NATIONAL

SECURITIES
CLEARING
CORPORATION

RULES & PROCEDURES

Effective November 21, 2022

 TABLE OF CONTENTS

NATIONAL SECURITIES CLEARING CORPORATION RULES ................................... 1

RULE 1. DEFINITIONS AND DESCRIPTIONS ............................................................. 1

RULE 2. MEMBERS, LIMITED MEMBERS AND SPONSORED MEMBERS ............. 34

RULE 2A. INITIAL MEMBERSHIP REQUIREMENTS ................................................ 38

RULE 2B. ONGOING MEMBERSHIP REQUIREMENTS AND MONITORING ........... 45

RULE 2C. SPONSORING MEMBERS AND SPONSORED MEMBERS..................... 53

RULE 2D. AGENT CLEARING MEMBERS ................................................................ 66

RULE 3. LISTS TO BE MAINTAINED ......................................................................... 76

RULE 4. CLEARING FUND ......................................................................................... 79

RULE 4A. SUPPLEMENTAL LIQUIDITY DEPOSITS ................................................. 87

RULE 5. GENERAL PROVISIONS .............................................................................. 92

RULE 6. (RULE NUMBER RESERVED FOR FUTURE USE)..................................... 94

RULE 7. COMPARISON AND TRADE RECORDING OPERATION

(INCLUDING SPECIAL REPRESENTATIVE/INDEX RECEIPT
AGENT) ....................................................................................................... 95

RULE 8. BALANCE ORDER AND FOREIGN SECURITY SYSTEMS ...................... 100

RULE 9. ENVELOPE SETTLEMENT SERVICE ....................................................... 101

RULE 10. FAILURE TO DELIVER ON SECURITY BALANCE ORDERS ................ 107

RULE 11. CNS SYSTEM ........................................................................................... 108

RULE 12. SETTLEMENT........................................................................................... 114

RULE 13. EXCEPTION PROCESSING ..................................................................... 119

RULE 14. TRANSFER TAXES .................................................................................. 120

RULE 15. ASSURANCES OF FINANCIAL RESPONSIBILITY AND

OPERATIONAL CAPABILITY................................................................... 121

RULE 16. (RULE NUMBER RESERVED FOR FUTURE USE) ................................. 123

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RULE 17. (RULE NUMBER RESERVED FOR FUTURE USE) ................................. 124

RULE 18. PROCEDURES FOR WHEN THE CORPORATION CEASES TO

ACT............................................................................................................ 125

RULE 19. MISCELLANEOUS RIGHTS OF THE CORPORATION ........................... 131

RULE 20. INSOLVENCY ........................................................................................... 132

RULE 21. HONEST BROKER ................................................................................... 133

RULE 22. SUSPENSION OF RULES ........................................................................ 134

RULE 23. ACTION BY THE CORPORATION ........................................................... 135

RULE 24. CHARGES FOR SERVICES RENDERED ................................................ 136

RULE 25. CROSS-GUARANTY OBLIGATION ......................................................... 137

RULE 26. BILLS RENDERED ................................................................................... 138

RULE 27. ADMISSION TO PREMISES OF THE CORPORATION – POWERS

OF ATTORNEY, ETC. ............................................................................... 139

RULE 28. FORMS...................................................................................................... 140

RULE 29. QUALIFIED SECURITIES DEPOSITORIES ............................................. 141

RULE 30. (RULE NUMBER RESERVED FOR FUTURE USE) ................................. 142

RULE 31. (RULE NUMBER RESERVED FOR FUTURE USE) ................................. 143

RULE 32. SIGNATURES ........................................................................................... 144

RULE 33. PROCEDURES ......................................................................................... 145

RULE 34. INSURANCE ............................................................................................. 146

RULE 35. FINANCIAL REPORTS ............................................................................. 147

RULE 36. RULE CHANGES ...................................................................................... 148

RULE 37. HEARING PROCEDURES ........................................................................ 149

RULE 38. GOVERNING LAW AND CAPTIONS ....................................................... 153

RULE 39. RELIANCE ON INSTRUCTIONS .............................................................. 154

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RULE 40. WIND-DOWN OF A MEMBER, FUND MEMBER OR INSURANCE
CARRIER/RETIREMENT SERVICES MEMBER....................................... 155

RULE 41. CORPORATION DEFAULT ...................................................................... 157

RULE 42. WIND-DOWN OF THE CORPORATION................................................... 161

RULE 43. (RULE NUMBER RESERVED FOR FUTURE USE) ................................. 171

RULE 44. DELIVERIES PURSUANT TO BALANCE ORDERS ................................ 172

RULE 45. NOTICES................................................................................................... 174

RULE 46. RESTRICTIONS ON ACCESS TO SERVICES......................................... 175

RULE 47. INTERPRETATION OF RULES ................................................................ 177

RULE 48. DISCIPLINARY PROCEEDINGS .............................................................. 178

RULE 49. RELEASE OF CLEARING DATA AND CLEARING FUND DATA ........... 179

RULE 50. AUTOMATED CUSTOMER ACCOUNT TRANSFER SERVICE .............. 180

RULE 51. OBLIGATION WAREHOUSE ................................................................... 190

RULE 52. MUTUAL FUND SERVICES ..................................................................... 192

A. Fund/SERV® ..................................................................................... 192
B. Networking ....................................................................................... 202
C. DTCC Payment aXis ........................................................................ 204
D. Mutual Fund Profile Service ............................................................. 205

RULE 53. ALTERNATIVE INVESTMENT PRODUCT SERVICES AND

MEMBERS ................................................................................................. 208

RULE 54. DTCC LIMIT MONITORING RISK MANAGEMENT TOOL....................... 219

RULE 55. SETTLING BANKS AND AIP SETTLING BANKS ................................... 221

RULE 56. SECURITIES FINANCING TRANSACTION CLEARING SERVICE ......... 226

RULE 57. INSURANCE & RETIREMENT SERVICES .............................................. 244

RULE 58. LIMITATIONS ON LIABILITY ................................................................... 250

RULE 59. ACCOUNT INFORMATION TRANSMISSION SERVICE ......................... 252

RULE 60. MARKET DISRUPTION AND FORCE MAJEURE ................................... 253

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RULE 60A. SYSTEMS DISCONNECT: THREAT OF SIGNIFICANT IMPACT
TO THE CORPORATION’S SYSTEMS..................................................... 256

RULE 61. INTERNATIONAL LINKS.......................................................................... 259

RULE 62. (RULE NUMBER RESERVED FOR FUTURE USE) ................................. 260

RULE 63. SRO REGULATORY REPORTING .......................................................... 261

RULE 64. DTCC SHAREHOLDERS AGREEMENT .................................................. 262

RULE 65. ID NET SERVICE ...................................................................................... 264

NATIONAL SECURITIES CLEARING CORPORATION PROCEDURES.................. 267

PROCEDURE I. INTRODUCTION ............................................................................. 267

PROCEDURE II. TRADE COMPARISON AND RECORDING SERVICE ................. 268
A. Introduction....................................................................................... 268
B. Equity and Listed Debt Securities -- Locked-In Trade Input ............. 268
C. Debt Securities ................................................................................. 269
D. When-Issued and When-Distributed Securities ................................ 275
E. Special Trades ................................................................................. 279
F. Index Receipts.................................................................................. 279
G. Reports and Output .......................................................................... 281
H. Consolidated Trade Summaries ....................................................... 282
PROCEDURE II.A OBLIGATION WAREHOUSE ...................................................... 284
A. Introduction....................................................................................... 284
B. OW Comparison ............................................................................... 285
C. Obligation Warehouse Storage, Tracking, Maintenance and
Settlement ........................................................................................ 286
D. Reconfirmation and Pricing .............................................................. 288
E. Pair Off ............................................................................................. 290
F. Notifications and Reports ................................................................. 290
G. Non-Guaranteed Service .................................................................. 291
H. Applicability of Marketplace Rules .................................................... 291
PROCEDURE III. TRADE RECORDING SERVICE (INTERFACE WITH
QUALIFIED CLEARING AGENCIES) ............................................................ 292
A. Introduction....................................................................................... 292
B. Settlement of Option Exercises and Assignments and
Settlement of Stock Futures Reaching Maturity ............................... 292
PROCEDURE IV. SPECIAL REPRESENTATIVE SERVICE .................................... 294
A. Introduction....................................................................................... 294
B. Institutional Clearing Service ............................................................ 294
C. Correspondent Clearing Service ...................................................... 295
D. Qualified Special Representatives .................................................... 296
E. Automated Special Representative Facility ...................................... 296

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PROCEDURE V. BALANCE ORDER ACCOUNTING OPERATION ........................ 297
A. Introduction....................................................................................... 297
B. Trade-for-Trade Balance Orders ...................................................... 297
C. Net Balance Orders .......................................................................... 297
D. Balance Order Contracts .................................................................. 298
E. Consolidated Trade Summaries ....................................................... 298
F. Obligation Warehouse ...................................................................... 298
PROCEDURE VI. FOREIGN SECURITY ACCOUNTING OPERATION ................... 299
A. Introduction....................................................................................... 299
B. Trade-for-Trade Foreign Security Receive and Deliver
Instructions ....................................................................................... 299
C. Netted Member-to-Member Receive and Deliver Instructions .......... 299
PROCEDURE VII. CNS ACCOUNTING OPERATION .............................................. 300
A. Introduction....................................................................................... 300
B. Consolidated Trade Summary .......................................................... 300
C. Receipt and Delivery of Securities .................................................... 301
D. Controlling Deliveries to CNS ........................................................... 303
E. Influencing Receipts from CNS ........................................................ 305
F. Computation of CNS Money Settlement ........................................... 308
G. CNS Dividend Accounting ................................................................ 309
H. Miscellaneous CNS Activity .............................................................. 311
I. CNS Sub-Accounting........................................................................ 318
J. Recording of CNS Buy-Ins ............................................................... 318
PROCEDURE VIII. MONEY SETTLEMENT SERVICE ............................................. 322
A. Settlement Statement ....................................................................... 322
B. Money Settlement............................................................................. 322
C. Final Settlement Statement .............................................................. 322
D. Settling Bank Procedures ................................................................. 323
PROCEDURE IX. (RESERVED FOR FUTURE USE)................................................ 331
PROCEDURE X. EXECUTION OF BUY-INS ............................................................ 332
PROCEDURE XI. FEES – SEE ADDENDUM A ........................................................ 334
PROCEDURE XII. TIME SCHEDULE ........................................................................ 335
PROCEDURE XIII. DEFINITIONS ............................................................................. 336
PROCEDURE XIV. FORMS, MEDIA AND TECHNICAL SPECIFICATIONS ............ 338
PROCEDURE XV. CLEARING FUND FORMULA AND OTHER MATTERS............ 339
PROCEDURE XVI. ID NET SERVICE ....................................................................... 357
PROCEDURE XVII. DTCC LIMIT MONITORING PROCEDURE .............................. 359
A. Introduction....................................................................................... 359
B. DTCC Limit Monitoring Processing................................................... 359
PROCEDURE XVIII. ACATS SETTLEMENT ACCOUNTING OPERATION ............. 361
ADDENDUM A ............................................................................................................ 364
FEE STRUCTURE ................................................................................. 364
ADDENDUM B ............................................................................................................ 384
QUALIFICATIONS AND STANDARDS OF FINANCIAL
RESPONSIBILITY, OPERATIONAL CAPABILITY AND
BUSINESS HISTORY ...................................................................... 384

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ADDENDUM C ............................................................................................................ 398
(ADDENDUM LETTER RESERVED FOR FUTURE USE) .................... 398
ADDENDUM D ............................................................................................................ 399
STATEMENT OF POLICY ENVELOPE SETTLEMENT SERVICE,
MUTUAL FUND SERVICES, INSURANCE & RETIREMENT
SERVICES AND OTHER SERVICES OFFERED BY THE
CORPORATION ............................................................................... 399
ADDENDUM E ............................................................................................................ 402
(ADDENDUM LETTER RESERVED FOR FUTURE USE) .................... 402
ADDENDUM F ............................................................................................................ 403
STATEMENT OF POLICY IN RELATION TO SAME DAY FUNDS
SETTLEMENT .................................................................................. 403
ADDENDUM G ........................................................................................................... 405
FULLY-PAID-FOR ACCOUNT ............................................................... 405
ADDENDUM H ............................................................................................................ 407
INTERPRETATION OF THE BOARD OF DIRECTORS RELEASE
OF CLEARING DATA....................................................................... 407
ADDENDUM I ............................................................................................................. 409
(ADDENDUM LETTER RESERVED FOR FUTURE USE) .................... 409
ADDENDUM J ............................................................................................................ 410
STATEMENT OF POLICY LOCKED-IN DATA FROM SERVICE
BUREAUS ........................................................................................ 410
ADDENDUM K ............................................................................................................ 413
THE CORPORATION’S GUARANTY .................................................... 413
ADDENDUM L ............................................................................................................ 414
STATEMENT OF POLICY PERTAINING TO INFORMATION
SHARING ......................................................................................... 414
ADDENDUM M ........................................................................................................... 415
(ADDENDUM LETTER RESERVED FOR FUTURE USE) .................... 415
ADDENDUM N ............................................................................................................ 416
(ADDENDUM HEADER RESERVED FOR FUTURE USE) ................... 416
ADDENDUM O ........................................................................................................... 417
ADMISSION OF NON-U.S. ENTITIES AS DIRECT NSCC
MEMBERS ....................................................................................... 417
ADDENDUM P ............................................................................................................ 420
FINE SCHEDULE .................................................................................. 420
ADDENDUM Q ........................................................................................................... 423
(ADDENDUM LETTER RESERVED FOR FUTURE USE) .................... 423
ADDENDUM R ............................................................................................................ 424
(ADDENDUM LETTER RESERVED FOR FUTURE USE) .................... 424
ADDENDUM S ............................................................................................................ 425
(ADDENDUM LETTER RESERVED FOR FUTURE USE) .................... 425
ADDENDUM T ............................................................................................................ 426
(ADDENDUM LETTER RESERVED FOR FUTURE USE) .................... 426
ADDENDUM U ............................................................................................................ 427
(ADDENDUM LETTER RESERVED FOR FUTURE USE) .................... 427

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ADDENDUM V ............................................................................................................ 428
BY-LAWS AND CERTIFICATE OF INCORPORATION......................... 428

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 (RULE 1)

NATIONAL SECURITIES CLEARING CORPORATION RULES

RULE 1. DEFINITIONS AND DESCRIPTIONS *

[Changes to this Rule, as amended by File No. SR-NSCC-2021-016, are available

at [Link] These changes have been
approved by the SEC but have not yet been implemented. On August 26, 2023,
these changes will be implemented and this legend will automatically be removed
from this Rule.]

Unless the context requires otherwise, the terms defined in this Rule shall, for all
purposes of these Rules and Procedures, have the meanings herein specified.

ACAT Receive and Deliver Instruction

The term “ACAT Receive and Deliver Instruction” shall mean such document, form, file,
report or other information issued by the Corporation to a Member or to a QSD (as
defined in Rule 50), on behalf of such QSD’s participants, which identifies Automated
Customer Account Transfer receive and deliver obligations.

ACATS Settlement Accounting Operation

The term “ACATS Settlement Accounting Operation” relates to the accounting operation
for the processing of eligible ACATS transactions in accordance with Procedure XVIII.

Accounting Operation

The term “Accounting Operation” includes the ACATS Settlement Accounting

Operation, Balance Order Accounting Operation, the Foreign Security Accounting
Operation and the CNS Accounting Operation.

Acknowledgment Cutoff Time

The term “Acknowledgement Cutoff Time” means the time set forth as the
Acknowledgment Cutoff Time in the DTC Settlement Service Guide which can be found
on NSCC’s Website at [Link]

Actual Deposit

The term “Actual Deposit” has the meaning specified in Rule 4.

* 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.

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 (RULE 1)

Affiliate

The term “Affiliate” means a Person that controls or is controlled by or is under common
control with another Person. Control of a Person means the direct or indirect ownership
or power to vote more than 50% of any class of the voting securities or other voting
interests of any Person.

Agent Clearing Member

The term “Agent Clearing Member” means a Member that enters into transactions on
behalf of Customers in accordance with the provisions of Rule 2D.

Agent Clearing Member Agreement

The term “Agent Clearing Member Agreement” means an agreement between the
Corporation and a Member who is approved to become an Agent Clearing Member and
specifies the terms and conditions deemed by the Corporation to be necessary in order
to protect itself and its participants.

Agent Clearing Member Customer Omnibus Account

The term “Agent Clearing Member Customer Omnibus Account” means a ledger
maintained on the books and records of the Corporation that reflects the outstanding
Agent Clearing Member Transactions that an Agent Clearing Member enters into on
behalf of Customers and that have been novated to the Corporation, the SFT Positions
or SFT Cash associated with those transactions, and any debits or credits of cash
associated with such transactions effected pursuant to Rule 12.

Agent Clearing Member Required Fund Deposit

The term “Agent Clearing Member Required Fund Deposit” shall have the meaning
given to such term in Rule 2D.

Agent Clearing Member Termination Date

The term “Agent Clearing Member Termination Date” means the date on which the
termination of an Agent Clearing Member’s status as an Agent Clearing Member
becomes effective.

Agent Clearing Member Transaction

The term “Agent Clearing Member Transaction” shall have the meaning given to such
term in Rule 2D.

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 (RULE 1)

Agent Clearing Member Voluntary Termination Notice

The term “Agent Clearing Member Voluntary Termination Notice” means a written notice
from an Agent Clearing Member to the Corporation that the Agent Clearing Member is
voluntarily electing to terminate its status as an Agent Clearing Member.

Aggregate Net SFT Close-out Value

The term “Aggregate Net SFT Close-out Value” means, with respect to an SFT
Member, the sum of the SFT Close-out Value for each SFT Position to which the SFT
Member is a party.

AIP Acknowledgment Cutoff Time

The term “AIP Acknowledgement Cutoff Time” means, with respect to each AIP Settling
Bank regarding AIP Settlement of AIP Debit Balances and AIP Credit Balances, the
later of (i) 30 minutes after the AIP Settling Bank has been notified of its AIP Debit
Balance or AIP Credit Balance (or, the new AIP Debit Balance or new AIP Credit
Balance, if readjusted as set forth herein), as applicable, and (ii) 30 minutes prior to the
settlement deadlines established by the Corporation. The Corporation shall post the
settlement deadlines for AIP Settlement on the NSCC Website.

AIP Adjusted Credit Balance

The term “Adjusted Credit Balance” has the meaning set forth in Rule 53.

AIP Credit Balance

The term “Credit Balance” has the meaning set forth in Rule 53.

AIP Debit Balance

The term “Debit Balance” has the meaning set forth in Rule 53.

AIP Fund Administrator

The term “AIP Fund Administrator” has the meaning set forth in Rule 53.

AIP Member

The term “AIP Member” means any Person who is specified in Section 2.(ii)(h) of Rule 2
and has qualified pursuant to the provisions of Rule 2A.

AIP Non-Member Fund

The term “AIP Non-Member Fund” means an entity that is not an AIP Member but that
the Corporation has approved to settle AIP Payments as described in Rule 53.

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 (RULE 1)

AIP Payment

The term “AIP Payment” has the meaning set forth in Rule 53.

AIP Settlement

The term “AIP Settlement” has the meaning set forth in Rule 53.

AIP Settling Sub-Account

The term “AIP Settling Sub-Account” has the meaning set forth in Rule 53.

AIP Settling Bank

The term “AIP Settling Bank” means

(1) a Member which is a bank or trust company which would otherwise qualify under
Section 2. (ii)(f) of Rule 2 and Rule 2A and which is a party to an effective Settling Bank
Agreement, or

(2) a Settling Bank Only Member which has qualified under Section 2. (ii)(f) of Rule 2,
Rule 2A and Addendum B and which is a party to an effective Settling Bank Agreement.

Approved SFT Submitter

The term “Approved SFT Submitter” means a provider of transaction data on an SFT
that the parties to the SFT have selected and the Corporation has approved, subject to
such terms and conditions as to which the Approved SFT Submitter and the Corporation
may agree.

Average RFD

The term “Average RFD” has the meaning specified in Rule 4.

Balance Order Accounting Operation

The term “Balance Order Accounting Operation” covers all the operations having to do
with Balance Order Securities after the Comparison Operation to which these Rules are
applicable.

Balance Order Contracts

The term “Balance Order Contracts” has the meaning specified in Rule 5.

Balance Order Securities

The term “Balance Order Securities” means Cleared Securities other than CNS
Securities or Foreign Securities.

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 (RULE 1)

Balance Order System

The term “Balance Order System” means the method of accounting for and settling
securities transactions provided for in these Rules.

Bilaterally Initiated SFT

The term “Bilaterally Initiated SFT” means an SFT, the Initial Settlement of which
occurred prior to the submission of such SFT to the Corporation.

Board or Board of Directors

The terms “Board” or “Board of Directors” means the Board of Directors of National
Securities Clearing Corporation, or a committee thereof, acting under delegated
authority.

Business Day

The term “Business Day” means any day on which the Corporation is open for business.
However, on any Business Day that banks or transfer agencies in New York State are
closed or a Qualified Securities Depository is closed, no deliveries of securities and no
payments of money shall be made through the facilities of the Corporation.

Buy-In

The term “Buy-In” shall have the meaning given to such term in Rule 56.

