(PROCEDURE XV) 340 PROCEDURE XV. CLEARING FUND FORMULA AND OTHER MATTERS 1 I.(A) Clearing Fund Formula for Members Each Member of the Corporation, except as otherwise provided in this Procedure, is required to contribute to the Clearing Fund maintained by the Corporation an amount calculated by the Corporation equal to: (1) For CNS Transactions (a) (i) The volatility of such Member’s Net Unsettled Positions, which shall be the highest resultant value among the following: I. an estimation of volatility calculated 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 Exchange Act, provided, however, that not less than two standard deviations’ volatility shall be calculated under any model chosen. Such calculation shall be made utilizing (1) such assumptions and based on such historical data as the Corporation deems reasonable and shall cover such range of historical volatility as the Corporation from time to time deems appropriate; and (2) each of the following estimations: A. an exponentially-weighted moving average volatility estimation using a decay factor of less than 1, and B. an evenly-weighted volatility estimation using a look-back period of not less than 253 days. The higher of the two estimations described in (A) and (B) above, shall be the “Core Parametric Estimation”. In calculating these estimations of volatility, the Corporation shall include 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 groups: (i) large and medium capitalization equities, (ii) small capitalization equities, (iii) micro- capitalization equities, and (iv) exchange traded products (“ETPs”). II. if the absolute value of the largest non-index position in the portfolio represents more than 30 percent of the value of the entire portfolio (the “concentration threshold”), an amount determined by multiplying the gross 1 All calculations shall be performed daily or, if the Corporation deems it appropriate, on a more frequent basis. (PROCEDURE XV) 341 market value of such position by a percentage designated by the Corporation, which percentage shall be not less than 10 percent. Such percentage shall be determined by selecting the largest of the 1st and 99th percentiles of three-day returns of a composite set of equities, using a look-back period of not less than 10 years that includes a one-year stress period, 2 and then rounding the result up to the nearest whole percentage. The concentration threshold would be no more than 30 percent, and would be determined by the Corporation from time to time and calibrated based on the portfolio’s backtesting results during a time period of not less than the previous 12 months. III. the sum of: A. the net directional market value of the portfolio, which shall be the absolute difference between the market value of the long positions and the short positions in the portfolio, multiplied by a percentage; such percentage shall be determined by the Corporation based on a percentile of the annual historical volatility levels of relevant equity indices (which shall be no less than the historical minimum volatility of the indices), as determined by the Corporation from time to time; and B. the balanced market value of the portfolio, which shall be the lowest corresponding market value of long positions and short positions in the portfolio, multiplied by a percentage; such percentage shall be a fraction of the percentage used in (A) above, determined by the Corporation from time to time by considering the model backtesting performance of the applicable balanced portfolios. (ii) (A) The Corporation shall have the discretion to exclude from the calculations in subsection (i) above Net Unsettled Positions in: (l) securities that are not Illiquid Securities whose volatility is less amenable to statistical analysis, and shall instead calculate an amount by multiplying the absolute value of such positions by a percentage designated by the Corporation, which percentage shall not be less than 10%; and (II) securities that are not unit investment trusts whose volatility is amenable to generally accepted statistical analysis only in a complex manner, and shall instead calculate an amount by 2 If the one-year stress period overlaps with the ten-year look-back, only the non-overlapping period will be combined with the look-back window. (PROCEDURE XV) 342 multiplying the absolute value of such positions by a percentage designated by the Corporation, which percentage shall be not less than 2%. (B) The Corporation shall exclude from the calculations in subsection (i) above Net Unsettled Positions in: (I) Illiquid Securities, and shall instead (A) group such securities by price level, and Illiquid Securities that are sub-penny securities shall be separately grouped by long or short positions, and (B) calculate an amount for each such grouping by multiplying the absolute value of the positions in each group by a percentage designated by the