Participant Roles in the SFT Clearing Service

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A.   The following table outlines the roles and responsibilities for each type of participant in the SFT Clearing service:

SFT Clearing Service Roles and Responsibilities
Role Description

Approved SFT Submitter

Submits a matched SFT to NSCC on a locked-in basis. May be an NSCC member or a third-party vendor. All data submitted into the SFT Clearing service must come through an Approved SFT Submitter who has been authorized to submit SFTs to NSCC on behalf of one or more NSCC members.

Prior to submitting an SFT to NSCC, the Approved SFT Submitter is expected to:

  • Perform matching functions.
  • Determine eligibility for central clearing services.
  • Submit the data to NSCC in near real-time and support subsequent actions on novated SFTs.

All Approved SFT Submitters, regardless of whether or not they are an NSCC member, are expected to adhere to specific participation requirements, such as proven operational capabilities and other requirements as outlined in the NSCC Rules & Procedures and the Approved SFT Submitter Agreement.

NSCC Full‑Service Member

Any NSCC full-service member that files a W-9 with the IRS can apply to participate in the SFT Clearing service. As described above, participation requires opening a separate SFT Clearing account at NSCC that will be eligible only for the clearance of SFT activities. The SFT Clearing account must be linked to a DTC settling account.

Sponsoring Member

An NSCC full-service member permitted to novate to NSCC its principal SFTs with its Sponsored Members. The Sponsoring Member is responsible to NSCC for:

  • Posting all Clearing Funds associated with the SFT activity of its Sponsored Members.
  • Providing a backup guaranty to NSCC for its Sponsored Members’ settlement obligations. This means that in the event that one or more of its Sponsored Members default and do not satisfy their settlement obligations to NSCC, the Sponsoring Member is required to satisfy those obligations.
  • Responsible for any default loss allocated to its Sponsored Members and its own loss allocation as an NSCC full-service member.

Sponsored Member

 Eligible institutional client of a Sponsoring Member. A Sponsored Member is permitted to engage in two-directional SFT activities, meaning it can borrow or lend securities through a linked account of its Sponsoring Member on the books of NSCC.

Agent Clearing Member

An NSCC full-service member permitted to novate to NSCC SFTs that it has executed as agent on behalf of its customers with a third-party NSCC member. The Agent Clearing Member is responsible to NSCC for:

  • Posting all Clearing Funds associated with the activity of its customers.

  • Covering any default loss allocatable to its customers, as well as its own default loss allocation as an NSCC full-service member.

However, unlike a Sponsoring Member, an Agent Clearing Member is not required to provide a backup guaranty to NSCC for its customers’ obligations. This is because the Agent Clearing Member is liable as a principal on all activities the Agent Clearing Member submits to NSCC on behalf of its customers.

A.   Yes, NSCC allows lenders and borrowers to submit pre-established bilaterally settled SFTs into the SFT Clearing service. When NSCC receives a message from an Approved SFT Submitter regarding a pre-established bilaterally settled SFT, it immediately generates an off-leg position that novates to NSCC (no shares need to move because they are already with the borrower). Members receive acceptance of the submitted on-leg instruction through the Universal Trade Capture (UTC) system and receive the PEND of the off-leg instruction through the Securities Financing Accounting System (SAS) after receiving the on-leg instruction from the UTC system.

It is important that any memo positions related to a bilaterally settled SFT (from Stock Loan DO reason codes 10s and 20s) need to be updated or deleted from tracking at DTC by the two counterparties directly using the Stock Loan REPO Adjustment Menu (SLRM) function.

SFT Clearing Account Numbers

A.   Members are required to obtain new account numbers for SFT Clearing activity. This is necessary so that NSCC can perform margining separately from the member’s regular street-side cash activity.

A.   DTC membership is required to participate in the SFT Clearing service because all street-side SFTs settle at DTC.

A.   To support settlement of the SFT activity, each NSCC full-service member is required to identify a DTC account that is associated with its SFT activity. For more information about the NSCC and DTC account linkage, see the SFT Clearing General User Guide available in the DTCC Learning Center.

A.   Firms can have multiple SFT Clearing account numbers, each pertaining to a different role that it takes on to play within the SFT Clearing service. For example, in its capacity as an Agent Clearing Member, an NSCC member could have a customer omnibus lending account and a separate customer omnibus borrowing account. It could also have a Sponsoring Member account and a proprietary account.