Buy-In Amount

The term “Buy-In Amount” means a net amount equal to (x) the Buy-In Costs or
Deemed Buy-In Costs of the SFT Securities in respect of which a Transferor has
effected a Buy-In, less (y) the amount of the SFT Cash for the relevant SFT (unless the
Transferor effected a Buy-In in respect of some, but not all, of the SFT Securities that
are the subject of the SFT, in which case (y) shall be the amount of the Corresponding
SFT Cash).

Buy-In Costs

The term “Buy-In Costs” shall have the meaning given to such term in Rule 56.

Buy-In Indemnified Parties

The term “Buy-In Indemnified Parties” shall have the meaning given to such term in
Rule 56.

CFTC

The term “CFTC” shall mean the Commodity Futures Trading Commission.

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 (RULE 1)

Cleared Securities

The term “Cleared Securities” means securities included in the lists for which provision
is made in Section 1 of Rule 3 and, until such time as the Corporation shall determine
that it shall cease to be a Cleared Security, any security which may be distributed in
respect of a CNS Security.

Clearing Agency Cross-Guaranty Agreement

The term “Clearing Agency Cross-Guaranty Agreement” shall mean an agreement

between the Corporation and one or more Registered Clearing Agencies, or a clearing
organization affiliated with or designated by contract markets trading specific futures
products under the oversight of the CFTC, relating to the guaranty by the Corporation of
certain obligations of a Member to such Registered Clearing Agency or Agencies or
CFTC recognized clearing organization.

Clearing Fund

The term “Clearing Fund” means the fund created pursuant to Rule 4. Clearing Fund
shall include the SFT Deposit, if any, unless otherwise noted in these Rules.

Clearing Fund Cash

The term “Clearing Fund Cash” has the meaning specified in Rule 4.

Closing Position

The term “Closing Position” means the Long Position or the Short Position of a Member
in a security at the close of business on any Business Day.

CNS Accounting Operation

The term “CNS Accounting Operation” covers all the operations having to do with CNS
Securities after the Comparison Operation to which these Rules are applicable.

CNS Contracts

The term “CNS Contracts” has the meaning specified in Rule 5.

CNS Fails Position

The term “CNS Fails Position” means either a Long Position or a Short Position that did
not settle on the Settlement Date.

CNS Market Value

The term “CNS Market Value” has the meaning specified in Rule 41.

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 (RULE 1)

CNS Position

The term “CNS Position” has the meaning specified in Rule 18.

CNS Securities

The term “CNS Securities” means securities which are Cleared Securities, are eligible
for transfer on the books of each Qualified Securities Depository and are included in the
list for which provision is made in Section 1(b) of Rule 3.

CNS System

The term “CNS System” means the method of accounting for and settling securities
transactions provided for in these Rules.

CNS Transaction

The term “CNS Transaction” has the meaning specified in Rule 11.

Code

The term “Code” means the Internal Revenue Code of 1986, as amended.

Compared Contract

The term “Compared Contract” has the meaning set forth in Rule 5.

Comparison Operation

The term “Comparison Operation” covers all operations having to do with Cleared
Securities to which these Rules are applicable.

Contract Price

The term “Contract Price” means, with respect to SFT Securities subject to an SFT, the
price of such securities at the time the SFT is submitted to the Corporation for novation,
which price shall be determined by the SFT Member parties to the relevant SFT and
provided by an Approved SFT Submitter to the Corporation in accordance with the
communication links, formats, timeframes and deadlines established by the Corporation
for such purpose; provided that if no such price is provided by the time required by the
Corporation, the “Contract Price” shall be the Current Market Price of the SFT
Securities.

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.

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 (RULE 1)

Corporate Contribution

The term “Corporate Contribution” has the meaning specified in Rule 4.

Corporation

The term “Corporation” means National Securities Clearing Corporation.

Corporation Default

The term “Corporation Default” shall have the meaning given to such term in Rule 41.

Corresponding SFT Cash

The term “Corresponding SFT Cash” means:

(a) in respect of a Recalled SFT for which a Transferor has effected a Buy-In in
respect of some, but not all, of the SFT Securities that are the subject of the
SFT, the portion of the SFT Cash for such SFT equal to the product of (i) the
percentage of the SFT Securities in respect of which the Transferor effected a
Buy-In and (ii) the SFT Cash of the SFT; and
(b) in respect of a Settling SFT which has a greater quantity of SFT Securities as
its subject than the corresponding Linked SFT, the portion of the SFT Cash of
the Settling SFT equal to the product of (i) the percentage of the SFT Securities
of the Settling SFT that the Linked SFT has as its subject and (ii) the SFT Cash
of the Settling SFT.

Credit Risk Rating Matrix

The term “Credit Risk Rating Matrix” means a matrix of credit ratings of Members
specified in Section 4 of Rule 2B. 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.

Cross-Guaranty Obligation

The term “Cross-Guaranty Obligation” shall mean the obligation of a Member to the
Corporation pursuant to Rule 25.

Cross-Guaranty Party

The term “Cross-Guaranty Party” shall mean a party to a Clearing Agency Cross-
Guaranty Agreement.

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 (RULE 1)

Current Market Price

The term “Current Market Price” means the price for a security determined daily by the
Corporation for the purposes of the CNS System. Such price shall be closing price of
such security on the principal stock exchange on which such security is listed on the last
previous day on which there were trades on such exchange in such security, or if the
security is not listed on a national securities exchange, in such market as the
Corporation shall deem appropriate, for trades on the Business Day prior to the day
such price is used. If no last sale price is available for the Business Day prior to the day
such price is used, then such price shall be such price as the Corporation shall deem
appropriate.

Customer

The term “Customer” shall have the meaning given to such term in Rule 2D.

Customer Clearing Service

The term “Customer Clearing Service” means an Agent Clearing Member’s clearing of
Agent Clearing Member Transactions for Customers.

Cybersecurity Confirmation

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

Corporation by all Members, Limited Members and applicants for 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, Limited 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, Limited 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, Limited 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,
Limited 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.

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 (RULE 1)

4. The cybersecurity program and framework protect the segment of the

Member’s, Limited Member’s or applicant’s system that connects to and/or
interacts with the Corporation.
5. The Member, Limited Member or applicant has in place an established process
to remediate cyber issues identified to fulfill the Member’s, Limited 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, Limited Member’s or applicant’s
cybersecurity program and framework has been conducted by one of the
following:
• The Member, Limited 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,
Limited Member or applicant, such that the findings of that review are
shared with these governance bodies.

Data Services Only Member

The term “Data Services Only Member” means a Person who is specified in Section
2.(ii)(a) of Rule 2 and has qualified pursuant to the provisions of Rule 2A.

Declared Non-Default Loss Event

The term “Declared Non-Default Loss Event” has the meaning specified in Rule 4.

Deemed Buy-In Costs

The term “Deemed Buy-In Costs” means the product of the number of SFT Securities
subject to the relevant Buy-In and the per-share price therefor on the date of the Buy-In
obtained from a generally recognized source or the last bid quotation from such a
source at the most recent close of trading for the SFT Security.

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 (RULE 1)

Defaulting Member

The term “Defaulting Member” has the meaning specified in Rule 4.

Defaulting Member Event

The term “Defaulting Member Event” has the meaning specified in Rule 4.

Defaulting SFT Member

The term “Defaulting SFT Member” means an SFT Member for which the Corporation
has ceased to act in accordance with Section 14 of Rule 56.

Default-Related SFT

The term “Default-Related SFT” shall have the meaning given to such term in Rule 56.

Distribution

The term “Distribution” means, with respect to any SFT Security at any time, any cash
payment of amounts equivalent to dividends and other distributions on the SFT
Security.

Distribution Amount

The term “Distribution Amount” means, in respect of an SFT, an amount of cash equal
to the product of:
(a) the amount per security in respect of (x) a cash dividend on the SFT Securities
that are the subject of the SFT or (y) an exchange of the SFT Securities that
are the subject of the SFT for cash; and
(b) the number of the relevant SFT Securities subject to the SFT.

Distribution Payment

The term “Distribution Payment” means an amount payable by one party to an SFT to
the other party to the SFT during the term of the SFT in respect of a Distribution on the
SFT Securities subject to the SFT.

DTC

The term “DTC” means The Depository Trust Company.

DTCC

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

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 (RULE 1)

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 Clearing Fund Agency Security

The term “Eligible Clearing Fund Agency Security” shall mean a direct obligation of
those U.S. agencies or government sponsored enterprises as the Corporation may
designate from time to time, and which 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” shall mean 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” shall mean 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 which
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” shall mean a direct obligation of the
U.S. government and which satisfies the criteria set forth in notices issued by the
Corporation from time to time.

Eligible Government Security

The term “Eligible Government Security” means a Government Security included in the
list for which provision is made in Section 1.(e) of Rule 3.

Eligible ID Net Security

The term “Eligible ID Net Security” has the meaning specified in Rule 65.

Eligible Letter of Credit

The term “Eligible Letter of Credit” has the meaning specified in Rule 4.

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 (RULE 1)

Event Period

The term “Event Period” has the meaning specified in Rule 4.

Exchange Act

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

Existing Master Agreement

The term “Existing Master Agreement” means, in respect of an SFT, a written

agreement that (i) exists at the time transaction data for the SFT is submitted to the
Corporation by an Approved SFT Submitter, (ii) provides for, among other things, terms
governing the payment and delivery obligations of the parties and (iii) the parties have
established (by written agreement, oral agreement, course of conduct or otherwise) will
govern such SFT.

Family-Issued Security

The term “Family-Issued Security” means a security that was issued by a Member or an
Affiliate of that Member.

FATCA

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

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 (RULE 1)

FFI Member

The term “FFI Member” means any Member, Limited Member or Sponsored Member
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, Limited Member or Sponsored
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.

FICC

The term “FICC” means Fixed Income Clearing Corporation.

Final Net Settlement Position

The term “Final Net Settlement Position” shall have the meaning given to such term in
Rule 2C.

Final Settlement

The term “Final Settlement” means the exchange of SFT Securities for SFT Cash
described in clause (b) of the definition of Securities Financing Transaction or SFT.

Final Settlement Date

The term “Final Settlement Date” means the Business Day on which the final settlement
of a transaction is scheduled to occur. If the transaction is an SFT, the Final Settlement
Date means the Business Day on which the Final Settlement of the SFT is scheduled to
occur in accordance with Rule 56 or, if the SFT is accelerated in accordance with Rule
56, the date to which the Final Settlement obligations have been accelerated.

Foreign Financial Institution

The term “Foreign Financial Institution” means any foreign entity/organization or person
with whom the Corporation enters into a link agreement pursuant to Rule 61.

Foreign Securities

The term “Foreign Securities” means Cleared Securities which the Corporation has
determined to include in the Foreign Security Accounting Operation.

Foreign Security Accounting Operation

The term “Foreign Security Accounting Operation” covers all the operations having to do
with Foreign Securities after the Comparison Operation to which these Rules are
applicable.

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 (RULE 1)

Foreign Security System

The term “Foreign Security System” means the method of accounting for and settling
securities transactions provided for in these Rules.

Former Sponsored Member

The term “Former Sponsored Member” shall have the meaning given to such term in
Rule 2C.

FRB

The term “FRB” means the Board of Governors of the Federal Reserve System and
each Federal Reserve Bank, as appropriate.

FRBNY

The term “FRBNY” means the Federal Reserve Bank of New York.

Fund Member

The term “Fund Member” (previously referred to as a Fund/SERV Member) means any
Person who is specified in Section 2.(ii)(b) of Rule 2 and has qualified pursuant to the
provisions of Rule 2A.

Fund/SERV Eligible Fund

The term “Fund/SERV Eligible Fund” means a fund or other pooled investment entity
included in the list for which provision is made in Section 1.(c) of Rule 3.

Fund/SERV Member - (See “Fund Member”)

GAAP

The term “GAAP” means generally accepted accounting principles, consistently applied.

Gross Credit Balance

The term “Gross Credit Balance” for a Business Day as used in respect of a Member,
Mutual Fund/Insurance Services Member, Insurance Carrier/Retirement Services
Member or Fund Member means the aggregate amount of money the Corporation
credits to the Member’s, Mutual Fund/Insurance Services Member’s, Insurance
Carrier/Retirement Services Member’s or Fund Member’s account pursuant to these
Rules on such Business Day without accounting for any amount of money the
Corporation debits or charges to such participant’s account pursuant to these Rules for
such Business Day. The contribution of a Member, Mutual Fund/Insurance Services
Member, Insurance Carrier/Retirement Services Member or Fund Member to the
Clearing Fund from time to time does not constitute part of such participant’s Gross
Credit Balance.

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 (RULE 1)

Gross Debit Balance

The term “Gross Debit Balance” for a Business Day as used in respect of a Member,
Mutual Fund/Insurance Services Member, Insurance Carrier/Retirement Services
Member or Fund Member means the aggregate amount of money the Corporation
debits or charges to the Member’s, Mutual Fund/Insurance Services Member’s,
Insurance Carrier/Retirement Services Member’s or Fund Member’s account pursuant
to these Rules on such Business Day without accounting for any amount of money the
Corporation credits to such participant’s account pursuant to these Rules for such
Business Day. Any obligation of a Member, Mutual Fund/Insurance Services Member,
Insurance Carrier/Retirement Services Member or Fund Member to contribute, or make
up a deficit in its contribution, to the Clearing Fund does not constitute part of such
participant’s Gross Debit Balance.

He, him, his

The words “he”, “him” and “his” shall include partnerships, corporations or other
organizations or entities, as well as individuals, when the context so requires.

I&RS Eligible Product

The term “I&RS Eligible Product” means an insurance product or a retirement or other
benefit plan or program included in the list for which provision is made in Section 1.(d)
of Rule 3.

Id Net Subscriber

The term “ID Net Subscriber” has the meaning specified in Rule 65.

Illiquid Security

The term “Illiquid Security” means a security that either

(i) is not listed on a specified securities exchange (defined below), as determined
on a daily basis;
(ii) is listed on a specified securities exchange and, as determined on a monthly
basis, (a)(i) its market capitalization is considered a micro-capitalization as of
the last Business Day of the prior month or (ii) it is an American depositary
receipt and (b) the median of its calculated illiquidity ratio (defined below) of the
prior six months exceeds a threshold that will be determined by the Corporation
on a monthly basis that is based on the 99th percentile of the illiquidity ratio of
all non-micro-capitalization common stocks over the prior six months; or
(iii) is listed on a specified securities exchange, and, as determined on a monthly
basis, has fewer than 31 Business Days of trading history over the past 153
Business Days on such exchange.
For purposes of this definition,

16
 (RULE 1)

(i) a “specified securities exchange” is a national securities exchange that has

established listing services and is covered by industry pricing and data
vendors.
(ii) a security’s market capitalization shall be considered micro-capitalization if its
capitalization is below a threshold to be determined by the Corporation from
time to time. The Corporation will set the micro-capitalization threshold at a
level that the Corporation determines indicates that securities with such
capitalization exhibit illiquid characteristics based on its regular review of
margining methodologies. Initially, the capitalization threshold shall be $300
million and may be updated from time to time as announced by Important
Notice. For purposes of this criterion, NSCC would calculate the product of the
outstanding shares and market price with respect to a security on a daily basis.
Each month, NSCC would use the average of those calculations over the prior
month to determine market capitalization with respect to a security.
(iii) the “illiquidity ratio” of a security on any day is equal to (i) the price return of
such security on such day (based on the natural logarithm of the ratio between
the closing price of the security on such day to the closing price of the security
on the prior trading day) divided by (ii) the average daily trading amount 1 of
such security over the prior 20 Business Days. 2

Incremental Additional Independent Amount SFT Cash

The term “Incremental Additional Independent Amount SFT Cash” means:

(a) in respect of a Linked SFT, the excess, if any, of the Independent Amount SFT
Cash of the Linked SFT over the Independent Amount SFT Cash of the Settling
SFT;
(b) in respect of a Non-Returned SFT, the portion of the Price Differential payable
by the Transferee, if any, that is attributable to the Independent Amount SFT
Cash of the SFT (which shall be calculated by multiplying such Price
Differential by the excess, if any, of the Independent Amount Percentage over
100%); and
(c) in respect of any other SFT, the Independent Amount SFT Cash of such SFT.

1 The daily trading amount equals the daily trading volume multiplied by the end of day price.
2 Securities that are exchange-traded products or American depositary receipts are not included when
calculating the illiquidity ratio threshold. In addition, if the Corporation is unable to retrieve data to
calculate the illiquidity ratio for the median illiquidity ratio for a security on any day, the Corporation
will use a default value for that day for purposes of the calculation for the security (i.e., the security
would essentially be treated as illiquid for that day).

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 (RULE 1)

Independent Amount Percentage

The term “Independent Amount Percentage” means, in respect of an SFT, a percentage

obtained by dividing the SFT Cash of such SFT by the Market Value SFT Cash of such
SFT.

Independent Amount SFT Cash

The term “Independent Amount SFT Cash” means the portion, if any, of the SFT Cash
for an SFT equal to the amount by which the SFT Cash for such SFT at the time of the
Initial Settlement exceeds the Contract Price of the SFT Securities that are the subject
of such SFT.

Independent Amount SFT Cash Deposit

The term “Independent Amount SFT Cash Deposit” shall have the meaning given to
such term in Rule 56.

Independent Amount SFT Cash Deposit Requirement

The term “Independent Amount SFT Cash Deposit Requirement” shall have the
meaning given to such term in Rule 56.

Index Receipt Agent

The term “Index Receipt Agent” has the meaning specified in Rule 7.

Ineligibility Date

The term “Ineligibility Date” means, with respect to an SFT, the date on which the SFT
Security that is the subject of the SFT becomes an Ineligible SFT Security.

Ineligible SFT

The term “Ineligible SFT” means an SFT that has, as its subject, SFT Securities that
have become Ineligible SFT Securities.

Ineligible SFT Security

The term “Ineligible SFT Security” means an SFT Security that is not eligible to be the
subject of a novated SFT.

Initial Settlement

The term “Initial Settlement” means the exchange of SFT Securities for SFT Cash
described in clause (a) of the definition of Securities Financing Transaction or SFT.

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 (RULE 1)

Insurance Carrier/Retirement Services Member

The term “Insurance Carrier/Retirement Services Member” (previously referred to as an

Insurance Carrier Member) means any Person who is specified in Section 2.(ii)(c) of
Rule 2 and who has qualified pursuant to the provisions of Rule 2A.

Insurance Company

The term “Insurance Company” means any Person who is subject to supervision or
regulation pursuant to the provisions of state insurance law and issues insurance
contracts.

Insurance Entity

The term “Insurance Entity” means an insurance company, partnership, corporation,

limited liability corporation or other organization or entity who is licensed to sell
insurance products and is subject to supervision or regulation pursuant to the provisions
of state insurance laws.

Insurance Participant

The term “Insurance Participant” has the meaning specified in Rule 4.

Issuer

The term “Issuer” has the meaning specified in Rule 4.

Investment Manager/Agent Member

The term “Investment Manager/Agent Member” means any Person who is specified in
Section 2. (ii)(i) of Rule 2 and has qualified pursuant to the provisions of Rule 2A.

IPO Tracking System

The term “IPO Tracking System” means the system offered by DTC pursuant to its rules
and procedures which allows lead managers and syndicate members of Initial Public
Offerings to monitor flipping of new issues in an automated book-entry environment.

Lender

The term “Lender” has the meaning specified in Rule 4.

Limited Member

The term “Limited Member” means a Person whose use of the Corporation’s services is
limited to those services specified by the Corporation and is of a member type specified
in Rule 2 as a “Limited Member”.

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 (RULE 1)

Linked SFT

The term “Linked SFT” means an SFT entered into by the pre-novation SFT Member
parties to a Settling SFT that has the same Transferor, Transferee and subject SFT
Securities (including CUSIP) as the Settling SFT. A Linked SFT shall include an SFT
that has as its subject fewer SFT Securities than the corresponding Settling SFT but
shall not include an SFT that has as its subject more SFT Securities than the
corresponding Settling SFT.

LM Member-provided Data

The term “LM Member-provided Data” has the meaning specified in Rule 54.

LM Trade Date Data

The term “LM Trade Date Data” has the meaning specified in Rule 54.

LM Transaction Data

The term “LM Transaction Data” has the meaning specified in Rule 54.

Long Position

The term “Long Position” means the number of units of a CNS Security which a Member
is entitled to receive from the Corporation.

Loss Allocation Cap

The term “Loss Allocation Cap” has the meaning specified in Rule 4.

Loss Allocation Notice

The term “Loss Allocation Notice” has the meaning specified in Rule 4.

Loss Allocation Withdrawal Notice

The term “Loss Allocation Withdrawal Notice” has the meaning specified in Rule 4.

Loss Allocation Withdrawal Notification Period

The term “Loss Allocation Withdrawal Notification Period” has the meaning specified in
Rule 4.

Market Value SFT Cash

The term “Market Value SFT Cash” means the portion of the SFT Cash for an SFT
equal to the amount of the SFT Cash for such SFT minus the Independent Amount SFT
Cash of such SFT.

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 (RULE 1)

Member

The term “Member” means any Person specified in Section 2.(i) of Rule 2 who has
qualified pursuant to the provisions of Rule 2A. Except where the text of the Rule
indicates a contrary intent, the term “Member” shall also include Special Representative.