Corporation at least annually, which percentage shall be based on the security’s Current Market Price, 3 and shall be the highest of (1) 10%, (2) a percent benchmarked to be sufficient to cover 99.5th percentile of the historical 3-day return of each group in each Member’s portfolio using a look-back period of no less than 5 years, and (3) a percent benchmarked to be sufficient to cover 99th percentile of the historical 3-day return of each group in each Member’s portfolio using a look- back period of no less than 5 years after incorporating a fixed transaction cost equal to one-half of the estimated bid-ask spread; and (II) unit investment trusts, and shall instead calculate an amount by multiplying the absolute value of such positions by a percentage designated by the Corporation at least annually, which percentage shall be based on the security’s Current Market Price, and shall be the highest of (1) 2% and (2) a percent benchmarked to be sufficient to cover 99.5th percentile of the historical 3-day return of unit investment trusts in each Member’s portfolio using a look-back period of no less than 5 years. The Corporation shall exclude from the calculations in subsection (i) above and this subsection (ii), (A) Net Unsettled Positions in municipal and corporate bonds, which are addressed in subsection (iii) below, and (B) long Net Unsettled Positions in Family-Issued Securities, which are addressed in subsection (iv) below. (iii) The Corporation shall exclude from the calculations in subsections (i) and (ii) above Net Unsettled Positions in corporate and municipal bonds. The amount of Clearing Fund required with respect to Net Unsettled Positions in corporate and municipal bonds shall be determined by multiplying the absolute value of such positions by a percentage designated by the Corporation, which shall be not less than 2%, calculated as follows: 3 The Current Market Price of each sub-penny security is deemed to be one cent. (PROCEDURE XV) 343 (A) Corporate bonds shall be categorized into groups according to the bonds’ “remaining time to maturity” and credit rating. From time to time, but not less frequently than annually, the Corporation shall establish for each category of corporate bonds a percentage calculated using historical market price volatility of a benchmark index. Such percentage shall be based on (1) the historical returns of the applicable benchmark index; (2) a pre-determined look-back period, which shall not be shorter than 10 years; and (3) a pre-determined calibration percentile, which shall not be less than 99%. (B) Municipal bonds shall be grouped by “remaining time to maturity” and credit rating, and municipal bonds that are rated BBB+ or lower, or that are not rated, shall also be separately categorized by municipal sector. From time to time, but not less frequently than annually, the Corporation shall establish a percentage applicable to each grouping. Such percentage shall be based on (1) the historical returns of applicable benchmark indices, such as tenor-based indices (i.e., based on time to maturity), municipal bond sector-based indices, and high-yield indices; (2) a pre- determined look-back period, which shall not be shorter than 10 years; and (3) a pre-determined calibration percentile, which shall not be less than 99%. In extraordinary circumstances where the Corporation determines that a certain municipality or issuer of municipal bonds presents unique risks that are not captured by the grouping set forth herein, NSCC may, in its discretion, apply the highest percentage being applied to any municipal bond group pursuant to this subsection (B) to municipal bonds issued by such municipality or issuer. (iv) The Corporation shall exclude from the calculations in subsections (i) and (ii) above long Net Unsettled Positions in Family-Issued Securities. The amount of Clearing Fund required with respect to long Net Unsettled Positions in Family- Issued Securities shall be determined by multiplying the absolute value of such positions by a percentage designated by the Corporation; such percentage shall be (A) no less than 80% for long Net Unsettled Positions in fixed income securities that are Family-Issued Securities, and (B) 100% for long Net Unsettled Positions in equity securities that are Family-Issued Securities; plus (b) The net debit of each day’s difference between (x) the contract price of such Member’s Regular Way, When-Issued and When-Distributed net positions (excluding transactions submitted through the ID Net service that have not yet passed Settlement Date and its fail positions, and (y) the Current Market Price for such positions 4 (such difference to be known as the “Mark-to-Market”); provided that the Corporation may, but shall not be required to, exclude from this 4 For fail positions, the contract price used for this purpose is the prior day’s Market Price. (PROCEDURE XV) 344 calculation