will have sufficient Collateral to obtain funding for settlement. <FTNT> <SU>12</SU>  Settlement Guide, <E T="03">supra</E> note 3, at 5 and 61. </FTNT> <FTNT> <SU>13</SU>  “Net Debit Balance” of a Participant means the amount by which the Gross Debit Balance of the Participant exceeds its Gross Credit Balance. Rule 1, <E T="03">supra</E> note 3. “Gross Credit Balance” of a Participant on any Business Day means the aggregate amount of money DTC credits to all the Accounts in all the Account Families of the Participant without accounting for any amount of money DTC debits or charges thereto. <E T="03">Id.</E> “Gross Debit Balance” of a Participant on any Business Day means the aggregate amount of money DTC debits or charges to all the Accounts in all the Account Families of the Participant without accounting for any amount of money DTC credits thereto. <E T="03">Id.</E> </FTNT> <FTNT> <SU>14</SU>  “Collateral” of a Participant, as used with respect to its obligations to DTC, means, on any Business Day, the sum of (i) the Actual Participants Fund Deposit of the Participant, (ii) the Actual Preferred Stock Investment of a Participant, (iii) all Net Additions of the Participant, and (iv) any settlement progress payments (“SPPs”) wired by the Participant to the account of DTC at the Federal Reserve Bank of New York in the manner specified in the Procedures. Rule 1, <E T="03">supra</E> note 3. SPPs are funds that may be wired to DTC to increase a Participant's Collateral Value for its Collateral Monitor and reduce a Participant's Net Debit Balance. Settlement Guide, <E T="03">supra</E> note 3, at 62. </FTNT> <E T="03">Net Debit Caps.</E> The Net Debit Cap of an individual Participant and the Aggregate Affiliated Family Net Debit Cap of an Affiliated Family (collectively, “Debit Caps”) limit the Net Debit Balance that Participants and Affiliated Families can incur, irrespective of available Collateral. Each Partic ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 40k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━