Municipal Comparison Only Member

The term “Municipal Comparison Only Member” means any municipal securities broker
or municipal securities dealer, as defined in Section 3(a)(30) and 3(a)(31) respectively,
of the Exchange Act, who is specified in Section 2.(ii)(d) of Rule 2 and has qualified
pursuant to the provisions of Rule 2A.

Municipal Securities Brokers’ Broker

The term “Municipal Securities Brokers’ Broker” means any municipal securities broker
as defined in Rule 15c3-1(a)(8)(ii) of the Exchange Act.

Mutual Fund Participant

The term “Mutual Fund Participant” has the meaning specified in Rule 4.

Mutual Fund/Insurance Services Member

The term “Mutual Fund/Insurance Services Member” 3 means a Person who is specified
in Section 2.(ii)(e) of Rule 2 and has qualified pursuant to the provisions of Rule 2A

National Securities Clearing Corporation

The term “National Securities Clearing Corporation” means National Securities Clearing
Corporation, a New York corporation.

Net Capital

The term “Net Capital” means, as of a particular date, the amount equal to the net
capital of a Registered Broker-Dealer as defined in Rule 15c3-1(c)(2) of the Exchange
Act, or any successor rule or regulation thereto.

Net Close Out Position

The term “Net Close Out Position” has the meaning specified in Rule 18.

3 The members now known as “Mutual Fund/Insurance Services Members” were previously known as
either “Mutual Fund Services Members” or “Annuities Agency Members”. The members known as
“Mutual Fund Services Members” were, at one point, referred to as “Mutual Fund Services Broker-
Dealers” or “Fund/SERV Broker-Dealers”.

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 (RULE 1)

Net Credit Balance

The term “Net Credit Balance” for a Business Day as used with respect to a Member,
Mutual Fund/Insurance Services Member, Insurance Carrier/Retirement Services
Member or Fund Member means the amount by which its Gross Credit Balance for such
Business Day exceeds its Gross Debit Balance on such Business Day.

Net Debit Balance

The term “Net Debit Balance” for a Business Day as used with respect to a Member,
Mutual Fund/Insurance Services Member, Insurance Carrier/Retirement Services
Member or Fund Member means the amount by which its Gross Debit Balance for such
Business Day exceeds its Gross Credit Balance on such Business Day.

Net Balance Order Unsettled Position

For purposes of calculating each Member’s required contribution to the Clearing Fund
pursuant to Procedure XV, the term “Net Balance Order Unsettled Position” as used in
Procedure XV means a Member’s net of unsettled Regular Way, When-Issued and
When-Distributed positions in Balance Order Securities that have not yet passed
Settlement Date.

Net Member Capital

The term “Net Member Capital” means Net Capital, net assets or equity capital, as
applicable to a Member, based on the type of regulation, and in particular the capital
requirements, to which the Member is subject.

Net Unsettled Position

For purposes of calculating each Member’s required contribution to the Clearing Fund
pursuant to Procedure XV, the term “Net Unsettled Position” as used in Procedure XV
means a Member’s net of unsettled Regular Way, When-Issued and When-Distributed
positions in CNS Securities that have not yet passed Settlement Date and net positions
in CNS Securities that did not settle on Settlement Date. Transactions submitted
through the ID Net Service are excluded from Net Unsettled Positions.

Net Worth

The term “Net Worth” means, as of a particular date, the amount equal to the excess of
the assets of a Person over the liabilities of such Person, computed in accordance with
generally accepted accounting principles. For Registered Broker-Dealers, Net Worth
shall include liabilities that are subordinated to the claims of creditors pursuant to a
satisfactory subordination agreement, as defined in Appendix D to Rule 15c3-1 of the
Exchange Act.

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 (RULE 1)

Non-Returned SFT

The term “Non-Returned SFT” shall have the meaning given to such term in Rule 56.

NSCC

The term “NSCC” means National Securities Clearing Corporation.

NSCC Website

The term “NSCC Website” means any URL (Uniform Resource Locator) designated by
the Corporation from time to time which may include DTCC’s website at
[Link]

Obligation Warehouse

The term “Obligation Warehouse” has the meaning specified in Rule 51.

Off-the-Market Transaction

The term “Off-the-Market Transaction” shall mean either of the following:

(1) A single transaction that is: (a) greater than $1 million in gross proceeds and
(b) on the day of the submission of the transaction to the Corporation, either
higher or lower than the most recently observed market price of the underlying
Cleared Security by a percentage amount determined by the Corporation
based upon market conditions and factors that impact trading behavior of the
underlying Cleared Security, including the volatility, liquidity and other
characteristics of such security; or
(2) A series of transactions submitted by or on behalf of two Members within the
same settlement cycle that, if looked at as a single transaction, would be
encompassed by subsection (1) of this definition.

OW Obligation

The term “OW Obligation” has the meaning specified in Rule 51.

Person

The term “Person” means a partnership, corporation, limited liability corporation or other
organization, entity or an individual.

Price Differential

The term “Price Differential” means:

(a) for purposes of the discharge of offsetting Final Settlement and Initial
Settlement obligations, (i) the SFT Cash for the Settling SFT (or if the Settling
SFT has a greater quantity of SFT Securities as its subject than the

23
 (RULE 1)

corresponding Linked SFT, the Corresponding SFT Cash) minus (ii) the SFT
Cash for the Linked SFT; and
(b) for all other purposes, (i) the SFT Cash for the SFT minus (ii) the product of the
Independent Amount Percentage, if any, and the Current Market Price of the
SFT Securities.

Procedures

The term “Procedures” means the Procedures of the Corporation adopted pursuant to
Rule 33 and set forth in these Rules & Procedures.

Qualified Securities Depository

The term “Qualified Securities Depository” means a Registered Clearing Agency which
has entered into an agreement with the Corporation pursuant to which it will act as a
securities depository for the Corporation and effect book-entry transfers of securities to
and by the Corporation in respect of the CNS System and/or the SFT Clearing Service.

Rate Payment

The term “Rate Payment” means an amount payable from one party to an SFT to the
other party to the SFT at the Final Settlement expressed as a percentage of the amount
of SFT Cash for the SFT.

RBC Ratio

The term “RBC Ratio” means the Risk-Based Capital ratio of an Insurance Company,
calculated pursuant to the law of the state of such Insurance Company’s state regulator.

Recall Date

The term “Recall Date” means, in respect of a Recall Notice, the second Business Day
following the Corporation’s receipt of such Recall Notice.

Recall Notice

The term “Recall Notice” means a notice that triggers the provisions of Section 9(b) of
Rule 56 relating to a Buy-In in respect of an SFT and that is submitted by an Approved
SFT Submitter on behalf of a Transferor in accordance with the communication links,
formats, timeframes and deadlines established by the Corporation for such purpose.

Recalled SFT

The term “Recalled SFT” means an SFT that has been novated to the Corporation in
respect of which a Recall Notice has been submitted.

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 (RULE 1)

Refusal

The term “Refusal” has the meaning specified in Rule 55.

Registered Broker-Dealer

The term “Registered Broker-Dealer” means a broker or dealer registered under the
Exchange Act.

Registered Clearing Agency

The term “Registered Clearing Agency” means a clearing agency as defined in Section
3(a)(23) of the Exchange Act which has been registered by the SEC pursuant to the
provisions of Section 19(a) of the Exchange Act.

Required Fund Deposit

The term “Required Fund Deposit” has the meaning specified in Rule 4. Required Fund
Deposit shall include the Sponsoring Member Required Fund Deposit, the Agent
Clearing Member Required Fund Deposit and the Required SFT Deposit, if any, unless
otherwise noted in these Rules.

Required SFT Deposit

The term “Required SFT Deposit” shall have the meaning given to that term in Rule 56
and includes any and all Independent Amount SFT Cash Deposit Requirements.

RP Member-provided Data

The term “RP Member-provided Data” has the meaning specified in Rule 54.

RP Trade Date Data

The term “RP Trade Date Data” has the meaning specified in Rule 54.

RP Transaction Data

The term “RP Transaction Data” has the meaning specified in Rule 54.

RVP/DVP Transaction

The term “RVP/DVP Transaction” means any wholly executory receipt-versus-payment

or delivery-versus-payment transaction between a Member and an RVP/DVP Customer.

RVP/DVP Customer

The term “RVP/DVP Customer” means a party who has executed a RVP/DVP
Transaction with a Member for whom the Corporation has ceased to act, or with an

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 (RULE 1)

introducing broker who clears through a Member for whom the Corporation has ceased
to act.

SEC

The term “SEC” means the Securities and Exchange Commission.

Section 1446(f)

The term “Section 1446(f)” means section 1446(f) of the Code and the related Treasury
Regulations or other official interpretations thereof, as in effect from time to time.

Section 1446(f) Withholding

The term “Section 1446(f) Withholding” means the tax withholding required pursuant to
Treasury Regulation Section 1.1446(f)-4(a), upon the transfer of an interest in a publicly
traded partnership.

Section 1446(f) Withholding Agent

The term “Section 1446(f) Withholding Agent” means an FFI Member that is a Member
and has certified to the Corporation that Section 1446(f) Withholding would not apply to
any Gross Credit Balance of such FFI Member by providing to the Corporation a Tax
Certification.

Section 1446(f) Withholding Compliance Date

The term “Section 1446(f) Withholding Compliance Date” means January 1, 2022 or, if
the commencement of Section 1446(f) Withholding is delayed beyond January 1, 2022
under Section 1446(f), two calendar months plus one calendar day before such delayed
effective date.

Securities Financing Transaction or SFT

The term “Securities Financing Transaction” or “SFT” means a transaction between two
SFT Members pursuant to which:
(a) one SFT Member agrees to transfer specified SFT Securities to another SFT
Member versus the SFT Cash; and
(b) the Transferee agrees to retransfer such specified SFT Securities or equivalent
SFT Securities (including quantity and CUSIP) to the Transferor versus the SFT
Cash on the following Business Day.

Securities Financing Transaction Clearing Service or SFT Clearing Service

The term “Securities Financing Transaction Clearing Service” or “SFT Clearing Service”
means the service offered by the Corporation to clear SFTs, as more fully described in
Rule 56.

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 (RULE 1)

Security

The term “security” shall have the meaning given that term in the Exchange Act and the
general rules and regulations promulgated thereunder. The term “securities” shall mean
more than one security.

Settlement Agent

The term “Settlement Agent” means the bank or trust company that the Corporation
may, from time to time, designate to act as its agent for purposes of receiving money
settlement debit amounts from Settling Banks, AIP Settling Banks and participants and
paying money settlement credit amounts to Settling Banks, AIP Settling Banks and
participants.

Settlement Date

The term “Settlement Date” means, with respect to any contracts, security balance
orders, security orders or other transactions to which these Rules and Procedures
apply, the date specified for the settlement of such contract, security balance order,
security order or transaction, as provided in these Rules and Procedures.

Settlement Day

The term “settlement day” means any Business Day on which banks and transfer
agencies in New York State are open and on which deliveries of securities and
payments of money may be made through the facilities of the Corporation.

Settling Bank

The term “Settling Bank” means

(1) a Member which is a bank or trust company which would otherwise qualify under
Section 2.(ii)(f) of Rule 2 and Rule 2A and which is a party to an effective Settling
Bank Agreement, or
(2) a Settling Bank Only Member which has qualified under Section 2.(ii)(f) of Rule 2,
Rule 2A and Addendum B and which is a party to an effective Settling Bank
Agreement.

Settling Bank Agreement

The term “Settling Bank Agreement” means an agreement to which the Corporation is a
party pursuant to which a Settling Bank or AIP Settling Bank has been appointed to, and
affirmatively undertakes to, perform settlement services for, in the case of a Settling
Bank, a Member, Mutual Fund/Insurance Services Member, Insurance
Carrier/Retirement Services Member or Fund Member, or, in the case of an AIP Settling
Bank, an AIP Member or an AIP Non-Member Fund, which in either case is also a party
thereto.

27
 (RULE 1)

Settling Bank Only Member

The term “Settling Bank Only Member” means a Person who is specified in Section
2.(ii)(f) of Rule 2 and which has qualified pursuant to the provisions of Rule 2A.

Settling SFT

The term “Settling SFT” means, as of any Business Day, an SFT that has been novated
to the Corporation, the Final Settlement of which is scheduled to occur on that Business
Day.

SFT Account

The term “SFT Account” means a ledger maintained on the books and records of the
Corporation that reflects the outstanding SFTs that an SFT Member enters into and that
have been novated to the Corporation, the SFT Positions or SFT Cash associated with
those transactions and any debits or credits of cash associated with such transactions
effected pursuant to Rule 12. The term “SFT Account” shall include any Agent Clearing
Member Customer Omnibus Account and any Sponsored Member Sub-Account.

SFT Cash

The term “SFT Cash” means the specified amount of U.S. dollars that the Transferee
agrees to transfer to the Transferor at the Initial Settlement of an SFT, (i) plus any Price
Differential paid by the Corporation to the SFT Member as Transferor or by the SFT
Member as Transferee to the Corporation during the term of the SFT and (ii) less any
Price Differential paid by the Corporation to the SFT Member as Transferee or by the
SFT Member as Transferor to the Corporation during the term of the SFT.

SFT Close-out Value

The term “SFT Close-out Value” means, with respect to an SFT Position of an SFT
Member, an amount equal to:
(i) if the SFT Member is the Transferor of the SFT Securities that are the subject
of such SFT, (a) the CNS Market Value of the SFT Securities that are the
subject of such SFT minus (b) the SFT Cash for such SFT; and
(ii) if the SFT Member is a Transferee of the SFT Securities that are the subject of
such SFT, (a) the SFT Cash for such SFT minus (b) the CNS Market Value of
the SFT Securities that are the subject of such SFT.

SFT Deposit

The term “SFT Deposit” shall have the meaning given to such term in Rule 56 and
includes any and all Independent Amount SFT Cash Deposits.

28
 (RULE 1)

SFT Long Position

The term “SFT Long Position” means the number of units of an SFT Security which an
SFT Member is entitled to receive from the Corporation at Final Settlement of an SFT
against payment of the SFT Cash.

SFT Member

The term “SFT Member” means any Member, Sponsored Member acting in its principal
capacity, Sponsoring Member acting in its principal capacity or Agent Clearing Member
acting on behalf of a Customer, in each case that is a party to an SFT, permitted to
participate in the Corporation’s SFT Clearing Service.

SFT Position

The term “SFT Position” means an SFT Member’s SFT Long Position or SFT Short
Position in an SFT Security that is the subject of an SFT that has been novated to the
Corporation.

SFT Security

The term “SFT Security” shall mean a security that is eligible to be the subject of an
SFT novated to the Corporation and is included in the list for which provision is made in
Section 1(g) of Rule 3. If any new or different security is exchanged for any SFT
Security in connection with a recapitalization, merger, consolidation or other corporate
action, such new or different security shall, effective upon such exchange, become an
SFT Security in substitution for the former SFT Security for which such exchange is
made.

SFT Short Position

The term “SFT Short Position” means the number of units of an SFT Security that an
SFT Member is obligated to deliver to the Corporation at Final Settlement of an SFT
against payment of the SFT Cash.

Short Position

The term “Short Position” means the number of units of a CNS Security that a Member
is obligated to deliver to the Corporation.

Special Representative

The term “Special Representative” has the meaning specified in Rule 7. Unless the
context otherwise requires, the term “Special Representative” also includes “Qualified
Special Representative”, as defined in Rule 7.

29
 (RULE 1)

Special Trade

The term “Special Trade” means a transaction reported to the Corporation involving a
Cleared Security either which the parties thereto agree to settle on a Member-to-
Member basis or which the Corporation designates as settling on a Member-to-Member
basis. Special Trades shall be accounted for and settled as provided in these Rules.

Specified Location

The term “Specified Location” shall be the location where a Member receives envelope
deliveries.

Sponsored Member

The term “Sponsored Member” means any Person that has been approved by the
Corporation to be sponsored into membership by a Sponsoring Member pursuant to
Rule 2C.

Sponsored Member Agreement

The term “Sponsored Member Agreement” shall have the meaning given to such term in
Rule 2C.

Sponsored Member Liquidation Amount

The term “Sponsored Member Liquidation Amount” shall have the meaning given to
such term in Rule 2C.

Sponsored Member Sub-Account

The term “Sponsored Member Sub-Account” means a ledger maintained on the books
and records of the Corporation that reflects the outstanding SFTs that a Sponsoring
Member enters into in respect of a Sponsored Member and that have been novated to
the Corporation, the SFT Positions or SFT Cash associated with those transactions and
any debits or credits of cash associated with such transactions effected pursuant to
Rule 12.

Sponsored Member Termination Date

The term “Sponsored Member Termination Date” means the date on which the
termination of a Sponsored Member becomes effective.

Sponsored Member Transaction

The term “Sponsored Member Transaction” shall have the meaning given to such term
in Rule 2C.

30
 (RULE 1)

Sponsored Member Voluntary Termination Notice

The term “Sponsored Member Voluntary Termination Notice” means a written notice
from a Sponsored Member to the Corporation that the Sponsored Member is voluntarily
electing to terminate its membership.

Sponsoring Member

The term “Sponsoring Member” means a Member whose application to become a

Sponsoring Member has been approved by the Board of Directors or the Corporation,
as applicable, pursuant to Rule 2C.

Sponsoring Member Agreement

The term “Sponsoring Member Agreement” means an agreement between the

Corporation and a Member who is approved to become a Sponsoring Member and
specifies the terms and conditions deemed by the Corporation to be necessary in order
to protect itself and its participants.

Sponsoring Member Guaranty

The term “Sponsoring Member Guaranty” means a guaranty, in the form and substance
acceptable to the Corporation, whereby the Sponsoring Member guarantees to the
Corporation the payment and performance by its Sponsored Members of their
obligations under these Rules and Procedures in respect of the Sponsoring Member’s
Sponsored Member Sub-Accounts, including, without limitation all of the settlement
obligations of its Sponsored Members in respect of such Sponsored Member Sub-
Accounts.

Sponsoring Member Liquidation Amount

The term “Sponsoring Member Liquidation Amount” shall have the meaning given to
such term in Rule 2C.

Sponsoring Member Required Fund Deposit

The term “Sponsoring Member Required Fund Deposit” shall have the meaning given to
such term in Rule 2C.

Sponsoring Member Settling Bank Omnibus Account

The term “Sponsoring Member Settling Bank Omnibus Account” shall have the meaning
given to such term in Rule 2C.

31
 (RULE 1)

Sponsoring Member Termination Date

The term “Sponsoring Member Termination Date” means the date on which the
termination of a Sponsoring Member’s status as a Sponsoring Member becomes
effective.

Sponsoring Member Voluntary Termination Notice

The term “Sponsoring Member Voluntary Termination Notice” means a written notice
from a Sponsoring Member to the Corporation that the Sponsoring Member is
voluntarily electing to terminate its status as a Sponsoring Member with respect to all of
its Sponsored Members or with respect to one or more of its Sponsored Members.

Sponsoring/Sponsored Membership Program Indemnified Parties or SMP Indemnified

Parties

The term “Sponsoring/Sponsored Membership Program Indemnified Parties” or “SMP

Indemnified Parties” shall have the meaning given to such term in Rule 2C.

Statutory Disqualification

The term “Statutory Disqualification” shall have the meaning given that term in Section
3(a)(39) of the Exchange Act.

Tax Certification

The term “Tax Certification” means an executed copy of the relevant tax form required
by the Internal Revenue Service, as in effect from time to time, that each Member,
Limited Member and Sponsored Member (or applicant to become such) shall provide
from time to time to the Corporation as set forth under these Rules and Procedures.

Termination Date

The term “Termination Date” has the meaning specified in Rule 2B.

Third Party Administrator Member

The term “Third Party Administrator Member” (or “TPA Member”) means any Person
that acts as a third party administrator on behalf of a retirement or other benefit plan,
who is specified in Section 2.(ii)(g) of Rule 2 and has qualified pursuant to the
provisions of Rule 2A.

Third Party Provider Member

The term “Third Party Provider Member” (or “TPP Member”) means any Person that
acts as a routing platform for financial intermediaries, who is specified in Section 2.(ii)(j)
of Rule 2 and has qualified pursuant to the provisions of Rule 2A.

32
 (RULE 1)

Transferee

The term “Transferee” means the SFT Member party to an SFT that agrees to receive
SFT Securities from the other SFT Member party to the SFT in exchange for SFT Cash
in connection with the Initial Settlement of the SFT.

Transferor

The term “Transferor” means the SFT Member party to an SFT that agrees to transfer
SFT Securities to the other SFT Member party to the SFT in exchange for SFT Cash in
connection with the Initial Settlement of the SFT.

Volatility Charge

The term “Volatility Charge” means, in respect to a Member, the portion of its Required
Fund Deposit calculated by the Corporation by applying Sections I.(A)(1)(a)(i) – (iii) of
Procedure XV.

Voluntary Termination Notice

The term “Voluntary Termination Notice” has the meaning specified in Rule 2B.

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 and Limited Members that, based on the Corporation’s consideration of
relevant factors, including those set forth in Section 4(d) of Rule 2B, are deemed by the
Corporation to pose a heightened risk to the Corporation and its Members.

33
 (RULE 2)

RULE 2. MEMBERS, LIMITED MEMBERS AND SPONSORED MEMBERS

SEC. 1. The Corporation shall make its services, or certain of its services,
available to Persons who (i) apply to the Corporation to act for them, (ii) meet the
membership qualifications specified in these Rules, (iii) are approved by the Corporation
or the Board of Directors, as applicable, and (iv) if required, have contributed to the
Clearing Fund as provided in Rule 4.