any shares delivered by the Member in the night cycle to satisfy all or any portion of a short position; plus (c) An additional payment (“special charge”) from Members in view of price fluctuations in or volatility or lack of liquidity of any security. The Corporation shall make any such determination based on such factors as the Corporation determines to be appropriate from time to time; plus (d) An amount that is calculated by multiplying the Current Market Value for such Member’s aggregate CNS Fails Positions by (i) 5% for Members rated 1 through 4 on the Credit Risk Rating Matrix, (ii) 10% for Members rated 5 or 6 on the Credit Risk Rating Matrix, or (iii) 20% for Members rated 7 on the Credit Risk Rating Matrix; plus (e) a margin requirement differential component charge calculated as the sum of the exponentially weighted moving average (“EWMA”) of the daily positive changes over a 100-day look back period in the Member’s (i) Mark-to-Market component and (ii) volatility component, times a multiplier calibrated based on backtesting results; plus (f) a coverage component charge calculated as the EWMA of the Member’s daily backtesting coverage deficiency amount over a 100-day look back period; the Member’s backtesting deficiency amount for each day is determined as the difference between the simulated profit and loss on the Member’s portfolio and the sum of the Member’s (i) volatility component and (ii) margin requirement differential component. plus (g) A Margin Liquidity Adjustment (“MLA”) charge shall apply to a Member’s Net Unsettled Positions, other than long Net Unsettled Positions in Family-Issued Securities. For purposes of calculating this charge, Net Unsettled Positions shall be categorized into the following asset groups: (1) equities (excluding Illiquid Securities), (2) Illiquid Securities, (3) unit investment trusts (“UITs”), (4) municipal bonds (including municipal bond ETPs), and (5) corporate bonds (including corporate bond ETPs). The equities asset group shall be further segmented into the following subgroups: (i) micro-capitalization equities, (ii) small capitalization (PROCEDURE XV) 345 equities, (iii) medium capitalization equities, (iv) large capitalization equities, (v) treasury ETPs, and (vi) all other ETPs. The Corporation shall first calculate a measurement of market impact cost for Net Unsettled Positions in each of the asset groups or subgroups, as described below. i. For Net Unsettled Positions in the market capitalization subgroups of the equities asset group, by multiplying four components: 1. an impact cost coefficient that is a multiple of the one-day market volatility of that subgroup, 2. the gross market value of the Net Unsettled Position in that subgroup, 3. the square root of the gross market value of the Net Unsettled Position in that subgroup in the portfolio divided by an assumed percentage of the average daily trading volume of that subgroup, and 4. a measurement of the concentration of each Net Unsettled Position in that subgroup. ii. For Net Unsettled Positions in the Illiquid Securities, UIT, municipal bond, and corporate bond asset groups and for Net Unsettled Positions in the treasury ETP and other ETP subgroups of the equities asset group, by multiplying three components: 1. an impact cost coefficient that is a multiple of the one-day market volatility of that asset group or subgroup, 2. the gross market value of the Net Unsettled Position in that asset group or subgroup, and 3. the square root of the gross market value of the Net Unsettled Position in that asset group or subgroup in the portfolio divided by an assumed percentage of the average daily trading volume of that asset group or subgroup. For each asset group and equities subgroup, the calculated market impact cost shall be compared to a portion of the volatility charge applicable to Net Unsettled Positions (as determined by Section I.(A)(1)(a) of this Procedure XV). If the ratio of the calculated market impact cost to the portion of the volatility charge is greater than a threshold, to be determined by the Corporation from time to time, an MLA charge will be applicable to that asset group or subgroup. If the ratio of these two amounts is equal to or less than the threshold, an MLA charge will not be applicable to that asset group or subgroup. (PROCEDURE XV) 346 When applicable, an MLA charge for each asset group or subgroup would be calculated as a proportion of the product of (1) the amount by which the ratio of the calculated market impact cost to the applicable 1-day volatility charge exceeds the threshold, and (2) the 1-day volatility charge allocated to that asset group or subgroup. All MLA charges for each of the equities subgroups shall be added together to result in one MLA charge for the equities subgroup. All MLA charges for each of the asset groups shall be added together to result in a total MLA charge. The