SEC. 2. Membership Types

The Corporation shall have the following membership types:

(i) Member –

A Member, unless otherwise limited by the Corporation pursuant to these

Rules, may generally access all services made available by the
Corporation. Only Members shall be entitled to settle contracts through
the Corporation and to participate in the Comparison and Recording
Operation and Accounting Operation.

A Member shall include a Member in its capacity as a Sponsoring Member

to the extent specified in Rule 2C and an Agent Clearing Member to the
extent specified in Rule 2D.

(ii) Limited Members –

In addition to Members, upon the request of an applicant, the Corporation

may approve an application by a Person to become a Limited Member,
whose use of the Corporation’s services is limited to those services
specified by the Corporation. Such Limited Members will be termed as
follows:

(a) Data Services Only Member –

Participates solely in the transmission of data and information, and

shall utilize only those features of services that the Corporation
may, from time to time, expressly designate as eligible for access
by a Data Services Only Member.

(b) Fund Member –

Participates in the Corporation’s Mutual Fund Services, acting as a

mutual fund’s 1) principal underwriter, 2) co-distributor, 3) sub-
distributor, or 4) an entity that is otherwise authorized to process
transactions on behalf of a mutual fund.

34
 (RULE 2)

(c) Insurance Carrier/Retirement Services Member –

Participates in the Corporation’s Insurance & Retirement Services

as provided for in Rule 57.

(d) Municipal Comparison Only Member –

Participates in the Corporation’s Comparison Operation, solely for

the comparison of municipal securities transactions.

(e) Mutual Fund/Insurance Services Member –

Participates in the Corporation’s Mutual Fund Services and

Insurance & Retirement Services as provided for in Rules 52 and
57.

(f) Settling Bank Only Member –

Undertakes to perform settlement services with respect to

transactions or matters covered by these Rules on behalf of
Members, Fund Members, Mutual Fund/Insurance Services
Members and Insurance Carrier/Retirement Services Members.

(g) Third Party Administrator Member –

Participates in the Corporation’s Mutual Fund Services for the

purpose of communicating order, redemption or other information
on behalf of a retirement or other benefit plan.

(h) AIP Member –

Participates in the Corporation’s AIP Services as provided in Rule

53.

(i) Investment Manager/Agent Member –

Participates in the Corporation’s Mutual Fund Services as or on

behalf of one or more investment managers to a managed account
or similar program.

(j) Third Party Provider Member –

Participates in the Corporation’s Mutual Fund Services as a routing

platform for financial intermediaries.

35
 (RULE 2)

(iii) In addition to Members and Limited Members, the Corporation may

approve a Person to become a Sponsored Member, whose use of the
Corporation’s services is limited to those services specified by the
Corporation as follows:

Sponsored Member –

Participates in the Corporation’s Securities Financing Transaction Clearing

Service as provided for in Rule 56.

When these Rules refer to “Members and Limited Members”, the reference
includes all member types other than Sponsored Members; when reference is made to
“participants” in these Rules, the reference generally means all participants other than
Settling Bank Only Members, unless the context makes clear it refers to one or more
specific member types.

SEC. 3. Responsible as Principal

A participant who submits, compares, settles or carries out through the

Corporation any contract or transaction for a Person who is not also a participant
(hereinafter a non-Member) shall, so far as the rights of the Corporation and all other
participants are concerned, be liable as a principal, except with respect to municipal
security transactions compared by a Member on behalf of the non-Member pursuant to
a Municipal Comparison Only Multi-Number Agreement, in which case the non-Member
shall remain liable as principal on the underlying transactions. A non-Member who
compares, settles or carries out transactions through a participant shall not be deemed
to possess any of the rights or benefits of a participant.

SEC 4. Compliance with Applicable Law

(i) General

Members, Limited Members and Sponsored Members may not submit or confirm
any transaction, charge, request, instruction or transmission through the
Corporation’s services, nor otherwise utilize the Corporation’s services, in
contravention of any law, rule, regulation or statute, including, but not limited to,
those related to securities, taxation and money laundering, as well as sanctions
administered and enforced by the Office of Foreign Assets Control (“OFAC”).

(ii) OFAC

All Members, Limited Members and Sponsored Members must agree not to
conduct any transaction or activity through NSCC that it knows to violate
sanctions administered and enforced by OFAC.

All Members, Limited Members and Sponsored Members subject to the

jurisdiction of the U.S. (as defined by OFAC regulations), with the exception of

36
 (RULE 2)

Data Services Only Members, Municipal Comparison Only Members, Third Party
Administrator Members and Investment Manager/Agent Member, are required to
periodically confirm that they have 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 and Section 1446(f)

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.

Beginning on the Section 1446(f) Withholding Compliance Date, each FFI

Member that is a Member must agree not to conduct any transaction or activity
through the Corporation if such FFI Member is not a Section 1446(f) Withholding
Agent, unless such requirement has been explicitly waived in writing by the
Corporation with respect to the specific FFI Member.

Each FFI Member is required to certify and periodically recertify to the

Corporation that such FFI Member is FATCA Compliant and/or a Section 1446(f)
Withholding Agent, as applicable, by providing to the Corporation a Tax
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 shall indemnify the Corporation for any loss, liability or expense
sustained by the Corporation as a result of such FFI Member failing to be FATCA
Compliant or a Section 1446(f) Withholding Agent.

37
 (RULE 2A)

RULE 2A. INITIAL MEMBERSHIP REQUIREMENTS

SEC. 1. ELIGIBILITY FOR MEMBERSHIP

In furtherance of the Corporation’s rights and authority to establish standards for

membership, the Corporation shall establish, as it deems necessary or appropriate,
standards of financial responsibility, operational capability, experience and competence
for membership applicable to Members and to Limited Members. The Corporation shall
also establish guidelines for the application of such membership standards.

A. Qualifications

A Person shall be qualified to become a participant if it satisfies the qualifications

for membership applicable to its membership type, as set forth in Addendum B of these
Rules.

B. Membership Standards

The Corporation shall approve a membership application only upon a

determination by the Corporation that the applicant meets the qualifications and
financial, operational and other standards applicable to its membership type as set forth
in Addendum B of these Rules, or such other qualifications and standards as the
Corporation may promulgate. 1 In addition, with regard to any applicant that shall be an
FFI Member, such applicant must be FATCA Compliant and/or a Section 1446(f)
Withholding Agent, as applicable.

C. Application Documents

Each applicant shall, as required by the Corporation from time to time, complete
and deliver to the Corporation an Applicant Questionnaire in such form as prescribed by
the Corporation from time to time and shall provide such other reports, opinions,
financial and other information as the Corporation may determine are appropriate for
each membership type.

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 Tax Certification, and (2) a Cybersecurity Confirmation.

Each applicant (as determined by the Corporation) must also fulfill, within the
timeframes established by the Corporation, any operational testing requirements (the
scope of such testing to be determined by the Corporation in its sole discretion),
network and connectivity testing at the current NSCC standards (the scope of such

1 Pursuant to its authority, the Corporation has established (i) a policy statement on the admission of
non-U.S. entities as Members, Mutual Fund/Insurance Services Members, Fund Members and
Insurance Carrier/Retirement Services Members, which policy statement is set forth as Addendum O
to these Rules and (ii) guidelines with regard to character and other considerations that are reflected
in subsection G of this Rule.

38
 (RULE 2A)

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)
that may be imposed by the Corporation to ensure the operational capability of the
applicant.

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.

D. Evaluation of Applicant

In evaluating a membership application, the Corporation shall, in addition to

reviewing the qualifications and standards set forth in Sections 1.A. and 1.B. of this
Rule, review any Applicant Questionnaire and any other information submitted by the
applicant to the Corporation and shall have such authority to examine the financial
responsibility and operational capability of any applicant as set forth in Rule 15.

The Corporation shall approve an applicant only upon a determination by the

Corporation that the applicant meets the qualifications, standards and other
requirements applicable to the relevant membership type.

Notwithstanding that a membership application shall have been approved by the

Corporation, if a material change in condition at the applicant occurs which could bring
into question the applicant’s ability to perform, and such material change becomes
known to the Corporation prior to the applicant commencing use of the Corporation’s
services (or, for Settling Bank Only Members, prior to the applicant commencing the
services of a Settling Bank ), the Corporation shall have the right to stay
commencement by the applicant until a reconsideration of the applicant’s financial
responsibility and operational capability can be completed. As a result of such
reconsideration, the Corporation may determine to withdraw approval or condition the
approval upon the furnishing of additional information or assurances.

If the Corporation determines that the applicant fails to meet any membership
standards, but in the opinion of the Corporation any one or more of such standards as
applied to the applicant is unduly or disproportionately severe or the conduct of the
applicant has been such as not to make it against the interests of the Corporation, its

39
 (RULE 2A)

participants, creditors or investors to approve such application, the Corporation may

approve the application either unconditionally or on a temporary or other conditional
basis. When approving an application on a conditional or temporary basis, the
Corporation may obtain additional assurances from the applicant as provided for in
Rule 15.

Notwithstanding the foregoing, the Corporation may deny an application or

request to use one or more additional services of the Corporation upon a determination
by the Corporation that the Corporation does not have adequate personnel, space, data
processing capacity or other operational capability at such time to perform its services
for the applicant or participant without impairing the ability of the Corporation to provide
services for its existing participants, 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.

Before denying an application 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 to determine whether the application should be denied,
such request to be filed by the applicant with the Corporation pursuant to Rule 37.

E. Membership and Other Agreements

Each Member, Mutual Fund/Insurance Services Member, Insurance

Carrier/Retirement Services Member, Fund Member, Third Party Administrator Member,
Third Party Provider Member, Investment Manager/Agent Member, AIP Member or
Data Services Only Member agrees, among other things:

(a) That the only services or systems which the participant may utilize are
those that are permitted by the Corporation. If the participant intends only to use
the (i) AIP Services, (ii) Mutual Fund Services and/or (iii) the Insurance &
Retirement Services, that the participant will so limit its activities at the
Corporation;

(b) These Rules shall be a part of the terms and conditions of every contract
or transaction which the participant may make or have with or through the
Corporation;

(c) Not to submit, clear or settle through the Corporation any contract or
transaction unless these Rules are part of the terms and conditions of such
contract or transaction;

(d) That it has reviewed these Rules including the provisions of Rule 4
relating to the Clearing Fund and Addendum D relating to the non-guarantee by
the Corporation of payments made in the settlement of transactions submitted
through the Corporation’s services;

40
 (RULE 2A)

(e) To abide by these Rules and be bound by all the provisions thereof, and
that the Corporation shall have all the rights and remedies contemplated by these
Rules. Notwithstanding that the participant may have ceased to be a participant,
the participant shall continue to be bound by these Rules as to all matters and
transactions occurring while a participant;

(f) To be bound by any amendment to these Rules with respect to any

transaction occurring subsequent to the time such amendment takes effect, as
fully as though such amendment were now a part of these Rules; provided,
however, that no such amendment shall affect the participant’s right to cease to
be a participant or alter the provisions of Rule 4, unless before such amendment
becomes effective, the participant is given an opportunity to give written notice to
the Corporation of the participant’s election that the Corporation shall cease to
act for the participant;

(g) Not to submit or confirm any transaction, charge, request, instruction or

transmission through the Corporation’s services, nor to otherwise utilize the
Corporations services, in contravention of any law, rule, regulation or statute;

(h) To pay to the Corporation the compensation provided for under these
Rules for services rendered to the participant, while a participant 2;

(i) To pay such fines while a participant as may be imposed in accordance

with these Rules for the failure to comply therewith;

(j) If applicable to its membership type, to pay to the Corporation any

amounts which, pursuant to the provisions of Rule 4, shall become payable by
the participant to the Corporation and that the determination by the Board of
Directors of the Corporation of all questions affecting the charges to which the
participant’s contribution to the Clearing Fund (if required pursuant to Rule 4) are
or may be subject shall be final and conclusive;

(k) That its books and records 3 shall at all times be open to the inspection of
the duly authorized representatives of the Corporation, and that the Corporation

2 With respect to Fund Members, the Fund Member agrees to pay to the Corporation the compensation
provided for by these for Fund/SERV Eligible Fund transactions if the Fund Member distributes
shares on a principal basis. However, to the extent the Fund Member distributes shares of an
investment company regulated under the Investment Company Act of 1940, as amended, on an
agency basis, then the Fund Member shall agree to pay to the Corporation the compensation
provided for by these Rules for transactions in such investment company shares to the extent that the
Fund Member can recover such amount from the investment company(ies) whose shares it
distributes. Whether the Fund Member distributes shares on a principal or agency basis, the Fund
Member shall agree to pay such fines as may be imposed in accordance with these Rules for the
failure to comply therewith.
3 With respect to Fund Members, the Fund Member agrees that the Fund Member’s books and records
and, to the extent the Fund Member is not a management company, the books and records of each
management company affiliated with the Fund Member and, with respect to Fund/SERV Eligible

41
 (RULE 2A)

shall be furnished with all such information in respect of the participant’s

business and transactions as it may require, provided that if the participant shall
cease to be a participant, the Corporation shall have no right to inspect the
participant’s books and records or to require information relating to transactions
wholly subsequent to the time when the participant ceases to be such; 4 and

(l) That to the extent the participant authorizes an agent (if permitted
pursuant to these Rules) to receive from and/or transmit to the Corporation data
or payments, the participant shall be solely responsible for the acts of said
agents as if it were receiving and/or transmitting such data itself and that the
failure of said agents to perform shall not excuse the participant from a violation
of these Rules.

In addition to the above:

1. Members:

Members that are Municipal Securities Brokers’ Brokers agree that (i) if
securities received on a Business Day are pledged prior to money settlement on
that Business Day, the Corporation shall be paid directly by the pledgee bank the
amount the Member is required to pay for the securities received or the
Member’s net settlement obligation for that Business Day, whichever is less; and
(ii) no securities received on a Business Day through a qualified securities
depository shall be placed in transfer, withdrawn or delivered to a third party for
no value prior to paying the Corporation the amount the Member is obligated to
pay for the receipt of the securities or the Member’s net settlement obligation for
that Business Day, whichever is less.

2. Third Party Administrator Members, Third Party Provider Members and

Investment Manager/Agent Members:

Third Party Administrator Members, Third Party Provider Members and

Investment Manager/Agent Members shall sign and deliver to the Corporation, (i)
documentation and/or agreements in such form as required by the Corporation
from time to time, for the payment or collection of charges pursuant to Rule 26 for
the processing of transactions through the Mutual Fund Services and (ii) a duly

Funds that are not investment companies regulated under the Investment Company Act of 1940, as
amended, the books and records of any entity affiliated or having any regulatory connection with the
fund, shall at all times be open to inspection by the duly authorized representatives of the Corporation
and that the Corporation shall be furnished with all such information in respect of its business and
transactions as the Corporation may require; provided that if it shall cease to be a Fund Member, the
Corporation shall have no right to inspect its books and records, or the books and records of each
such management company and/or entity affiliated or connected with the fund, as the case may be,
or to require information relating to transactions wholly subsequent to the time when it ceased to be a
Fund Member.
4 This provision is not applicable to Data Services Only Members, Investment Manager/Agent
Members, TPP Members or TPA Members.

42
 (RULE 2A)

completed consent and authorization form, designating the Member(s)/Mutual

Fund/Insurance Services Member(s) who will be responsible for the settlement of
orders initiated by the participant.

Each Settling Bank Only Member or Municipal Comparison Only Member shall
sign and deliver to the Corporation such instruments in writing as the Corporation may
require from time to time.

F. Original Clearing Fund Contribution

An applicant whose application has been approved by the Corporation shall, if

required, pay to the Corporation its original contribution to the Clearing Fund determined
in accordance with the provisions of Rule 4 and shall, if required, sign and deliver to the
Corporation an instrument in writing evidencing any open account indebtedness
permitted pursuant to Rule 4.

G. Disqualification Criteria

Rule 15 provides the Corporation with the authority to establish, as it deems

necessary or appropriate, standards of financial responsibility, operational capability,
experience and competence for membership. The Rule also provides the Corporation
with the authority to establish guidelines for the application of such membership
standards. Pursuant to this authority, the Corporation has determined to establish the
following additional standards. The Corporation may deny membership to any applicant
or cease to act for any participant when such participant or its Controlling Management
has a record that reflects:

(i) the applicant is subject to any 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 a non-U.S. examining authority or regulator;

(ii) the applicant or its Controlling Management is responsible for: (A)

making a misstatement of a material fact or has omitted to state a material fact
to the Corporation in connection with its application to become a Member or
thereafter, (B) fraudulent acts or a violation of the Securities Act of 1933, the
Exchange Act, or the Investment Company Act, the Investment Advisers Act 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 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

43
 (RULE 2A)

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, or self-regulatory organization as defined in
Section 3(a)(26) of the Exchange Act, or an entity 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, entity, 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. Further, applicants are required to inform the Corporation
as to any member of its Controlling Management that is or becomes subject to Statutory
Disqualification (as defined in Section 3(a)(39) of the Exchange Act).

Finally, this Rule shall not be construed to limit the Corporation’s authority to
deny membership to, cease to act for, or obtain further assurances from, any applicant
or participant in accordance with the Corporation’s Rules and Procedures when the
circumstances warrant even if such circumstances include (or consist solely of) items
that are specifically not grounds for such action under this Rule.

44
 (RULE 2B)

RULE 2B. ONGOING MEMBERSHIP REQUIREMENTS AND MONITORING

SEC. 1. REQUIREMENTS

The qualifications and standards provided for in Rule 2A1 shall be continuing
membership requirements. In addition, each Member, Fund Member, Insurance
Carrier/Retirement Services Member, Municipal Comparison Only Member, Mutual
Fund/Insurance Services Member, Data Services Only Member, Settling Bank Only
Member, Third Party Administrator Member, Third Party Provider Member, Investment
Manager/Agent Member and AIP Member shall comply with the ongoing informational
and operational requirements set forth below.

SEC. 2. DATA TO BE FILED WITH THE CORPORATION

A. Reports and Information

Each Member, Mutual Fund/Insurance Services Member, Fund Member, and

Insurance Carrier/Retirement Services Member (each hereinafter in this rule referred to
collectively as “participants”) shall submit to the Corporation the following reports and
information as applicable to such participant, together with all addenda and
amendments applicable thereto, within the time periods prescribed by the Corporation
from time to time. (Unless specifically set forth below, the time periods prescribed by the
Corporation are set forth in the form of notices posted at the NSCC Website. Pursuant
to Section 7 of Rule 45, it is the participant’s responsibility to retrieve all notices daily
from the NSCC Website.):

(a) with respect to each such participant, a copy of the participant’s

annual audited financial statements and, with respect to each such participant
whose membership is contingent upon a guarantee of a third party, a copy of the
annual audited financial statements of such guarantor. If annual audited financial
statements of the entity that is the participant or its guarantor are not available,
the Corporation in its sole discretion may accept consolidated financial
statements or financial information prepared at the level of the parent of such
entity. Financial statements submitted in respect of an Insurance Company shall
be prepared substantially in the form adopted by the National Association of
Insurance Commissioners (the “NAIC”);

(b) with respect to a participant that is a broker or dealer registered

under Section 15 of the Exchange Act, a copy of its: (i) Form X-17-A-5 (Financial
and Operational Combined Uniform Single (“FOCUS”) Report); (ii) report of its
independent auditors on internal controls; and (iii) any supplemental report
required to be filed with the SEC pursuant to Rule 17a-11 of the Exchange Act or
17 C.F.R. Section 405.3, or any successor rules or regulations thereto;

1 Including Addendum O to these Rules, as set forth in Section 1.B of Rule 2A.

45
 (RULE 2B)

(c) with respect to a participant that is a bank or a trust company, if the

bank or trust company is required to file a Consolidated Report of Condition and
Income (“Call Report”), a copy of its Call Report, and (to the extent not contained
within such Call Reports) information containing each of its capital levels and
ratios; if the bank or trust company is not required to file a Call Report, a copy of
its unaudited quarterly financial statements as provided to the state regulatory
authority having jurisdiction over the participant, containing each of its capital
levels and ratios;

(d) with respect to a participant that is an SEC-registered investment

adviser, copies of its Form ADV;

(e) with respect to a participant that is subject to capital or other

financial requirements prescribed by its regulatory authority, copies of any
regulatory notification required to be made when the participant’s capital level or
other financial requirement falls below the levels prescribed by the applicable
regulator;

(f) with respect to a participant 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; and

(g) with respect to a participant that has provided to the SEC any notice
required pursuant to paragraph (e) of the SEC’s 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.

Each Member and Limited 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.

The Corporation may from time to time require the submission of additional
reports and other information as it may deem necessary or advisable. Reports
and information provided to the Corporation pursuant to this Rule shall be
provided in the form and to the persons or departments specified by the
Corporation from time to time and the provisions of Rule 45 shall not apply
thereto.

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 Member, Limited Member, or Sponsored Member shall maintain or upgrade

their network technology, or communications technology or protocols on the

46
 (RULE 2B)

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.

B. Notification of Changes in Condition

(a) Each Member, Mutual Fund/Insurance Services Member, Fund Member,

Municipal Comparison Only Member, Insurance Carrier/Retirement Services Member,
TPA Member, TPP Member, Investment Manager/Agent Member, AIP Member and
Data Services Only Member shall:

(i) promptly inform the Corporation, within two Business Days, both
orally and in writing, if it is no longer in compliance with any of the
relevant qualifications and standards for membership set forth in
these Rules as applicable to its type of membership (regardless of
whether in effect at the time the participant was admitted), or with
respect to any additional qualifications as required by the
Corporation in connection with approval of its admission to, or
continued participation in, the Corporation, including in the event of
the participant becoming subject to a Statutory Disqualification.
Such notification must be given by the participant as soon as
practicable and in any event must be received by the Corporation
within two Business Days from the date on which the participant
first learns of its non-compliance;

(ii) submit to the Corporation written notice of material organization

changes including mergers, acquisitions, changes in corporate
form, name changes at least 90 calendar days prior to the effective
date of such event unless the member demonstrates that it could
not have reasonably given notice within such timeframe.

(b) Each Member shall submit to the Corporation written notice of any event
that would effect a change in control of the participant or could have a material impact
on such participant’s business and/or financial condition, including but not limited to:

(i) material changes in ownership, control or management;

(ii) material changes in business lines, including but not limited to new
business lines undertaken; or

(iii) participation as a defendant in litigation which could reasonably be

anticipated to have a direct negative impact on the participant’s
financial condition or ability to conduct business.

With respect to an event (such as a merger or a planned change in business) for

which the participant has advance knowledge, written notification must be received by
the Corporation as soon as practicable upon the participant’s having knowledge that
such event is scheduled to occur and, with respect to an event for which the participant

47
 (RULE 2B)

does not have advance knowledge thereof, such written notification must be received by
the Corporation as soon as practicable after such event has occurred.

(c) Each FFI Member shall inform the Corporation, both orally and in writing, if
it (i) undergoes a change in circumstance that would affect its Tax Certification or (ii)
otherwise has reason to know that it is not, or will not be, FATCA Compliant, in each
case, within two calendar days of knowledge thereof. In addition, beginning on the
Section 1446(f) Withholding Compliance Date, each FFI Member that is a Member shall
inform the Corporation, both orally and in writing, if it has reason to know that it is not, or
will not be, a Section 1446(f) Withholding Agent within two calendar days of knowledge
thereof.

(d) Notice provided to the Corporation pursuant to this Section shall be

provided in the form and to the persons or departments specified by the Corporation
from time to time and the provisions of Rule 45 shall not apply thereto.

(e) Failure to notify the Corporation under this Section may be deemed to be
a violation of the Corporation’s Rules and therefore may be subject to sanctions. In
addition, the Corporation may review the financial responsibility and operational
capability of the Member to the extent provided in these Rules and Procedures 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 4 of Rule
2B.

SEC. 3. OPERATIONAL TESTING

(a) The Corporation may, from time to time, determine those Members, Fund
Members, Insurance Carrier/Retirement Services Members, Municipal Comparison Only
Members, Mutual Fund/Insurance Services Members, Data Services Only Members,
Settling Bank Only Members, Investment Manager/Agent Members, AIP Members,
Third Party Provider Members and Third Party Administrator Members (collectively,
“participants”) who shall be required 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 participant. The Corporation may assess a fine upon those
participants that fail to 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

participants who shall be required to participate in annual business continuity and

48
 (RULE 2B)

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 participant during the twelve months prior to the
designation; and (3) past performance of the participant with respect to operational
testing. The specific standards adopted by the Corporation and any updates or
modifications thereto shall be published to participants and applied on a prospective
basis.

Upon notification that the participant has been designated to participate in the
annual business continuity and disaster recovery testing, as described above,
participants 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.

SEC. 4. ONGOING MONITORING

(a) All Members and certain Limited 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 U.S. bank or trust company that files the
Consolidated Report of Condition and Income (“Call Report”), (B) a
U.S. broker-dealer that files the Financial and Operational
Combined Uniform Single Report (“FOCUS Report”) or the
equivalent with its regulator or (C) a non-U.S. bank or trust
company 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 2B(e) of Rule 2B, or
as may be otherwise required under the Rules and Procedures
(including this Rule 2B, Section 4).

(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 4 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

49
 (RULE 2B)

additional actions with regard to the Member as are permitted by

the Rules and Procedures.

(c) Members other than those specified in paragraph (b)(i) of this Section 4
and Limited Members that are monitored and reviewed by the Corporation pursuant to
paragraph (a) of this Section 4 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 4 include, but are not limited to, (i) news reports and/or regulatory
observations that raise reasonable concerns relating to the Member or Limited Member,
(ii) reasonable concerns around the Member’s or Limited Member’s liquidity
arrangements, (iii) material changes to the Member’s or Limited Member’s
organizational structure, (iv) reasonable concerns of the Corporation about the
Member’s or Limited 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 or Limited Member to demonstrate satisfactory financial
condition or operational capability or if the Corporation has a reasonable concern
regarding the Member’s or Limited Member’s ability to maintain applicable membership
standards and (vi) failure of the Member or Limited Member to provide information
required by the Corporation to assess risk exposure posed by the Member’s or Limited
Member’s activity (including information requested by the Corporation pursuant to
Section 2B(e) of this Rule 2B).

(e) The Corporation may require a Member or Limited 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 Procedure XV (which additional
deposit shall constitute a portion of the Member’s or Limited 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 or Limited Member.
The Corporation may also retain any deposit in excess of the Required Fund Deposit of
a Member or Limited Member that has been placed on the Watch List as provided in
Section 9 of Rule 4.

(f) A Member or Limited Member being placed on the Watch List shall result
in a more thorough monitoring of the Member’s or Limited 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 or Limited Member placed on the Watch List to
make more frequent financial disclosures, including, without limitation, interim and/or
pro forma reports. Members and Limited Members that are 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

50
 (RULE 2B)

Corporation may also take such additional actions with regard to any Member or Limited
Member (including a Member or Limited Member placed on the Watch List) as are
permitted by the Rules and Procedures.

(g) Unless the context otherwise requires, the parent bank holding company
of a Member that has guaranteed the obligations of the Member in accordance with
Addendum B, and any material banking subsidiary of such parent bank holding
company, shall, for the purpose of applying this Section 4, be treated as if it were also a
Member, so that the Member, the parent bank holding company and any material
banking subsidiary shall be required individually to meet the standards for a Member not
on the Watch List, if the Member is not to be placed on the Watch List.

SEC. 5. DTCC CONFIDENTIAL INFORMATION

Each Member, Limited Member and Sponsored 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 Member’s, Limited
Member’s or Sponsored Member’s obligations under these Rules or as otherwise
required by applicable law. Each Member, Limited Member and Sponsored 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 Member, Limited
Member or Sponsored 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.

SEC. 6. VOLUNTARY TERMINATION

A Member, Fund Member, Insurance Carrier/Retirement Services Member,

Municipal Comparison Only Member, Mutual Fund/Insurance Services Member, Data
Services Only Member, Investment Manager/Agent Member, AIP Member, Third Party
Provider Member or Third Party Administrator Member each may elect to voluntarily
terminate such membership by providing the Corporation with a written notice of such
termination (“Voluntary Termination Notice”). The participant shall specify in the
Voluntary Termination Notice a desired date for its withdrawal from membership;
provided, however, such date shall not be prior to the scheduled final settlement date of
any remaining obligation owed by the participant to the Corporation as of the time such
Voluntary Termination Notice is submitted to the Corporation, unless otherwise
approved by the Corporation. A participant that is a Limited Member may be deemed to
have voluntarily terminated its membership if the Corporation is unable to contact an
authorized representative of the participant, as designated by the participant pursuant to
Rule 5, and there has been no activity in the account by the participant for at least 6
months.

51
 (RULE 2B)

Such termination will not be effective until accepted by the Corporation, which
shall be no later than ten (10) Business Days after the receipt of the Voluntary
Termination Notice from such participant, or in the case of a deemed voluntary
termination described above, when the Corporation determines that the criteria for a
deemed voluntary termination have been met. The Corporation’s acceptance or
determination shall be evidenced by a notice to the Corporation’s participants
announcing the participant’s termination and the last trade date for the participant. The
effective date of the participant’s termination shall be the final settlement date of all
transactions of the participant (the “Termination Date”). After the close of business on
the Termination Date, a participant that terminates its membership in the Corporation
shall no longer be eligible or required to submit transactions to the Corporation for
clearance and settlement, unless the Board determines otherwise in order to ensure an
orderly liquidation of the participant’s open obligations. If any transaction is submitted to
the Corporation by such participant that is scheduled to settle after the Termination
Date, such participant’s Voluntary Termination Notice will be deemed void, and the
participant will remain subject to these Rules and Procedures as if it had not given such
Voluntary Termination Notice.

A participant’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 (including, but not limited to,
any pro-rata charge made by the Corporation pursuant to Section 4 of Rule 4). The
return of the participant’s Clearing Fund deposit shall be governed by Sections 7, 13
and 14 of Rule 4, as applicable. If an Event Period were to occur after a participant has
submitted its Voluntary Termination Notice but on or prior to the Termination Date, in
order for such participant to benefit from its Loss Allocation Cap pursuant to Section 4 of
Rule 4, the participant will need to comply with the provisions of Section 6 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 participant.

52
 (RULE 2C)

RULE 2C. SPONSORING MEMBERS AND SPONSORED MEMBERS

SEC.1. General

The Corporation will permit the establishment of a sponsored membership

relationship between a 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 2C. References to a “Member” in other Rules
and/or Procedures shall not apply to Sponsoring Members and to Sponsored Members,
in their respective capacities as such, unless specifically noted as such in this Rule 2C
or in such other Rules and/or Procedures.

A Sponsoring Member shall continue to have all of the rights, liabilities and
obligations set forth in these Rules and Procedures and in any agreement between it
and the Corporation pertaining to its status as a 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 7, 8 and 9 of Rule 2C and under the
Sponsoring Member Guaranty.

SEC. 2. Qualifications of Sponsoring Members, the Application Process and

Continuance Standards.

(a) Any Member shall be eligible to apply to become a Sponsoring Member;

however, if a Member is a Registered Broker-Dealer, it shall only be eligible to apply to
become a Sponsoring Member if it has (1) Net Worth of at least $25 million and (2)
excess net capital over the minimum net capital requirement imposed by the SEC (or
such higher minimum capital requirement imposed by the Member’s designated
examining authority) of at least $10 million. The Corporation may require that a Person
be a Member for a time period deemed necessary by the Corporation before that
Person may be considered to become a Sponsoring Member.

(b) Each 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. Unless the Member is already an Agent Clearing Member under Rule 2D
or a sponsoring member of FICC, the Corporation shall recommend approval or
disapproval of the application to the Board of Directors.

(c) If the Board of Directors or the Corporation, as applicable, denies the

application of a Member to become a Sponsoring Member, such denial shall be handled
in the same way as set forth in Section 1 of Rule 2A with respect to membership
applications.

53
 (RULE 2C)

(d) The Corporation may impose financial requirements on a Member

applying to become a Sponsoring Member that are greater than the required minimum
financial standards for being a Sponsoring Member set forth in Section 2(a) of this Rule,
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 Sponsoring Member and the overall
financial condition of such applicant. With respect to an application of a Member to
become a Sponsoring Member that requires the Board of Directors’ approval, the Board
of Directors shall approve any increased financial requirements imposed by the
Corporation in connection with the approval of the application, and the Corporation shall
thereafter regularly review such Sponsoring Member regarding its compliance with such
increased financial requirements.

(e) Each Sponsoring Member, or any 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 Rule 15 as the
Corporation may at any time or from time to time deem necessary or advisable in order
to protect the Corporation, its participants, creditors or investors, 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.

(f) Each Member whose application is approved to become a Sponsoring

Member shall sign and deliver to the Corporation a Sponsoring Member Agreement.
Each Member to become a Sponsoring Member shall 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 and Procedures 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 and Procedures, or as
otherwise may be agreed by the Sponsored Member and Sponsoring Member.

(g) 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 Members are required to submit regardless of type of Member and the reports
and information required to be submitted for its respective type of Member, all pursuant
to Section 2 of Rule 2B and, if applicable, Addendum O.

(h) A Sponsoring Member’s books and records, insofar as they relate to the
Sponsored Member Transactions submitted to the Corporation, shall be open to the
inspection of the duly authorized representatives of the Corporation to the same extent
provided in Rule 2A for other Members.

54
 (RULE 2C)

(i) A Sponsoring Member shall promptly inform the Corporation, both orally
and 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.
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. The
Corporation shall assess a fine in accordance with the Fine Schedule in Addendum P
against any Sponsoring Member that fails to so notify the Corporation. If the
Sponsoring Member fails to remain in compliance with the relevant standards and
qualifications, 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
and Procedures 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 and
Procedures.

(j) In the event that a Sponsoring Member fails to remain in compliance with
the relevant requirements of these Rules and Procedures, 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 10 of this Rule, 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 and Procedures, cease to act for the
Sponsoring Member in its capacity as a Sponsoring Member pursuant to Section 10 of
this Rule.

(k) If the sum of the Volatility Charges applicable to a Sponsoring Member’s

Sponsored Member Sub-Accounts and its other accounts at the Corporation exceeds its
Net Member Capital, the Sponsoring Member shall not be permitted to submit activity
into its Sponsored Member Sub-Accounts, unless otherwise determined by the
Corporation in order to promote orderly settlement.

(l) 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
Sponsoring Member Voluntary Termination Notice. The Sponsoring Member shall

55
 (RULE 2C)

specify in the Sponsoring Member Voluntary Termination Notice the Sponsored

Member(s) in respect of which the Sponsoring Member is terminating its status (the
“Former Sponsored Members”) and a desired date for such termination, which date
shall not be prior to the scheduled Final Settlement Date of any remaining obligation
owed by the Sponsoring Member to the Corporation with respect to the Former
Sponsored Members as of the time such Sponsoring Member 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 Sponsoring Member
Voluntary Termination Notice from such Sponsoring Member. The Corporation’s
acceptance shall be evidenced by a notice to the Corporation’s participants announcing
the termination of the Sponsoring Member’s status as such with respect to the Former
Sponsored Members and the Sponsoring Member Termination Date. After the close of
business on the Sponsoring Member Termination Date, the Sponsoring Member shall
no longer be eligible to submit Sponsored Member Transactions on behalf of the
Former Sponsored Members, and each Former Sponsored Member shall cease to be a
Sponsored Member unless it is the Sponsored Member of another Sponsoring Member.
If any Sponsored Member Transactions is submitted to the Corporation by the
Sponsoring Member on behalf of a Former Sponsored Member that is scheduled to
settle 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.

(m) 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 Transactions submitted to the Corporation before the applicable
Sponsoring Member Termination Date. Any such Sponsored Member Transactions that
have been novated to the Corporation shall continue to be processed by the
Corporation. The return of the Sponsoring Member’s Clearing Fund deposit shall be
governed by Section 7 of Rule 4. If an Event Period were to occur after a Sponsoring
Member has submitted the Sponsoring Member Voluntary Termination Notice but on or
prior to the Sponsoring Member Termination Date, in order for the Sponsoring Member
to benefit from its Loss Allocation Cap pursuant to Section 4 of Rule 4, the Sponsoring
Member will need to comply with the provisions of Section 6 of Rule 4 and submit a
Loss Allocation Withdrawal Notice, which notice, upon submission, shall supersede and
void any pending Sponsoring Member Voluntary Termination Notice previously
submitted by the Sponsoring Member.

(n) 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

56
 (RULE 2C)

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.

SEC. 3. Qualifications of Sponsored Members, Approval Process and

Continuance Standards.

(a) A Person shall be eligible to apply to become a Sponsored Member if: (x)
it is sponsored into membership by a Sponsoring Member, and (y) it (1) is a “qualified
institutional buyer” as defined by Rule 144A under the Securities Act of 1933, as
amended, or (2) 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 (y).

(b) Each time that a Sponsoring Member wishes to sponsor a Person into
membership, it shall provide the Corporation with the representation referred to in
Section 3(a) of this Rule, 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 1 of Rule 2A with respect to membership applications
except that the written statement referred to therein shall be provided to both the
Sponsoring Member and the Person seeking to become a Sponsored Member.

(c) Each Person to become a Sponsored Member shall sign and deliver to the
Corporation an 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 participants
(the “Sponsored Member Agreement”). Each Person to become a Sponsored Member
that shall be an FFI Member must be FATCA Compliant.

(d) A Sponsored Member shall immediately inform its Sponsoring Member,

both orally and in writing, if the Sponsored Member is no longer in compliance with the
requirements of Section 3(a) of this Rule. A Sponsoring Member shall promptly inform
the Corporation, both orally and in writing, if a Sponsored Member is no longer in
compliance with the requirements of Section 3(a) of this Rule. Notification to the
Corporation by the Sponsoring Member must take place within one (1) Business Day
from the date on which the Sponsoring Member first learns of the Sponsored Member’s
non-compliance. The Corporation shall assess a fine in accordance with the Fine
Schedule in Addendum P against any Sponsoring Member that fails to so notify the
Corporation.

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 (RULE 2C)

(e) A Sponsored Member may voluntarily elect to terminate its membership

by providing the Corporation with a 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.

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 Sponsored Member
Voluntary Termination Notice from such Sponsored Member. The Corporation’s
acceptance shall be evidenced by a notice to the Corporation’s participants announcing
the termination of the Sponsored Member and the Sponsored Member Termination
Date. After the close of business on the Sponsored Member Termination Date, the
relevant Sponsoring Member shall no longer be eligible to submit Sponsored Member
Transactions on behalf of the Sponsored Member. If any Sponsored Member
Transaction is submitted to the Corporation by the relevant Sponsoring Member on
behalf of the Sponsored Member that is scheduled to settle 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.

(f) 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 Transactions
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.

SEC. 4. Compliance with Laws.

Each Sponsoring Member and Sponsored Member 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.

SEC. 5. Sponsored Member Transactions.

A Sponsoring Member shall be permitted to submit to the Corporation Securities

Financing Transactions between itself and its Sponsored Members (“Sponsored
Member Transactions”) in accordance with Rule 56. The Corporation directs each
Sponsored Member and Sponsoring Member to settle all Final Settlement, Rate
Payment, Price Differential, and other securities delivery and payment obligations
arising under a Sponsored Member Transaction that has been novated to the
Corporation by causing the relevant cash and securities to be transferred to the

58
 (RULE 2C)

Transferor or Transferee, as applicable, on the books and records of the Sponsoring

Member, and each Sponsored Member and Sponsoring Member agrees that any such
transfer shall satisfy the Corporation’s corresponding obligation with respect to such
Sponsored Member Transaction.

SEC. 6. Sponsoring Member Agent Obligations.

A Sponsored Member shall appoint its Sponsoring Member to act as agent with
respect to the Sponsored Member’s satisfaction of its settlement obligations arising
under Sponsored Member Transactions between the Sponsored Member and the
Sponsoring Member and for performing all functions and receiving reports and
information set forth in these Rules and Procedures. The Corporation’s provision of
such reports and information to the Sponsoring Member shall constitute satisfaction of
any obligation of the Corporation to provide such reports and information to the affected
Sponsored Members. Notwithstanding the foregoing and any other activities the
Sponsoring Member may perform in its capacity as agent for Sponsored Members,
each Sponsored Member shall be obligated as principal to the Corporation with respect
to all settlement obligations under these Rules and Procedures, and the Sponsoring
Member shall not be a principal under these Rules and Procedures with respect to
settlement obligations of its Sponsored Members.

SEC. 7. Clearing Fund Obligations.

(a) The Corporation shall maintain one or more Sponsored Member Sub-
Accounts for a Sponsoring Member. Each Sponsoring Member shall make and
maintain so long as such Member is a Sponsoring Member a deposit to the Clearing
Fund as a Required Fund Deposit to support the activity in its Sponsored Member Sub-
Accounts (the “Sponsoring Member Required Fund Deposit”). Each Sponsoring
Member, so long as such Member is a Sponsoring Member, shall also provide
Supplemental Liquidity Deposits to the Clearing Fund, as may be required pursuant to
Rule 4A; however, the Supplemental Liquidity Deposits shall be calculated without
regard to Sponsored Member Transactions. Deposits to the Clearing Fund shall be
held by the Corporation or its designated agents, to be applied as provided in these
Rules and Procedures.

(b) In the ordinary course, for purposes of satisfying the Sponsoring

Member’s Clearing Fund requirements under these Rules and Procedures for its
Member activity, its Sponsoring Member activity, and, to the extent applicable, its Agent
Clearing Member activity, the Sponsoring Member’s proprietary accounts, its Sponsored
Member Sub-Accounts, and its Agent Clearing Member Customer Omnibus Account(s),
if any, shall be treated separately, as if they were accounts of separate entities.
Notwithstanding the previous sentence, however, the Corporation may, in its sole
discretion, at any time and without prior notice to the Sponsoring Member (but being
obligated to give notice to the Sponsoring Member as soon as possible thereafter) and
whether or not the Sponsoring Member or any of its Sponsored Members is in default of
its obligations to the Corporation, treat the Sponsoring Member’s accounts as a single
account for the purpose of applying Clearing Fund deposits; apply Clearing Fund

59
 (RULE 2C)

deposits made by the Sponsoring Member with respect to any account as necessary to
ensure that the Sponsoring Member meets all of its obligations to the Corporation under
any other account(s); and otherwise exercise all rights to offset and net against the
Clearing Fund deposits any net obligations among any or all of the accounts, whether or
not any other Person is deemed to have any interest in such account.