Corporation may apply a downward adjusting scaling factor to the total MLA charge based on the ratio of calculated market impact cost to a portion of the applicable volatility charge, where a higher ratio would trigger a larger downward adjustment of the MLA charge and a lower ratio would trigger no downward adjustment of the MLA charge. (2) For Balance Order Transactions (a) (i) The volatility of such Member’s Net Balance Order Unsettled Positions, which shall be the highest resultant value among the following: I. an estimation of volatility calculated 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 Exchange Act, provided, however, that not less than two standard deviations’ volatility shall be calculated under any model chosen. Such calculation shall be made utilizing (1) such assumptions and based on such historical data as the Corporation deems reasonable and shall cover such range of historical volatility as the Corporation from time to time deems appropriate; and (2) each of the following estimations: A. an exponentially-weighted moving average volatility estimation using a decay factor of less than 1, and B. an evenly-weighted volatility estimation using a look-back period of not less than 253 days. The higher of the two estimations described in (A) and (B) above, shall be the “Core Parametric Estimation”. In calculating these estimations of volatility, the Corporation shall include an additional bid-ask spread risk charge measured by multiplying the gross market value of each Net Balance Order 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: (i) large and medium capitalization equities, (ii) small capitalization equities, (iii) micro-capitalization equities, and (iv) ETPs. (PROCEDURE XV) 347 II. if the absolute value of the largest non-index position in the portfolio represents more than 30 percent of the value of the entire portfolio (the “concentration threshold”), an amount determined by multiplying the gross market value of such position by a percentage designated by the Corporation, which percentage shall be not less than 10 percent. Such percentage shall be determined by selecting the largest of the 1st and 99th percentiles of three-day returns of a composite set of equities, using a look-back period of not less than 10 years that includes a one-year stress period, 5 and then rounding the result up to the nearest whole percentage. The concentration threshold would be no more than 30 percent, and would be determined by the Corporation from time to time and calibrated based on the portfolio’s backtesting results during a time period of not less than the previous 12 months. III. the sum of: A. the net directional market value of the portfolio, which shall be the absolute difference between the market value of the long positions and the short positions in the portfolio, multiplied by a percentage; such percentage shall be determined by the Corporation based on a percentile of the annual historical volatility levels of relevant equity indices (which shall be no less than the historical minimum volatility of the indices), as determined by the Corporation from time to time; and B. the balanced market value of the portfolio, which shall be the lowest corresponding market value of long positions and short positions in the portfolio, multiplied by a percentage; such percentage shall be a fraction of the percentage used in (A) above, determined by the Corporation from time to time by considering the model backtesting performance of the applicable balanced portfolios. (ii) (A) The Corporation shall have the discretion to exclude from the calculations in subsection (i) above Net Balance Order Unsettled Positions in: (l) securities that are not Illiquid Securities whose volatility is less amenable to statistical analysis, and shall instead calculate an amount by multiplying the absolute value of such positions by a 5 If the one-year stress period overlaps with the ten-year look-back, only the non-overlapping period will be combined with the look-back window. (PROCEDURE XV) 348 percentage designated by the Corporation, which percentage shall not be less than 10%; and (ll) securities that are not unit investment trusts whose volatility is amenable to generally accepted statistical analysis only in a complex manner, and shall instead calculate an amount by multiplying the absolute value of such positions by a percentage designated by the Corporation, which percentage shall be not less than 2%. (B) The Corporation shall exclude from the calculations in subsection (i) above net Balance Order Unsettled Positions in: (I) Illiquid Securities, and shall instead (A) group such securities by price level, and Illiquid Securities that are sub-penny securities shall be separately grouped by long or short positions, and (B) calculate an amount for each such grouping by multiplying the absolute value of the positions in each group by a percentage