(c) The Sponsoring Member Required Fund Deposit for each Sponsored
Member Sub-Account shall be calculated separately based on the Sponsored Member
Transactions in such Sponsored Member Sub-Account, and the Sponsoring Member
shall, as principal, be required to satisfy the Sponsoring Member Required Fund Deposit
for each of the Sponsoring Member’s Sponsored Member Sub-Accounts.

(d) Sections 1, 2, 4, 5, 6, 7, 8, 9, 10, 11 and 12 of Rule 4 shall apply to the

Sponsoring Member Required Fund Deposit with respect to obligations of a Sponsoring
Member under these Rules and Procedures, including its obligations arising under the
Sponsored Member Sub-Accounts, and the obligations of a Sponsoring Member under
its Sponsoring Member Guaranty to the same extent as such sections apply to any
Required Fund Deposit and any other obligations of a Member. For purposes of
Section 1 of Rule 4, obligations and liabilities of a Member to the Corporation that shall
be secured shall include, without limitation, a Member’s obligations as a Sponsoring
Member under these Rules and Procedures, including, without limitation, any obligation
of any such Sponsoring Member to provide the Sponsoring Member Required Fund
Deposit, such Sponsoring Member’s obligations arising under the Sponsored Member
Sub-Accounts of such Sponsoring Member and such Sponsoring Member’s obligations
under its Sponsoring Member Guaranty.

(e) A Sponsoring Member shall be subject to such fines as may be imposed

in accordance with such Rules or Procedures of the Corporation for any late satisfaction
of a Clearing Fund deficiency call.

SEC. 8. Right of Offset.

In the ordinary course, with respect to satisfaction of any Sponsored Member’s

obligations under these Rules and Procedures, the Sponsoring Member’s Sponsored
Member Sub-Accounts, the Sponsoring Member’s proprietary accounts, and the
Sponsoring Member’s Agent Clearing Member Customer Omnibus Accounts, if any, at
the Corporation shall be treated separately, as if they were accounts of separate
entities. Notwithstanding the previous sentence, however, the Corporation may, in its
sole discretion, at any time any obligation of the Sponsoring Member arises under the
Sponsoring Member Guaranty to pay or perform thereunder with respect to any
Sponsored Member, exercise a right of offset and net any such obligation of the
Sponsoring Member under its Sponsoring Member Guaranty against any obligations of
the Corporation to the Sponsoring Member in respect of such Sponsoring Member’s
proprietary accounts at the Corporation.

60
 (RULE 2C)

SEC. 9. Loss Allocation Obligations.

(a) Sponsored Members shall not be obligated for allocations, pursuant to

Rule 4, of loss or liability incurred by the Corporation. To the extent that a loss or
liability is determined by the Corporation to arise in connection with Sponsored Member
Transactions (i.e., in connection with the insolvency or default of a Sponsoring
Member), the Sponsored Members shall not be responsible for or considered in the loss
allocation calculation, but rather such loss shall be allocated to other Members in
accordance with the principles set forth in Section 4 of Rule 4.

(b) To the extent the Corporation incurs a loss or liability from a Defaulting
Member Event or a Declared Non-Default Loss Event and a loss allocation obligation
arises, that would be the responsibility of a Sponsored Member Sub-Account as if the
Sponsored Member Sub-Account were a Member, the Corporation shall calculate such
loss allocation obligation as if the affected Sponsored Member were subject to such
allocations pursuant to Section 4 of Rule 4, but the Sponsoring Member shall be
responsible for satisfying such obligations.

(c) The entire amount of the Required Fund Deposit associated with the
Sponsoring Member’s proprietary accounts at the Corporation and the entire amount of
the Sponsoring Member Required Fund Deposit may be used to satisfy any amount
allocated against a Sponsoring Member, whether in its capacity as a Member, a
Sponsoring Member, or otherwise. With respect to an obligation to make payment due
to any loss allocation amounts assessed on a Sponsoring Member pursuant to Section
9(b) of this Rule, the Sponsoring Member may instead elect to terminate its membership
in the Corporation pursuant to Section 6 of Rule 4 and thereby benefit from its Loss
Allocation Cap pursuant to Section 4 of Rule 4; however, for the purpose of determining
the Loss Allocation Cap for such Sponsoring Member, its Required Fund Deposit shall
be the sum of its Required Fund Deposits associated with its proprietary accounts at the
Corporation (including its proprietary SFT Account pursuant to Rule 56), its Sponsoring
Member Required Fund Deposit, and its Agent Clearing Member Required Fund
Deposits, if any, for each of its Agent Clearing Member Customer Omnibus Accounts.

SEC. 10. Restrictions on Access to Services by a Sponsoring Member.

(a) The Board of Directors may at any time, upon Corporation providing notice
to a Sponsoring Member pursuant to Section 5 of Rule 45, suspend a Sponsoring
Member in its capacity as a Sponsoring Member from any service provided by the
Corporation either with respect to a particular transaction or transactions or with respect
to transactions generally, or prohibit or limit such Sponsoring Member’s access to
services offered by the Corporation in the event that one or more of the factors set forth
in Section 1 of Rule 46 is present with respect to the Sponsoring Member.

(b) Rule 46 shall apply with respect to a Sponsoring Member in the same way
as it applies to Members, including the Board of Directors’ right to summarily suspend
the Sponsoring Member and to cease to act for such Sponsoring Member.

61
 (RULE 2C)

(c) If the Corporation ceases to act for a Sponsoring Member in its capacity
as a Sponsoring Member, Section 14 of Rule 56 shall apply and the Corporation shall
decline to accept or process data from the Sponsoring Member on Sponsored Member
Transactions and the Corporation shall cease to act for all of the Sponsored Members
of the affected Sponsoring Member (unless such Sponsored Members are also
Sponsored Members of other Sponsoring Members). If the Corporation suspends,
prohibits or limits a Sponsoring Member in its capacity as a Sponsoring Member with
respect to such Sponsoring Member’s access to services offered by the Corporation,
the Corporation shall decline to accept or process data from the Sponsoring Member on
Sponsored Member Transactions and shall suspend the Sponsored Members of the
affected Sponsoring Member (unless they are also Sponsored Members of other
Sponsoring Members) for so long as the Corporation is suspending, prohibiting or
limiting the Sponsoring Member. Any Sponsored Member Transactions which have
been novated to the Corporation shall continue to be processed by the Corporation.
The Corporation, in its sole discretion, shall determine whether to close-out the affected
Sponsored Member Transactions or permit the Sponsored Members to complete their
settlement.

SEC. 11. Restrictions on Access to Services by a Sponsored Member.

(a) The Board of Directors may at any time, upon Corporation providing notice
to a Sponsored Member and its Sponsoring Member pursuant to Section 5 of Rule 45,
suspend a Sponsored Member from any service provided by the Corporation either with
respect to a particular transaction or transactions or with respect to transactions
generally, or prohibit or limit such Sponsored Member with respect to access to services
offered by the Corporation in the event that one or more of the factors set forth in
Section 1 of Rule 46 is present with respect to the Sponsored Member.

(b) Rule 46 shall apply with respect to a Sponsored Member in the same way
as it applies to Members, including the Board of Directors’ right to summarily suspend a
Sponsored Member and to cease to act for such Sponsored Member.

(c) If the Corporation ceases to act for a Sponsored Member, Section 14 of

Rule 56 shall apply.

(d) The Corporation shall cease to act for a Sponsored Member that is no
longer in compliance with the requirements of Section 3(a) of this Rule.

SEC. 12. Insolvency of a Sponsoring Member.

(a) A Sponsoring Member shall be obligated to immediately notify the

Corporation that (a) it fails, or is unable, to perform its contracts or obligations or (b) it is
insolvent, as required by Section 1 of Rule 20 for other Members. A Sponsoring
Member shall be treated by the Corporation in all respects as insolvent under the same
circumstances set forth in Section 2 of Rule 20 for other Members. Section 3 of Rule 20
shall apply, in the same manner in which such section applies to other Members, in the
case where the Corporation treats a Sponsoring Member as insolvent.

62
 (RULE 2C)

(b) In the event that the Corporation determines to treat a Sponsoring

Member as insolvent pursuant to Rule 20, the Corporation shall have the right to cease
to act for the insolvent Sponsoring Member pursuant to Section 10 of this Rule. If the
Corporation ceases to act for the insolvent Sponsoring Member, the Corporation shall
decline to accept or process data from the Sponsoring Member, including Sponsored
Member Transactions, and the Corporation shall terminate the membership of all of the
insolvent Sponsoring Member’s Sponsored Members unless they are the Sponsored
Members of another Sponsoring Member. Any Sponsored Member Transactions which
have been novated to the Corporation shall continue to be processed by the
Corporation. The Corporation, in its sole discretion, shall determine whether to close-
out the affected Sponsored Member Transactions and/or permit the Sponsored
Members to complete their settlement.

SEC. 13. Insolvency of a Sponsored Member.

(a) A Sponsored Member and its Sponsoring Member (to the extent it has
knowledge thereof) shall be obligated to immediately notify the Corporation that the
Sponsored Member is insolvent or that the Sponsored Member will be unable to
perform any of its material contracts, obligations or agreements in the same manner as
required by Section 1 of Rule 20 for other Members. For purposes of this section, a
Sponsoring Member shall be deemed to have knowledge that a Sponsored Member is
insolvent or will be unable to perform on any of its material contracts, obligations or
agreements if one or more duly authorized representatives of the Sponsoring Member,
in its capacity as such, has knowledge of such matters. A Sponsored Member shall be
treated by the Corporation in all respects as insolvent under the same circumstances
set forth in Section 2 of Rule 20 for other Members. Section 3 of Rule 20 shall apply, in
the same manner in which such section applies to other Members, in the case where
the Corporation treats a Sponsored Member as insolvent.

(b) In the event that the Corporation determines to treat a Sponsored Member
as insolvent pursuant to Rule 20, the Corporation shall have the right to cease to act for
the insolvent Sponsored Member pursuant to Section 11 of this Rule. If the Corporation
ceases to act for the insolvent Sponsored Member, Section 14 of Rule 56 shall apply
with respect to the close-out of the insolvent Sponsored Member’s Sponsored Member
Transactions.

SEC. 14. Liquidation of Sponsored Member and Related Sponsoring Member

Positions.

(a) The provisions of this Section 14, which shall supersede any conflicting
provisions of this Rule 2C, Rule 18 and Rule 56, shall only apply (i) with respect to the
liquidation of positions resulting from Sponsored Member Transactions that have been
novated to NSCC, (ii) in the event a Sponsoring Member is not a Defaulting Member
and the Corporation has not ceased to act for the Sponsoring Member and (iii) if a
Corporation Default has not occurred. In addition, the Corporation may only cause the
termination described in subsection (b) of this Section 14 if it has ceased to act for the
Sponsored Member at issue and the Sponsoring Member has not performed the

63
 (RULE 2C)

obligations of the Sponsored Member in respect of all positions guaranteed by such

Sponsoring Member.

(b) Subject to the provisions of subsection (a) of this Section 14, on any
Business Day, the Sponsoring Member or the Corporation may by written notice to the
other cause the immediate termination of all, but not fewer than all, of the SFT Positions
of the Sponsored Member established in the Sponsored Member Sub-Account. Any
such notice shall also cause the immediate termination of all of the corresponding,
offsetting SFT Positions of the Sponsoring Member established in the Sponsoring
Member’s proprietary SFT Account. Each such termination shall be effected by the
Sponsoring Member’s establishment of a final net settlement position for each eligible
security with a distinct CUSIP number that shall equal the net of all outstanding deliver
obligations and receive obligations of the parties thereto in each such eligible security
(the “Final Net Settlement Position”).

(c) To liquidate the Final Net Settlement Positions of any Sponsored Member
and the corresponding, offsetting Final Net Settlement Positions of the Sponsoring
Member established pursuant to subsection (b) of this Section 14, a Sponsoring
Member shall calculate a liquidation amount, which may be equal to zero. The
liquidation amount in respect of the Final Net Settlement Positions of a Sponsored
Member (the “Sponsored Member Liquidation Amount”) shall be due to or from the
Corporation from or to the Sponsored Member. The liquidation amount in respect of the
corresponding, offsetting Final Net Settlement Positions of the Sponsoring Member (the
“Sponsoring Member Liquidation Amount”) shall be due to or from the Corporation from
or to the Sponsoring Member. If the Sponsored Member Liquidation Amount in respect
of the Final Net Settlement Positions of a Sponsored Member is due to the Corporation,
the Sponsoring Member Liquidation Amount in respect of the corresponding Final Net
Settlement Positions of the Sponsoring Member shall be due to the Sponsoring
Member. If the Sponsored Member Liquidation Amount in respect of the Final Net
Settlement Positions of a Sponsored Member is due to the Sponsored Member, the
Sponsoring Member Liquidation Amount in respect of the Final Net Settlement Positions
of the Sponsoring Member shall be due to the Corporation.

Any Sponsoring Member Liquidation Amount calculated by a Sponsoring

Member pursuant to this subsection (c) may be based on prices obtained from a
generally recognized source or the most recent closing bid or offer quotation from such
a source and may include the losses (including costs such as fees, expenses and
commissions) and/or gains realized by the Sponsoring Member in entering into
replacement transactions and/or entering into or terminating hedge transactions in
connection with or as a result of, and any other loss, damage, cost or expense directly
arising or resulting from, the liquidation of the Sponsoring Member’s Final Net
Settlement Positions. The Sponsored Member Liquidation Amount in respect of Final
Net Settlement Positions of a Sponsored Member shall equal the Sponsoring Member
Liquidation Amount in respect of the corresponding Final Net Settlement Positions of
the Sponsoring Member. The Sponsoring Member’s calculation of any Sponsored
Member Liquidation Amount or Sponsoring Member Liquidation Amount shall be

64
 (RULE 2C)

conclusive and binding on all relevant parties, absent manifest error and subject to any
right of the Corporation to indemnification under these Rules and Procedures.

If a Sponsored Member Liquidation Amount is due to the Corporation from the

Sponsored Member, the Sponsoring Member shall be obligated to pay such Sponsored
Member Liquidation Amount under its Sponsoring Member Guaranty, which obligation
shall, notwithstanding anything to the contrary in the Sponsoring Member Guaranty, be
payable without demand and (automatically and without further action by any Person)
be set off against the obligation of the Corporation to pay the corresponding Sponsoring
Member Liquidation Amount to the Sponsoring Member.

If a Sponsored Member Liquidation Amount is due to the Sponsored Member

from the Corporation, the Corporation’s sole obligation in respect of any such
Sponsored Member Liquidation Amount shall be to transfer such amount to the
applicable account of the Sponsoring Member at the Settling Bank acting on behalf of a
Sponsoring Member (the “Sponsoring Member Settling Bank Omnibus Account”). The
Corporation hereby instructs the Sponsoring Member to discharge its obligation to pay
the Corporation any Sponsoring Member Liquidation Amount by transferring such
amount to the Sponsoring Member’s Sponsoring Member Settling Bank Omnibus
Account for application to the Corporation’s obligation to pay the corresponding
Sponsored Member Liquidation Amount to the Sponsored Member. To the extent that
the Sponsoring Member transfers such funds to the Sponsoring Member Settling Bank
Omnibus Account as provided in this paragraph, (i) the obligations of the Corporation in
respect of the Sponsored Member Liquidation Amount shall be discharged and (ii) the
obligations of the Sponsoring Member in respect of the corresponding Sponsoring
Member Liquidation Amount shall be discharged. The Sponsored Member agrees to
accept the transfer of such funds to the Sponsoring Member Settling Bank Omnibus
Account in full satisfaction of the obligation of the Corporation to pay the Sponsored
Member Liquidation Amount to the Sponsored Member.

(d) The Sponsoring Member shall indemnify the Corporation, and its
employees, officers, directors, shareholders, agents and Members (collectively, the
“Sponsoring/Sponsored Membership Program Indemnified Parties” or “SMP Indemnified
Parties”), for any and all losses, liability, or expenses of an SMP Indemnified Party
arising from any claim by an affected Sponsored Member disputing the Sponsoring
Member’s calculation of any Sponsored Member Liquidation Amount or Sponsoring
Member Liquidation Amount pursuant to this Section 14.

(e) The Corporation hereby acknowledges that a Sponsoring Member may

take a security interest in the deliver, receive and related payment obligations owed by
the Corporation to a Sponsored Member in respect of its transactions that have been
novated to the Corporation by such Sponsoring Member and established in the
Sponsoring Member’s Sponsored Member Sub-Account for the Sponsored Member,
including, but not limited to, such Sponsored Member’s rights to receive payment of any
Sponsored Member Liquidation Amount pursuant to this Section 14.

65
 (RULE 2D)

RULE 2D. AGENT CLEARING MEMBERS

SEC. 1. General.

The Corporation will permit a Member that is approved to be an Agent Clearing

Member to submit transactions to the Corporation for novation on behalf of one or more
its customers (each such customer, a “Customer”).

The rights, liabilities and obligations of Agent Clearing Members shall be

governed by this Rule 2D. References to a “Member” in other Rules and/or Procedures
shall not apply to Agent Clearing Members, in their capacities as such, unless
specifically noted as such in this Rule 2D or in such other Rules and/or Procedures.

An Agent Clearing Member shall continue to have all of the rights, liabilities and
obligations set forth in these Rules and Procedures and in any agreement between it
and the Corporation pertaining to its status as a Member, and such rights, liabilities and
obligations shall be separate from its rights, liabilities and obligations as an Agent
Clearing Member except as contemplated under Sections 6, 7 and 8 of Rule 2D.

SEC. 2. Qualifications of Agent Clearing Members, the Application Process and

Continuance Standards.

(a) Any Member shall be eligible to apply to become an Agent Clearing

Member; however, if a Member is a Registered Broker-Dealer, it shall only be eligible to
apply to become an Agent Clearing Member if it has (1) Net Worth of at least $25 million
and (2) excess net capital over the minimum net capital requirement imposed by the
SEC (or such higher minimum capital requirement imposed by the Member’s
designated examining authority) of at least $10 million. The Corporation may require
that a Person be a Member for a time period deemed necessary by the Corporation
before that Person may be considered to become an Agent Clearing Member.

(b) Each Member applicant to become an Agent Clearing 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 an Agent Clearing Member shall first be
reviewed by the Corporation. Unless the Member is already a Sponsoring Member
under Rule 2C or a sponsoring member of FICC, the Corporation shall recommend
approval or disapproval of the application to the Board of Directors.

(c) If the Board of Directors or the Corporation, as applicable, denies the

application of a Member to become an Agent Clearing Member, such denial shall be
handled in the same way as set forth in Section 1 of Rule 2A with respect to
membership applications.

(d) The Corporation may impose financial requirements on a Member

applying to become an Agent Clearing Member that are greater than the required
minimum financial standards for being an Agent Clearing Member set forth in Section
2(a) of this Rule, based upon the level of the anticipated positions and obligations of

66
 (RULE 2D)

such applicant, the anticipated risk associated with the volume and types of transactions
such applicant proposes to process through the Corporation as an Agent Clearing
Member and the overall financial condition of such applicant. With respect to an
application of a Member to become an Agent Clearing Member, the Board of Directors
shall approve any increased financial requirements imposed by the Corporation in
connection with the approval of the application, and the Corporation shall thereafter
regularly review such Agent Clearing Member regarding its compliance with such
increased financial requirements.

(e) Each Agent Clearing Member, or any 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 Rule 15 as the
Corporation may at any time or from time to time deem necessary or advisable in order
to protect the Corporation, its participants, creditors or investors, 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.

(f) Each Member whose application is approved to become an Agent

Clearing Member shall sign and deliver to the Corporation an Agent Clearing Member
Agreement and a related legal opinion in a form satisfactory to the Corporation.

(g) Each Agent Clearing Member shall submit to the Corporation, within the
timeframes and in the formats required by the Corporation, the reports and information
that all Members are required to submit regardless of type of Member and the reports
and information required to be submitted for its respective type of Member, all pursuant
to Section 2 of Rule 2B and, if applicable, Addendum O.

(h) An Agent Clearing Member’s books and records, insofar as they relate to
the Agent Clearing Member Transactions submitted to the Corporation, shall be open to
the inspection of the duly authorized representatives of the Corporation to the same
extent provided in Rule 2A for other Members.

(i) An Agent Clearing Member shall promptly inform the Corporation, both
orally and in writing, if it is no longer in compliance with the relevant standards and
qualifications for applying to become an Agent Clearing Member set forth in this Rule.
Notification must take place immediately and in no event later than 2 Business Days
from the date on which the Agent Clearing Member first learns of its non-compliance.
The Corporation shall assess a fine in accordance with the Fine Schedule in Addendum
P against any Agent Clearing Member that fails to so notify the Corporation. If the
Agent Clearing Member fails to remain in compliance with the relevant standards and
qualifications, the Corporation will, if necessary, undertake appropriate action to
determine the status of the Agent Clearing Member and its continued eligibility as such.
In addition, the Corporation may review the financial responsibility and operational
capability of the Agent Clearing Member, and otherwise require from the Agent Clearing
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

67
 (RULE 2D)

reason to believe that an Agent Clearing Member may fail to comply with any of the
Rules and Procedures applicable to Agent Clearing Members, it may require the Agent
Clearing 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 Agent Clearing Member shall not, in fact, violate any of these
Rules and Procedures.

(j) In the event that an Agent Clearing Member fails to remain in compliance
with the relevant requirements of these Rules and Procedures or the Agent Clearing
Member Agreement, the Corporation shall have the right to cease to act for the Agent
Clearing Member in its capacity as an Agent Clearing Member pursuant to Section 9 of
this Rule or as a Member more generally, unless the Agent Clearing Member requests
that such action not be taken and the Corporation determines that, depending upon the
specific circumstances and the record of the Agent Clearing Member, it is appropriate
instead to establish for such Agent Clearing 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 Agent Clearing
Member must resume compliance with such requirements. In the event that the Agent
Clearing Member is unable to satisfy such requirements within the time period specified
by the Corporation, the Corporation shall, pursuant to these Rules and Procedures,
cease to act for the Agent Clearing Member in its capacity as an Agent Clearing
Member pursuant to Section 9 of this Rule or as a Member more generally.

(k) If the sum of the Volatility Charges applicable to an Agent Clearing

Member’s Agent Clearing Member Customer Omnibus Account(s) and its other
accounts at the Corporation exceeds its Net Member Capital, the Agent Clearing
Member shall not be permitted to submit activity into its Agent Clearing Member
Customer Omnibus Account(s), unless otherwise determined by the Corporation in
order to promote orderly settlement.

(l) An Agent Clearing Member may voluntarily elect to terminate its status as
an Agent Clearing Member by providing the Corporation with an Agent Clearing
Member Voluntary Termination Notice. The Agent Clearing Member shall specify in the
Agent Clearing Member Voluntary Termination Notice the desired date for such
termination, which date shall not be prior to the scheduled Final Settlement Date of any
remaining obligation owed by the Agent Clearing Member in respect of Agent Clearing
Member Transactions entered into on behalf of Customers as of the time such Agent
Clearing Member 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 Agent Clearing Member
Voluntary Termination Notice from such Agent Clearing Member. The Corporation’s
acceptance shall be evidenced by a notice to the Corporation’s participants announcing
the termination of the Agent Clearing Member’s status as such and the Agent Clearing
Member Termination Date. After the close of business on the Agent Clearing Member
Termination Date, the Agent Clearing Member shall no longer be eligible to submit

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 (RULE 2D)

Agent Clearing Member Transactions. If any Agent Clearing Member Transaction is

submitted to the Corporation by the Agent Clearing Member on behalf of a Customer
that is scheduled to settle after the Agent Clearing Member Termination Date, such
Agent Clearing Member’s Agent Clearing Member Voluntary Termination Notice will be
deemed void, and the Agent Clearing Member will remain subject to this Rule as if it
had not given such Agent Clearing Member Voluntary Termination Notice.

(m) An Agent Clearing Member’s voluntary termination of its status as such

shall not affect its obligations to the Corporation, or the rights of the Corporation with
respect to Agent Clearing Member Transactions submitted to the Corporation before the
Agent Clearing Member Termination Date. Any such Agent Clearing Member
Transactions that have been novated to the Corporation shall continue to be processed
by the Corporation. The return of the Agent Clearing Member’s Clearing Fund deposit
shall be governed by Section 7 of Rule 4. If an Event Period were to occur after an
Agent Clearing Member has submitted the Agent Clearing Member Voluntary
Termination Notice but on or prior to the Agent Clearing Member Termination Date, in
order for the Agent Clearing Member to benefit from its Loss Allocation Cap pursuant to
Section 4 of Rule 4, the Agent Clearing Member will need to comply with the provisions
of Section 6 of Rule 4 and submit a Loss Allocation Withdrawal Notice, which notice,
upon submission, shall supersede and void any pending Agent Clearing Member
Voluntary Termination Notice previously submitted by the Agent Clearing Member.

(n) 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 Agent Clearing 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 Agent Clearing Member’s obligations
under these Rules or as otherwise required by applicable law. Each Agent Clearing
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 Agent
Clearing 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.

SEC. 3. Compliance with Laws.

Each Agent Clearing Member 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.

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 (RULE 2D)

SEC. 4. Agent Clearing Member Transactions.

An Agent Clearing Member shall be permitted to submit to the Corporation on

behalf of one or more Customers’ Securities Financing Transactions (“Agent Clearing
Member Transactions”) in accordance with Rule 56.

SEC. 5. Agent Clearing Member Agent Obligations.

(a) An Agent Clearing Member shall be permitted to submit to the Corporation

for novation Agent Clearing Member Transactions entered into by the Agent Clearing
Member as agent on behalf of one or more Customers. Any such submission shall be
in accordance with this Rule. Subject to the provisions of these Rules and Procedures,
the Customer Clearing Service may be provided by an Agent Clearing Member to its
Customers on any terms and conditions mutually agreed to by the Agent Clearing
Member and its Customers; provided, that each Agent Clearing Member shall, before
providing Customer Clearing Service to any Customer, enter into an agreement with
that Customer that binds the Customer to the provisions of these Rules and Procedures
applicable to Agent Clearing Member Transactions and Customers.

(b) With respect to an Agent Clearing Member that submits Agent Clearing
Member Transactions to the Corporation for novation on behalf of its Customers, the
Corporation shall maintain one or more Agent Clearing Member Customer Omnibus
Accounts in the name of the Agent Clearing Member for the benefit of its Customers.

(c) The Agent Clearing Member shall act solely as agent of its Customers in
connection with the clearing of Agent Clearing Member Transactions; provided, that the
Agent Clearing Member shall remain fully liable for the performance of all obligations to
the Corporation arising in connection with Agent Clearing Member Transactions; and
provided further, that the liabilities and obligations of the Corporation with respect to
Agent Clearing Member Transactions entered into by the Agent Clearing Member shall
extend only to the Agent Clearing Member. Without limiting the generality of the
foregoing, the Corporation shall not have any liability or obligation arising out of or with
respect to any Agent Clearing Member Transaction to any Customer on behalf of whom
an Agent Clearing Member entered into the Agent Clearing Member Transaction.

(d) Nothing in these Rules and Procedures shall prohibit an Agent Clearing
Member from seeking reimbursement from a Customer for payments made by the
Agent Clearing Member (whether out of Clearing Fund deposits or otherwise) under
these Rules and Procedures, or as otherwise may be agreed between the Agent
Clearing Member and the Customer.

SEC. 6. Clearing Fund Obligations.

(a) The Corporation shall maintain one or more Agent Clearing Member
Customer Omnibus Accounts for an Agent Clearing Member. Each Agent Clearing
Member shall make and maintain so long as such Member is an Agent Clearing
Member, a deposit to the Clearing Fund as a Required Fund Deposit to support the
activity in its Agent Clearing Member Customer Omnibus Account(s) (the “Agent

70
 (RULE 2D)

Clearing Member Required Fund Deposit”). Each Agent Clearing Member, so long as
such Member is an Agent Clearing Member, shall also provide Supplemental Liquidity
Deposits to the Clearing Fund, as may be required pursuant to Rule 4A, to support the
activity in its Agent Clearing Member Customer Omnibus Account(s). Deposits to the
Clearing Fund shall be held by the Corporation or its designated agents, to be applied
as provided in these Rules and Procedures.

(b) In the ordinary course, for purposes of satisfying the Agent Clearing
Member’s Clearing Fund requirements under these Rules and Procedures for its
Member activity, its Agent Clearing Member activity, and, to the extent applicable, its
Sponsoring Member activity, the Agent Clearing Member’s proprietary accounts, its
Agent Clearing Member Customer Omnibus Account(s), and its Sponsored Member
Sub-Accounts, if any, shall be treated separately, as if they were accounts of separate
entities. Notwithstanding the previous sentence, however, the Corporation may, in its
sole discretion, at any time and without prior notice to the Agent Clearing Member (but
being obligated to give notice to the Agent Clearing Member as soon as possible
thereafter) and whether or not the Agent Clearing Member is in default of its obligations
to the Corporation, treat the Agent Clearing Member’s accounts as a single account for
the purpose of applying Clearing Fund deposits; apply Clearing Fund deposits made by
the Agent Clearing Member with respect to any account as necessary to ensure that the
Agent Clearing Member meets all of its obligations to the Corporation under any other
account(s); and otherwise exercise all rights to offset and net against the Clearing Fund
deposits any net obligations among any or all of the accounts, whether or not any other
Person is deemed to have any interest in such account.

(c) The Agent Clearing Member Required Fund Deposit for each Agent
Clearing Member Customer Omnibus Account shall be calculated separately based on
the Agent Clearing Member Transactions in such Agent Clearing Member Customer
Omnibus Account, and the Agent Clearing Member shall, as principal, be required to
satisfy the Agent Clearing Member Required Fund Deposit for each of the Agent
Clearing Member’s Agent Clearing Member Customer Omnibus Accounts.

(d) Sections 1, 2, 4, 5, 6, 7, 8, 9, 10, 11 and 12 of Rule 4 shall apply to the

Agent Clearing Member Required Fund Deposit with respect to obligations of an Agent
Clearing Member under these Rules and Procedures, including its obligations arising
under the Agent Clearing Member Customer Omnibus Accounts, to the same extent as
such sections apply to any Required Fund Deposit and any other obligations of a
Member. For purposes of Section 1 of Rule 4, obligations and liabilities of a Member to
the Corporation that shall be secured shall include, without limitation, a Member’s
obligations as an Agent Clearing Member under these Rules and Procedures, including,
without limitation, any obligation of any such Agent Clearing Member to provide the
Agent Clearing Member Required Fund Deposit and such Agent Clearing Member’s
obligations arising under SFTs established in the Agent Clearing Member Customer
Omnibus Accounts of such Agent Clearing Member.

71
 (RULE 2D)

(e) An Agent Clearing Member shall be subject to such fines as may be

imposed in accordance with such Rules or Procedures of the Corporation for any late
satisfaction of a Clearing Fund deficiency call.

SEC. 7. Right of Offset.

In the ordinary course, with respect to satisfaction of any Customer’s obligations

under these Rules and Procedures, the Agent Clearing Member’s Agent Clearing
Member Customer Omnibus Accounts, the Agent Clearing Member’s proprietary
accounts, and the Agent Clearing Member’s Sponsored Member Sub-Accounts, if any,
at the Corporation shall be treated separately, as if they were accounts of separate
entities. Notwithstanding the previous sentence, however, the Corporation may, in its
sole discretion, at any time any obligation of the Agent Clearing Member arises in
respect of any Agent Clearing Member Customer Omnibus Account, exercise a right of
offset and net any such obligation against any obligations of the Corporation to the
Agent Clearing Member in respect of such Agent Clearing Member’s proprietary
accounts at the Corporation.

SEC. 8. Loss Allocation Obligations.

(a) To the extent the Corporation incurs a loss or liability from a Defaulting
Member Event or a Declared Non-Default Loss Event and a loss allocation obligation
arises, that would be the responsibility of the Agent Clearing Member Customer
Omnibus Account as if the Agent Clearing Member Customer Omnibus Account were a
Member, the Corporation shall calculate such loss allocation obligation and the Agent
Clearing Member shall, as principal, be responsible for satisfying such obligations.

(b) The entire amount of the Required Fund Deposit associated with the
Agent Clearing Member’s proprietary accounts at the Corporation and the entire amount
of the Agent Clearing Member Required Fund Deposit may be used to satisfy any
amount allocated against an Agent Clearing Member, whether in its capacity as a
Member, an Agent Clearing Member, or otherwise. With respect to an obligation to
make payment due to any loss allocation amounts assessed on an Agent Clearing
Member pursuant to Section 8(a) of this Rule, the Agent Clearing Member may instead
elect to terminate its membership in the Corporation pursuant to Section 6 of Rule 4 and
thereby benefit from its Loss Allocation Cap pursuant to Section 4 of Rule 4; however,
for the purpose of determining the Loss Allocation Cap for such Agent Clearing
Member, its Required Fund Deposit shall be the sum of its Required Fund Deposits
associated with its proprietary accounts at the Corporation (including its proprietary SFT
Account pursuant to Rule 56), its Agent Clearing Member Required Fund Deposits for
each of its Agent Clearing Member Customer Omnibus Accounts, and its Sponsoring
Member Required Fund Deposit, if any.

SEC. 9. Restrictions on Access to Services by an Agent Clearing Member.

(a) The Board of Directors may at any time, upon the Corporation providing
notice to an Agent Clearing Member pursuant to Section 5 of Rule 45, suspend an

72
 (RULE 2D)

Agent Clearing Member in its capacity as an Agent Clearing Member from any service
provided by the Corporation either with respect to a particular transaction or
transactions or with respect to transactions generally, or prohibit or limit such Agent
Clearing Member’s access to services offered by the Corporation in the event that one
or more of the factors set forth in Section 1 of Rule 46 is present with respect to the
Agent Clearing Member.

(b) Rule 46 shall apply with respect to an Agent Clearing Member in the same
way as it applies to Members, including the Board of Directors’ right to summarily
suspend the Agent Clearing Member and to cease to act for such Agent Clearing
Member.

(c) If the Corporation ceases to act for an Agent Clearing Member in its
capacity as an Agent Clearing Member, Section 14 of Rule 56 shall apply and the
Corporation shall decline to accept or process data from the Agent Clearing Member on
Agent Clearing Member Transactions and close-out any Agent Clearing Member
Transactions that have been novated to the Corporation. If the Corporation suspends,
prohibits or limits an Agent Clearing Member in its capacity as an Agent Clearing
Member with respect to such Agent Clearing Member’s access to services offered by
the Corporation, the Corporation shall decline to accept or process data from the Agent
Clearing Member on Agent Clearing Member Transactions for so long as the
Corporation is suspending, prohibiting or limiting the Agent Clearing Member. The
Corporation shall close-out any Agent Clearing Member Transactions which have been
novated to the Corporation.

SEC. 10. Insolvency of an Agent Clearing Member.

(a) An Agent Clearing Member shall be obligated to immediately notify the

Corporation that (a) it fails, or is unable, to perform its contracts or obligations or (b) it is
insolvent as required by Section 1 of Rule 20 for other Members. An Agent Clearing
Member shall be treated by the Corporation in all respects as insolvent under the same
circumstances set forth in Section 2 of Rule 20 for other Members. Section 3 of Rule 20
shall apply, in the same manner in which such section applies to other Members, in the
case where the Corporation treats an Agent Clearing Member as insolvent.

(b) In the event that the Corporation determines to treat an Agent Clearing
Member as insolvent pursuant to Rule 20, the Corporation shall have the right to cease
to act for the insolvent Agent Clearing Member pursuant to Section 9 of this Rule. If the
Corporation ceases to act for the insolvent Agent Clearing Member, the Corporation
shall decline to accept or process data from the Agent Clearing Member, including
Agent Clearing Member Transactions. The Corporation shall close-out any Agent
Clearing Member Transactions which have been novated to the Corporation.

73
 (RULE 2D)

SEC. 11. Transfer of Agent Clearing Member Transactions in Agent Clearing

Member Customer Omnibus Accounts.

(a) The provisions of this Section 11 shall only apply (i) with respect to Agent
Clearing Member Transactions that have been novated to NSCC, (ii) in the event the
relevant Agent Clearing Member is not a Defaulting Member and (iii) a Corporation
Default has not occurred.

(b) To the extent permitted under applicable laws and regulations, an Agent
Clearing Member may, upon a default of a Customer and the consent of the
Corporation, transfer the Agent Clearing Member Transactions of the Customer
established in one or more of the Agent Clearing Member’s Agent Clearing Member
Customer Omnibus Accounts from such Agent Clearing Member Customer Omnibus
Accounts to the Agent Clearing Member’s proprietary account at the Corporation as a
Member. Any such transfer shall occur by novation, such that the obligations between
the Corporation and the relevant Customer in respect of the Agent Clearing Member
Transactions shall be terminated and replaced with identical obligations between the
Corporation and the Agent Clearing Member, acting as principal. The Agent Clearing
Member shall indemnify the Corporation, and its employees, officers, directors,
shareholders, agents and Members, for any and all losses, liability, or expenses
incurred by them arising from, or in relation to, any such transfer.

SEC. 12. Customer Acknowledgments

Each Agent Clearing Member on behalf of each of its Customers agrees that
such Customer, by participating in and entering into Agent Clearing Member
Transactions through the Agent Clearing Member, understands, acknowledges, and
agrees that:

(a) the service provided by the Corporation with regard to the Customer
Clearing Service will be subject to and governed by these Rules and Procedures;

(b) these Rules and Procedures shall govern the novation of Agent Clearing
Member Transactions and all transactions between the Customer and its Agent
Clearing Member resulting in the novation of such transactions, and at the time of
novation of an Agent Clearing Member Transaction, the Customer on whose behalf it
was submitted will be bound by the Agent Clearing Member Transaction automatically
and without any further action by the Customer or by its Agent Clearing Member, and
the Customer agrees to be bound by the applicable provisions of these Rules and
Procedures in all respects;

(c) the Corporation shall be under no obligation to deal directly with the
Customer, and the Corporation may deal exclusively with the Customer’s Agent
Clearing Member;

(d) the Corporation shall have no obligations to the Customer with respect to
any Agent Clearing Member Transactions submitted by an Agent Clearing Member on

74
 (RULE 2D)

behalf of the Customer, including with respect to any payment or delivery obligations;
and

(e) the Customer shall have no right to receive from the Corporation, or any
right to assert a claim against the Corporation with respect to, nor shall the Corporation
be liable to the Customer for, any payment or delivery obligation in connection with any
Agent Clearing Member Transactions submitted by an Agent Clearing Member on
behalf of the Customer, and the Corporation shall make any such payments or
redeliveries solely to the relevant Agent Clearing Member.

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 (RULE 3)

RULE 3. LISTS TO BE MAINTAINED

SEC. 1. (a) The Corporation shall maintain a list of the securities which may be
the subject of contracts cleared through the Corporation (hereinafter referred to as
“Cleared Securities”), and may from time to time add securities to such list or remove
securities therefrom. Unless the Corporation shall otherwise determine, Cleared
Securities may only be those issues of securities the issuer of which is subject to, or
regularly complies with, Rule 10b-17 of the Exchange Act, promulgated pursuant to the
Exchange Act. The Corporation shall accept an issue of securities as a Cleared
Security only upon a determination by the Corporation that it has the existing
operational capability to do so and to continue successfully to provide its services to
Members.

A Cleared Security that the Corporation in its discretion determines no longer

meets the requirements imposed pursuant to this Section 1 shall cease to be a Cleared
Security. In addition, the Corporation may determine that a Cleared Security shall
cease to be a Cleared Security in the event that: (1) such Cleared Security shall have
been suspended from trading in the over-the- counter market or on any national
securities exchange by the SEC pursuant to Section 12(k) or (j) of the Exchange Act, or
has been suspended from trading by another regulatory authority or by a self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act), which has authority to
suspend such activity; or (2) the Corporation finds that the level of activity in the security
during the period of three consecutive months preceding that determination is
insufficient to produce benefits commensurate with the costs to the Members arising
from its continued inclusion as a Cleared Security; or (3) the Corporation determines
that there may exist a legal impediment to the validity or legality of the issuance or
continued transfer or delivery of the security; or (4) the Corporation determines, after
discussion with the appropriate marketplace regulator, where possible, that continued
clearance and settlement by the Corporation presents unacceptable risks to the
Corporation and/or its participants; or (5) the Corporation determines that the location of
the transfer agent(s) for the security or such transfer agent’s capability for reissuing
certificates for the security is such as to impair the efficient operation of clearing
procedures.

(b) The Corporation shall also maintain a list of Cleared Securities that are
eligible for book-entry transfer on the books of each Qualified Securities Depository and
are subject to clearance and settlement in the CNS System and may from time to time
add Cleared Securities to such list or remove Cleared Securities therefrom.

A Cleared Security shall be removed from the list of CNS Securities upon receipt
by the Corporation of written notice from a Qualified Securities Depository that the
security is no longer eligible under its rules for transfer by book-entry. A Cleared
Security may be removed from the list of CNS Securities, for example, if in the judgment
of the Corporation Members may lose important rights or additional risk may be
presented to the Corporation or its Members by reason of its continued status as a CNS
Security. Any such removal shall be promptly communicated to all Members by the
Corporation.

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 (RULE 3)

(c) The Corporation shall maintain a list of funds and other pooled investment
entities which may be the subject of orders processed through the Corporation’s Mutual
Fund Services (hereinafter referred to as “Fund/SERV Eligible Funds”) and may from
time to time add funds and other pooled investment entities to such list or remove
Fund/SERV Eligible Funds therefrom. Unless the Corporation shall otherwise
determine, a Fund/SERV Eligible Fund must be assigned a CUSIP 1 number, and may
only be: (i) an investment company regulated under the Investment Company Act of
1940, as amended; (ii) a fund or other pooled investment entity that is subject to
regulation under applicable federal and state banking and/or insurance law; or (iii) a
fund or other pooled investment entity subject to regulation under other applicable law
which meets criteria established by the Corporation from time to time.

(d) The Corporation shall maintain a list of insurance products and retirement
or other benefit plans or programs which may be the subject of orders processed
through the Insurance & Retirement Services (hereinafter referred to as “I&RS Eligible
Products”) and may from time to time add I&RS Eligible Products to such list or remove
I&RS Eligible Products therefrom. An I&RS Eligible Product must have been assigned
a CUSIP number.