designated by the Corporation at least annually, which percentage shall be based on the security’s Current Market Price, 6 and shall be the highest of (1) 10%, (2) a percent benchmarked to be sufficient to cover 99.5th percentile of the historical 3-day return of each group in each Member’s portfolio using a look-back period of no less than 5 years, and (3) a percent benchmarked to be sufficient to cover 99th percentile of the historical 3-day return of each group in each Member’s portfolio using a look-back period of no less than 5 years after incorporating a fixed transaction cost equal to one half of the estimated bid-ask spread; and (II) unit investment trusts, and shall instead calculate an amount by multiplying the absolute value of such positions by a percentage designated by the Corporation at least annually, which percentage shall be based on the security's Current Market Price, and shall be the highest of (1) 2% and (2) a percent benchmarked to be sufficient to cover 99.5th percentile of the historical 3-day return of unit investment trusts in each Member’s portfolio using a look-back period of no less than 5 years. The Corporation shall exclude from the calculations in subsection (i) above and this subsection (ii), (A) Net Balance Order Unsettled Positions in municipal and corporate bonds, which are addressed in subsection (iii) below, and (B) long Net Balance Order Unsettled Positions in Family-Issued Securities, which are addressed in subsection (iv) below. 6 The Current Market Price for each sub-penny security is deemed to be one cent. (PROCEDURE XV) 349 (iii) The Corporation shall exclude from the calculations in subsections (i) and (ii) above Net Balance Order Unsettled Positions in corporate and municipal bonds. The amount of Clearing Fund required with respect to Net Balance Order Unsettled Positions in corporate and municipal bonds shall be determined by multiplying the absolute value of such positions by a percentage designated by the Corporation, which shall be not less than 2%, calculated as follows: (A) Corporate bonds shall be categorized into groups according to the bonds’ “remaining time to maturity” and credit rating. From time to time, but not less frequently than annually, the Corporation shall establish for each category of corporate bonds a percentage calculated using historical market price volatility of a benchmark index. Such percentage shall be based on (1) the historical returns of the applicable benchmark index; (2) a pre-determined look-back period, which shall not be shorter than 10 years; and (3) a pre-determined calibration percentile, which shall not be less than 99%. (B) Municipal bonds shall be grouped by “remaining time to maturity” and credit rating, and municipal bonds that are rated BBB+ or lower, or that are not rated, shall be separately categorized by municipal sector. From time to time, but not less frequently than annually, the Corporation shall establish a percentage applicable to each grouping. Such percentage shall be based on (1) the historical returns of applicable benchmark indices, such as tenor-based indices (i.e., based on time to maturity), municipal bond sector-based indices, and high-yield indices; (2) a pre- determined look-back period, which shall not be shorter than 10 years; and (3) a pre-determined calibration percentile, which shall not be less than 99%. In extraordinary circumstances where the Corporation determines that a certain municipality or issuer of municipal bonds presents unique risks that are not captured by the grouping set forth herein, NSCC may, in its discretion, apply the highest percentage being applied to any municipal bond group pursuant to this subsection (B) to municipal bonds issued by such municipality or issuer. (iv) The Corporation shall exclude from the calculations in subsections (i) and (ii) above long Net Balance Order Unsettled Positions in Family-Issued Securities. The amount of Clearing Fund required with respect to long Net Balance Order Unsettled Positions in Family-Issued Securities shall be determined by multiplying the absolute value of such positions by a percentage designated by the Corporation; such percentage shall be (A) no less than 80% for long Net Balance Order Unsettled Positions in fixed income securities that are Family-Issued Securities, and (B) 100% for long Net Balance Order Unsettled Positions in equity securities that are Family-Issued Securities; plus (PROCEDURE XV) 350 (b) The net of each day’s difference between the contract price of such Member’s Net Balance Order Unsettled Positions, and the Current Market Price for such positions; plus (c) An additional payment (“special charge”) from Members in view of price fluctuations in or volatility or lack of liquidity of any security. The Corporation shall make any such determination based on such factors as the Corporation determines to be appropriate from time to time; plus (d) a margin requirement differential component charge calculated as the sum of the EWMA of the daily positive changes over a 100-day look back period in the Member’s (i) Mark-to-Market component and (ii) volatility component, times a multiplier calibrated based on backtesting results; plus (e) a coverage component charge calculated as the EWMA of the Member’s daily backtesting coverage deficiency amount over a 100-day look back period; the Member’s backtesting deficiency amount for each day is determined as the difference between the simulated profit and loss on the Member’s portfolio and the sum of the Member’s (i) volatility component, and (ii) margin requirement differential component. plus (f) An MLA charge shall apply to a Member’s Net Balance Order Unsettled Positions, other than long Net Balance Order Unsettled Positions in Family- Issued Securities. For purposes of calculating this charge, Net Balance Order Unsettled Positions shall be categorized into the following asset groups: (1) equities (excluding Illiquid Securities), (2) Illiquid Securities, (3) UITs, (4) municipal bonds (including municipal bond ETPs), and (5) corporate bonds (including corporate bond ETPs). The equities asset group shall be further segmented into the following subgroups: (i) micro-capitalization equities, (ii) small capitalization equities, (iii) medium capitalization equities, (iv) large capitalization equities, (v) treasury ETPs, and (vi) all other ETPs. The Corporation shall first calculate a measurement of market impact cost for Net Balance Order Unsettled Positions in each of the asset groups or subgroups, as described below. (PROCEDURE XV) 351 i. For Net Balance Order Unsettled Positions in the market capitalization subgroups of the equities asset group, by multiplying four components: 1. an impact cost coefficient that is a multiple of the one-day market volatility of that subgroup, 2. the gross market value of the Net Balance Order Unsettled Position in that subgroup, 3. the square root of the gross market value of the Net Balance Order Unsettled Position in that subgroup in the portfolio divided by an assumed percentage of the average daily trading volume of that subgroup, and 4. a measurement of the concentration of each Net Balance Order Unsettled Position in that subgroup. ii. For Net Balance Order Unsettled Positions in the Illiquid Securities, UIT, municipal bond, and corporate bond asset groups and for Net Balance Order Unsettled Positions in the treasury ETP and other ETP subgroups of the equities asset group, by multiplying three components: 1. an impact cost coefficient that is a multiple of the one-day market volatility of that asset group or subgroup, 2. the gross market value of the Net Balance Order Unsettled Position in that asset group or subgroup, and 3. the square root of the gross market value of the Net Balance Order Unsettled Position in that asset group or subgroup in the portfolio divided by an assumed percentage of the average daily trading volume of that asset group or subgroup. For each asset group and equities subgroup, the calculated market impact cost shall be compared to a portion of the volatility charge applicable to Net Balance Order Unsettled Positions (as determined by Section I.(A)(2)(a) of this Procedure XV). If the ratio of the calculated market impact cost to the portion of the volatility charge is greater than a threshold, to be determined by the Corporation from time to time, an MLA charge will be applicable to that asset group or subgroup. If the ratio of these two amounts is equal to or less than the threshold, an MLA charge will not be applicable to that asset group or subgroup. When applicable, an MLA charge for each asset group or subgroup would be calculated as a proportion of the product of (1) the amount by which the ratio of the calculated market impact cost to the applicable 1-day volatility (PROCEDURE XV) 352 charge exceeds the threshold, and (2) the 1-day volatility charge allocated to that asset group or subgroup. All MLA charges for each of the equities subgroups shall be added together to result in one MLA charge for the equities subgroup. All MLA charges for each of the asset groups shall be added together to result in a total MLA charge. The Corporation may apply a downward adjusting scaling factor to the total MLA charge based on the ratio of calculated market impact cost to a portion of the applicable volatility charge, where a higher ratio would trigger a larger downward adjustment of the MLA charge and a lower ratio would trigger no downward adjustment of the MLA charge. (3) For Other Transactions The greater of (i) 2-1/2% of such Member’s average daily settlement debits and credits other than CNS, Mutual Fund Services and Envelope Settlement Service debits and credits and (ii) 5% of such Member’s average daily settlement debits other than CNS, Mutual Fund Services and Envelope Settlement Service debits, for other transactions (Other Transactions) as determined by the Corporation from time to time, adjusted for broker/dealer Members by a factor that shall be calculated as follows: Average Daily Settlement Debits As Determined by the Corporation Excess Net Capital The factor calculation shall be adjusted in order to provide a minimum of one with a maximum of three. I.(B) Additional Clearing Fund Formula (1) Additional Deposits for Members on the Watch List Any Member or Limited Member who is placed on the Watch List shall be required to make such additional Clearing Fund deposits as determined by the Corporation on the same day as requested by the Corporation within such timeframe as required by the Corporation from time to time. (2) Excess Capital Premium (a) The Corporation shall collect an additional payment (“Excess Capital Premium”) if a Member’s Volatility Charge, when divided by its Net Capital, for Members that are broker-dealers, or Equity Capital, for all other Members, is greater than 1.0 (the “Excess Capital Ratio”). (b) An Excess Capital Premium shall be calculated as the product of: (a) the amount by which the Member’s Volatility Charge exceeds its Net Capital or Equity (PROCEDURE XV) 353 Capital, as applicable, multiplied by (b) its Excess Capital Ratio, which shall be no more than 2.0. For purposes of calculating an Excess Capital Premium, the Corporation shall use, as applicable, the Net Capital amount reported by a Member on its most recent Form X-17-A-5 (Financial and Operational Combined Uniform Single (“FOCUS”) Report), or the Equity Capital amount reported by a Member on its most recent Consolidated Report of Condition and Income (“Call Report”). 7 The Corporation may, in its sole discretion, accept an updated Net Capital or Equity Capital amount provided by a Member prior to the issuance of its next applicable financial report for purposes of calculating an Excess Capital Premium. (c) The Corporation may waive the collection of an Excess Capital Premium of a Member in exigent circumstances when the Corporation, in its sole discretion, observes extreme market conditions or other unexpected changes in factors such as market volatility, trading volumes or other similar factors. In determining whether it is appropriate to waive the collection of an Excess Capital Premium in such circumstances, the Corporation would review all relevant facts, circumstances and other information available to it at the time of such determination, including the degree to which a Member’s capital position and trading activity compare or correlate to the prevailing exigent circumstances and whether the Corporation can effectively address the risk exposure presented by a Member without the collection of the Excess Capital Premium from that Member. The collection of an Excess Capital Premium may be waived by a Managing Director in the Group Chief Risk Office of the Corporation, and such waiver shall be documented in a written report that is made available upon request to the Member impacted by the waiver. (3) Backtesting Charge The Corporation may require a Member to make an additional Clearing Fund deposit to mitigate exposures to the Corporation caused by settlement risks that may not be adequately captured by the Corporation’s portfolio volatility model (“Backtesting Charge”). The Corporation may assess this charge on the start of the day portfolio , as needed, to enable the Corporation to achieve its backtesting coverage target. The Backtesting Charge may apply to Members that have 12-month trailing backtesting coverage below the 99 percent backtesting coverage target. The Backtesting Charge shall generally be equal to the Member’s third largest deficiency that occurred during the previous 12 months. The Corporation may in its discretion adjust such charge if the Corporation determines that circumstances particular to a Member’s settlement activity and/or market price volatility warrant a different approach to determining or applying 7 If a Member is not required to file a FOCUS Report or a Call Report, the Corporation shall use the Net Capital or Equity Capital amount, as applicable, provided on the Member’s most recent financial statements or equivalent reporting delivered to the Corporation pursuant to Section 2.A of Rule 2B. (PROCEDURE XV) 354 such charge in a manner consistent with achieving the Corporation’s backtesting coverage target. In calculating a Member’s backtesting coverage for purposes of the Backtesting Charge and in calculating any applicable Backtesting Charge, the Corporation would not include amounts already collected as a Backtesting Charge from that Member. (4) Bank Holiday Charge For purposes of this section, “Holiday” means any day on which equities markets are open for trading, but the Board of Governors of the Federal Reserve System observes a holiday and banks are closed. On the Business Day prior to any Holiday, the Corporation may require each Member to make an additional Clearing Fund deposit (“Bank Holiday Charge”). The Bank Holiday Charge approximates the exposure that a Member’s trading activity on the applicable Holiday could pose to the Corporation. Since the Corporation cannot collect margin on the Holiday, the Bank Holiday Charge is due on the Business Day prior to the applicable Holiday. The methodology for calculating a Bank Holiday Charge shall be determined by the Corporation in advance of each applicable Holiday. The Bank Holiday Charge approximates each Member’s Required Fund Deposit to address the exposure that such Member’s trading activity on the Holiday could pose to the Corporation. The Corporation shall have the discretion to calculate the Bank Holiday Charge based on its assessment of market conditions at the time the Bank Holiday Charge is calculated (such as, for example, significant market occurrences that could impact market price volatility). The Corporation shall inform Members of the methodology it will use to calculate the Bank Holiday Charge by an Important Notice issued no later than 10 Business Days prior to the day on which the applicable Bank Holiday Charge is applied. Examples of potential methodologies for the Bank Holiday Charge may include, but shall not be limited to, time scaling of the volatility charge or a stress scenario that reflects potential market price volatility on the Holiday. (5) Intraday Mark-to-Market Charge The Corporation may also collect a payment on an intra-day basis that is calculated as the difference between (x) the most recent mark-to-market price of a Member’s net CNS and Balance Order positions (including its CNS failed positions) and (y) the most recently observed market price for such positions if such difference meets or exceeds 80 percent of the Member’s volatility component. The Corporation may reduce such threshold during volatile market conditions if the Corporation determines that a reduction of the threshold is appropriate to mitigate risks to the Corporation by accelerating the collection of anticipated additional margin from Members whose portfolios may present relatively greater risks to the Corporation on an overnight basis. (PROCEDURE XV) 355 (6) Intraday Volatility Charge The Corporation may collect an additional payment (“intraday volatility charge”) if (1) the difference between (i) a Member’s volatility charge calculated with respect to its Net Unsettled Position, calculated pursuant to Section I.(A)(1)(a) of this Procedure, and the Member’s volatility charge calculated with respect to its Net Balance Order Unsettled Positions, calculated pursuant to Section I.(A)(2)(a) of this Procedure XV (“volatility charge”) at the start of the day for a Member, and (ii) the volatility charge calculated for that Member intraday exceeds 100 percent; and (2) and the amount that would be collected, as calculated by the formula set forth below, would be greater than $250,000. The Corporation would not collect an intraday volatility charge if (a) trades submitted later in the day would offset trades submitted earlier in the day, such that the thresholds would not have been met if such activity had been submitted earlier in the day, or (b) the threshold was met due to the submission of an erroneous trade that can be corrected. The amount of intraday volatility charge that may be collected shall be calculated as the difference between (1)(i) and (1)(ii) in the first paragraph of this section, reduced by the portion of the margin requirement differential charge that represents the volatility component calculated pursuant to Sections I.(A)(1)(e)(ii) and (2)(d)(ii) and collected at the start of that Business Day. For purposes of calculating both (1)(i) and (1)(ii) in the first paragraph of this section, the Corporation would exclude the amount calculated for long positions in Family Issued Securities described in Sections I.(A)(1)(a)(iv) and (2)(a)(iv) of this Procedure XV. For purposes of calculating (1)(ii) in the first paragraph of this section, the Corporation would exclude from a Member’s Net Unsettled Positions and Net Balance Order Unsettled Positions any shares delivered to or received by the Member to satisfy all or any portion of a short or long position. The Corporation may reduce the 100 percent threshold, for example during volatile market conditions or market events that cause increases in trading volumes, if the Corporation determines that a reduction of the threshold is appropriate to mitigate risks to the Corporation by accelerating the collection of anticipated additional margin from those Members whose portfolios may present relatively larger risks to the Corporation on an overnight basis. II. Minimum Clearing Fund and Additional Deposit Requirements (A) Each Member of the Corporation shall be required to contribute