(e) The Corporation shall maintain a list of government securities which may
be the subject of contracts processed through the Corporation (hereinafter referred to
as “Eligible Government Securities”) and may from time to time add government
securities to such list or remove government securities therefrom. An Eligible
Government Security may only be: an unmatured, marketable debt security in book-
entry form that is a direct obligation of the United States Government; such other
security issued or guaranteed by the United States, a U.S. government agency or
instrumentality, or a U.S. government-sponsored corporation; or, such other security as
determined by the Corporation from time to time.

(f) The Corporation shall maintain a list of Eligible ID Net Securities as

defined in Rule 65 and may from time to time add CNS Securities to such list or remove
CNS Securities therefrom.

(g) The Corporation shall maintain a list of the securities that may be the
subject of a novated Securities Financing Transaction and may from time to time add
securities to such list or remove securities therefrom.

SEC. 2. The Corporation shall maintain a list of Eligible Clearing Fund

Securities.

SEC. 3. (a) The Corporation shall maintain a list of those Persons who are
entitled under the provisions of New York law to pay New York State stock transfer
taxes through the facilities of the Corporation.

1 CUSIP is a registered trademark of the American Bankers Association.

77
 (RULE 3)

(b) The Corporation shall maintain a list of Members, Limited Members, and
Sponsored Members as set forth in Rule 2.

(c) The Corporation shall maintain a list of broker dealers and others on
whose behalf Members have indicated they will act in comparing, clearing and/or
settling trades. Members shall provide the Corporation with such information, in
accordance with the Procedures as may be adopted from time to time by the
Corporation, or pursuant to agreement.

(d) The Corporation shall maintain a list of Members and Settling Bank Only
Members that have agreed to act as Settling Banks.

SEC. 4. Members, Sponsored Members, Mutual Fund/Insurance Services

Members, Fund Members, Insurance Carrier/Retirement Services Members, Municipal
Comparison Only Members, TPA Members, TPP Members, Investment Manager/Agent
Members, and AIP Members shall not:

(a) submit to the Corporation for processing, or

(b) request the inclusion on any list maintained pursuant to this Rule 3 of,

any security or other financial instrument if its issuer is: (i) listed on the Office of Foreign
Assets Control (“OFAC”) list of specially designated nationals distributed by the U.S.
Department of the Treasury, or (ii) incorporated in a country that is on the OFAC list of
countries subject to comprehensive sanctions.

SEC. 5. The Corporation shall maintain a list of AIP Members and AIP Eligible
Products as referenced in Rule 53. The Corporation shall maintain a list of Members
and Settling Bank Only Members that have agreed to act as AIP Settling Banks.

78
 (RULE 4)

RULE 4. CLEARING FUND

SEC. 1. Required Fund Deposits. Each Member shall make and maintain on an
ongoing basis a deposit to the Clearing Fund. The amount of each Member’s required
deposit shall be determined by the Corporation in accordance with Procedure XV and
other applicable Rules and Procedures (the “Required Fund Deposit”). The minimum
Required Fund Deposit, excluding Required SFT Deposit, for each Member shall be
$250,000. The Corporation may require any such Member to deposit additional
amounts to the Clearing Fund pursuant to Rule 15. A Member may in its discretion
maintain additional deposits at the Corporation, subject to any Procedures or other
requirements the Corporation may establish for such excess amounts. For purposes of
these Rules and Procedures, such additional deposits shall be deemed to be part of the
Clearing Fund and the Member’s Actual Deposit but shall not be deemed to be part of
the Member’s Required Fund Deposit.

The Corporation may permit Members to satisfy their Required Fund Deposit
obligations through a combination of cash and open account indebtedness secured by
Eligible Clearing Fund Securities, as further described in Procedure XV 1. The
aggregate of cash deposited, the collateral value of pledged Eligible Clearing Fund
Securities determined in accordance with Section III of Procedure XV, and the face
amount of any Eligible Letters of Credit shall not at any time be less than the Member’s
Required Fund Deposit.

Each Member grants to the Corporation a first priority perfected security interest
in its right, title and interest in and to any Eligible Clearing Fund Securities, funds and
assets pledged to the Corporation to secure the Member’s open account indebtedness
or placed by a Member in the possession of the Corporation (or its agents acting on its
behalf) (collectively with any Eligible Letters of Credit issued on behalf of a Member in
favor of the Corporation, the Member’s “Actual Deposit”), in each case to secure all
such Member’s obligations to the Corporation. The Corporation shall be entitled to

1 In addition, the Corporation reserves the right to require participants to post a letter of credit in an
instance where the Corporation, in its discretion, believes the participant presents legal risk. In such
circumstances the Corporation may require part of a participant’s deposit to be evidenced by an open
account indebtedness supported by one or more irrevocable letters of credit with a maturity of no
more than one year issued on behalf of the participant in favor of the Corporation (i) under which a
bank, trust company or United States branch or agency of a foreign bank (hereinafter, an “Issuer”), in
each case approved by the Corporation for such purpose, is obligated to honor drafts up to a
specified amount drawn on it by the Corporation and (ii) the terms and conditions of which the
Corporation determines are acceptable to the Corporation in its sole discretion (each such letter of
credit, an “Eligible Letter of Credit”). Any amount drawn on any Eligible Letters of Credit shall be
deposited into, and constitute an additional cash deposit to, the Clearing Fund and shall reduce the
participant’s open account indebtedness by a corresponding amount. Within ten (10) calendar days
prior to the stated expiration date of any such Eligible Letter of Credit or within such time as the
Corporation shall direct upon receipt by the Corporation of written notice from an approved bank of an
earlier expiration date of any Eligible Letter of Credit supporting a participant’s open account
indebtedness, such participant shall make a substitution for the Eligible Letter of Credit, in
accordance with the provisions of this Rule, in the amount required, effective upon or prior to the
expiration of the Eligible Letter of Credit.

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 (RULE 4)

exercise the rights of a pledgee under common law and a secured party under Articles 8
and 9 of the New York Uniform Commercial Code with respect to such assets. Eligible
Clearing Fund Securities pledged to secure a Member’s open account indebtedness
shall be delivered to the Corporation’s account at DTC, or on such other terms and
conditions as the Corporation may require. The Corporation may in its discretion hold
pledged Eligible Clearing Fund Securities in its account at a financial institution
designated by the Corporation.

SEC. 2. Permitted Use, Investment, and Maintenance of Clearing Fund Assets.

The Clearing Fund shall only be used by the Corporation (i) to secure each Member’s
performance of obligations to the Corporation, including each Member’s obligations with
respect to any loss allocations as set forth in Section 4 of this Rule, (ii) to provide
liquidity to the Corporation to meet its settlement obligations, including, without
limitation, through the direct use of cash in the Clearing Fund or through the pledge or
rehypothecation of pledged Eligible Clearing Fund Securities in order to secure liquidity,
and (iii) for investment as set forth in this section.

Each time the Corporation uses any part of the Clearing Fund pursuant to clause
(ii) in the preceding paragraph for more than 30 calendar days, the Corporation, at the
close of business on the 30th calendar day (or on the first Business Day thereafter) from
the day of such use, shall consider the amount used but not yet repaid as a loss to the
Clearing Fund incurred as a result of a Defaulting Member Event and immediately
allocate such loss in accordance with Section 4 of this Rule.

The Corporation may invest any cash in the Clearing Fund, including (i) cash
deposited by a Member as part of its Actual Deposit, (ii) the proceeds of (x) any loans
made to the Corporation secured by the pledge by the Corporation of Eligible Clearing
Fund Securities pledged to the Corporation or (y) any sales of Eligible Clearing Fund
Securities pledged to the Corporation, (iii) cash receipts from any investment of,
repurchase or reverse repurchase agreements relating to, or liquidation of, Clearing
Fund assets, and (iv) cash payments on Eligible Letters of Credit (collectively, “Clearing
Fund Cash”), in accordance with the Clearing Agency Investment Policy adopted by the
Corporation.

The Corporation shall not be required to segregate each Member’s Actual

Deposit, but shall maintain books and records concerning the assets that constitute
each Member’s Actual Deposit.

Each Member shall be entitled to any interest earned or paid on Clearing Fund
cash deposits. Any interest on pledged Eligible Clearing Fund Securities that is
received by the Corporation shall be credited to the Member’s cash deposit to the
Clearing Fund, except in the event of a default by such Member on any obligations to
the Corporation, in which case the Corporation may exercise its rights under Section 3
of this Rule.

SEC. 3. Application of Clearing Fund Deposits and Other Amounts to Members’

Obligations. If a Member is obligated to the Corporation pursuant to these Rules and

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 (RULE 4)

Procedures and (i) fails to satisfy the obligation or (ii) the obligation is a Cross-Guaranty
Obligation, the Corporation shall apply to such obligation the amount of such Member’s
Actual Deposit, any amounts available under a Clearing Agency Cross-Guaranty
Agreement, and any proceeds of any of the foregoing to satisfy the obligation, and the
Corporation may take any and all actions with respect to such assets and amounts,
including assignment, transfer, and sale of any Eligible Clearing Fund Securities, that
the Corporation determines is appropriate. If such application results in any deficiency
in the Member’s Actual Deposit as compared to its Required Fund Deposit, the Member
shall immediately replenish its Actual Deposit. If the Member fails to do so, the
Corporation may take disciplinary action against such Member pursuant to Rule 46 or
Rule 48. Any disciplinary action that the Corporation takes pursuant to Rule 46 or Rule
48 or the voluntary or involuntary cessation of membership shall not affect the
Member’s obligations to the Corporation or any remedy to which the Corporation may
be entitled under applicable law.

SEC. 4. Loss Allocation Waterfall, Off-the-Market Transactions. For the

purposes of this Rule, the following terms shall have the following meanings:

“Defaulting Member” shall mean a Member for which the Corporation has ceased
to act pursuant to Rule 46.

“Defaulting Member Event” shall mean the determination by the Corporation to

cease to act for a Member pursuant to Rule 46.

“Declared Non-Default Loss Event” shall mean the determination by the Board of
Directors that a loss or liability incident to the clearance and settlement business of the
Corporation may be a significant and substantial loss or liability that may materially
impair the ability of the Corporation to provide clearance and settlement services in an
orderly manner and will potentially generate losses to be mutualized among Members in
order to ensure that the Corporation may continue to offer clearance and settlement
services in an orderly manner.

If the Corporation incurs a loss or liability arising out of or relating to a Defaulting

Member Event or a Declared Non-Default Loss Event, the Corporation shall address the
loss or liability as follows:

Defaulting Member Events and/or Declared Non-Default Loss Events that occur
within a period of ten (10) Business Days (an “Event Period”) shall be grouped together
for purposes of applying the limits on loss allocation set forth in this Rule.

In the case of a Defaulting Member Event, an Event Period begins on the day the
Corporation notifies Members that it has ceased to act for the Defaulting Member (or the
next Business Day, if such day is not a Business Day).

In the case of a Declared Non-Default Loss Event, an Event Period begins on the
day that the Corporation notifies Members of the Declared Non-Default Loss Event (or
the next Business Day, if such day is not a Business Day), which notification shall be
issued promptly following any such determination. If a subsequent Defaulting Member

81
 (RULE 4)

Event or Declared Non-Default Loss Event occurs during an Event Period, any losses or
liabilities arising out of or relating to any such subsequent event shall be resolved as
losses or liabilities that are part of the same Event Period, without extending the
duration of such Event Period.

Each Member shall be obligated to the Corporation for the entire amount of any
loss or liability incurred by the Corporation arising out of or relating to any Defaulting
Member Event with respect to such Member. To the extent that such loss or liability is
not satisfied pursuant to Section 3 of this Rule 4, the Corporation shall apply a
Corporate Contribution thereto and charge the remaining amount of such loss or liability
ratably to other Members, as further provided below.

The Corporation shall apply the Corporate Contribution to losses and liabilities
that arise out of or relate to one or more Defaulting Member Events and/or Declared
Non-Default Loss Events that occur within an Event Period. If losses and liabilities with
respect to such Event Period remain unsatisfied following application of the Corporate
Contribution, the Corporation shall allocate such losses and liabilities to Members,
subject to the requirements and limitations below.

Each Member that is a Member on the first day of an Event Period shall be
obligated to pay its pro rata share of losses and liabilities arising out of or relating to
each Defaulting Member Event (other than a Defaulting Member Event with respect to
which it is the Defaulting Member) and each Declared Non-Default Loss Event occurring
during the Event Period. Any Member for which the Corporation ceases to act on a
non-Business Day, triggering an Event Period that commences on the next Business
Day, shall be deemed to be a Member on the first day of that Event Period.

A loss allocation “round” means a series of loss allocations relating to an Event

Period, the aggregate amount of which is limited by the sum of the Loss Allocation Caps
of affected Members (a “round cap”). When the aggregate amount of losses allocated
in a round equals the round cap, any additional losses relating to the applicable Event
Period would be allocated in one or more subsequent rounds, in each case subject to a
round cap for that round. The Corporation may continue the loss allocation process in
successive rounds until all losses from the Event Period are allocated among Members
that have not submitted a Loss Allocation Withdrawal Notice in accordance with Section
6 of this Rule.

Each loss allocation shall be communicated to Members by the issuance of a

notice that advises the Members of the amount being allocated to them (“Loss
Allocation Notice”). Each Member’s pro rata share of losses and liabilities to be
allocated in any round shall be equal to (i) the average of its Required Fund Deposit for
the seventy (70) Business Days preceding the first day of the applicable Event Period or
such shorter period of time that the Member has been a Member (each Member’s
“Average RFD”), divided by (ii) the sum of Average RFD amounts of all Members
subject to loss allocation in such round.

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 (RULE 4)

Each Loss Allocation Notice shall specify the relevant Event Period and the
round to which it relates. The first Loss Allocation Notice in any first, second, or
subsequent round shall expressly state that such Loss Allocation Notice reflects the
beginning of the first, second, or subsequent round, as the case may be, and that each
Member in that round has five (5) Business Days from the issuance of such first Loss
Allocation Notice for the round (such period, a “Loss Allocation Withdrawal Notification
Period”) to notify the Corporation of its election to withdraw from membership pursuant
to Section 6 of this Rule, and thereby benefit from its Loss Allocation Cap. The “Loss
Allocation Cap” of a Member shall be equal to the greater of (x) its Required Fund
Deposit on the first day of the applicable Event Period and (y) its Average RFD.

After a first round of loss allocations with respect to an Event Period, only
Members that have not submitted a Loss Allocation Withdrawal Notice in accordance
with Section 6 of this Rule shall be subject to further loss allocation with respect to that
Event Period.

Members shall pay to the Corporation the amount specified in any first round
Loss Allocation Notice on the second Business Day after the Corporation issues any
such notice. Members shall pay to the Corporation the amount specified in any
subsequent round Loss Allocation Notice on the second Business Day after the
Corporation issues such notice, unless the Member has timely notified (or will timely
notify) the Corporation of its election to withdraw from membership with respect to a
prior loss allocation round pursuant to Section 6 of this Rule.

To the extent that a Member’s Loss Allocation Cap exceeds the Member’s
Required Fund Deposit on the first day of the applicable Event Period, the Corporation
may, in its discretion, retain any excess amounts on deposit from the Member, up to the
Member’s Loss Allocation Cap.

If a Member fails to make payment to the Corporation in respect of a Loss

Allocation Notice by the time such payment is due, the Corporation shall have the right
to proceed against such Member as a Member that has failed to satisfy an obligation in
accordance with Section 3 of this Rule.

If a Member notifies the Corporation of its election to withdraw from membership

pursuant to Section 6 of this Rule, the Member shall comply with the provisions of
Section 6 of this Rule. If, after notifying the Corporation of its election to withdraw from
membership pursuant to Section 6 of this Rule, the Member fails to comply with the
provisions of Section 6 of this Rule, its notice of withdrawal shall be deemed void and
any further losses resulting from the applicable Event Period may be allocated against it
as if it had not given such notice.

To the extent that a loss or liability of the Corporation is determined by the

Corporation to arise in connection with the close-out or liquidation of an Off-the-Market
Transaction in the portfolio of a Defaulting Member, it shall be allocated directly and
entirely to the Member that was the counterparty to such Off-the-Market Transaction;
however, no allocation shall be made if the Defaulting Member has satisfied all

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 (RULE 4)

applicable intraday mark-to-market margin charges assessed by the Corporation with

respect to the Off-the-Market Transaction, as permitted by these Rules and Procedures,
prior to its default.

SEC. 5. Corporate Contribution. For any loss allocation pursuant to Section 4 of

this Rule, whether arising out of or relating to a Defaulting Member Event or a Declared
Non-Default Loss Event, the Corporation’s corporate contribution to losses or liabilities
that are incurred by the Corporation with respect to an Event Period (“Corporate
Contribution”) shall be an amount that is equal to fifty (50) percent of the amount
calculated by the Corporation in respect of its General Business Risk Capital
Requirement as of the end of the calendar quarter immediately preceding the Event
Period. The Corporation’s General Business Risk Capital Requirement, as defined in its
Clearing Agency Policy on Capital Requirements, is, at a minimum, equal to the
regulatory capital that the Corporation is required to maintain in compliance with Rule
17Ad-22(e)(15) under the Exchange Act. If the Corporate Contribution is applied by the
Corporation against a loss or liability relating to an Event Period, whether arising out of
or relating to a Defaulting Member Event or a Declared Non-Default Loss Event, the
Corporate Contribution for any subsequent Event Periods occurring during the two
hundred fifty (250) Business Days thereafter shall be reduced to the remaining unused
portion of the Corporate Contribution amount that applied for the first Event Period. The
Corporation shall notify Members of any such reduction to the Corporate Contribution.

Nothing in these Rules and Procedures shall prevent the Corporation from
voluntarily applying amounts greater than the Corporate Contribution against any loss or
liability of the Corporation, whether arising out of or relating to a Defaulting Member
Event or a Declared Non-Default Loss Event, if the Board of Directors, in its sole
discretion, believes such to be appropriate under the factual situation existing at the
time.

SEC. 6. Withdrawal Following Loss Allocation. If a Member timely notifies the

Corporation of its election to withdraw from membership in respect of a loss allocation
round as set forth in Section 4 of this Rule (“Loss Allocation Withdrawal Notice”), the
Member shall:

(i) specify in the Loss Allocation Withdrawal Notice an effective date for its
withdrawal from membership, which date shall not be later than ten (10)
Business Days following the last day of the Loss Allocation Withdrawal
Notification Period,

(ii) cease all activity that would result in transactions being submitted to the
Corporation for clearance and settlement for which such Member would be
obligated to perform, where the scheduled final settlement date would be later
than the effective date of the Member’s withdrawal, and

(iii) ensure that all clearance and settlement activity for which such Member is
obligated to the Corporation is fully and finally settled by the effective date of the

84
 (RULE 4)

Member’s withdrawal from membership, including, without limitation, by resolving

by such date all fails and buy-in obligations.

A Member that withdraws in compliance with the requirements of this section

shall nevertheless remain obligated for its pro rata share of losses and liabilities with
respect to any Event Period for which it is otherwise obligated hereunder; however, its
aggregate obligation shall be limited to the amount of its Loss Allocation Cap (as fixed in
the round for which it withdrew).

If the Member fails to comply with the requirements in this section, its Loss
Allocation Withdrawal Notice will be deemed void, and the Member will remain subject
to further loss allocations pursuant to Section 4 of this Rule as if it had not given such
Loss Allocation Withdrawal Notice.

SEC. 7. Return of Members’ Clearing Fund Deposits. If a Member gives notice

to the Corporation of its election to withdraw from membership, the Member’s Actual
Deposit in the form of (i) cash or securities shall be returned to it within thirty (30)
calendar days and (ii) Eligible Letters of Credit shall be returned to it within ninety (90)
calendar days, after all of its transactions have settled and all matured and contingent
obligations to the Corporation for which the Member was responsible while a Member
have been satisfied.

SEC. 8. Changes in Members’ Required Fund Deposits. Each Member shall

deposit in the Clearing Fund such amount that is necessary to satisfy any increase in
its Required Fund Deposit within such time as the Corporation shall require. At the time
the increase becomes effective, the Member’s obligations to the Corporation shall be
determined in accordance with the increased Required Fund Deposit whether or not the
Member has satisfied such increased amount.

SEC. 9. Excess Clearing Fund Deposits. The Corporation shall determine with
such frequency as it shall, from time to time to specify, whether the amount deposited
by each Member to the Clearing Fund may be in excess of such Member’s Required
Fund Deposit. On any day that the Corporation has determined that an excess deposit
exists with respect to any Member, the Corporation will, in the form and manner
required by the Corporation, notify each such Member of such excess. Subject to the
Corporation’s rights under these Rules and Procedures to require additional amounts to
be deposited by a Member, upon a Member’s request, and in accordance with such
procedures as the Corporation may set forth from time to time, the Corporation shall
return to the Member such amount of its excess cash on deposit (subject to the
minimum amount of cash required to be maintained in the Clearing Fund) and/or
pledged Eligible Clearing Fund Securities (valued at their collateral value in accordance
with Section III of Procedure XV on the day of such withdrawal) as the Member
requests. Notwithstanding the foregoing, the Corporation may, in its discretion,
determine to withhold all or part of any excess deposit of a Member if such Member has
been placed on the Watch List pursuant to these Rules and Procedures or if the
Corporation determines that the Member’s anticipated activities in the Corporation in the

85
 (RULE 4)

near future may reasonably be expected to be materially different than its activities of
the recent past.

The provisions of this Section 9 of Rule 4 shall not limit the rights or remedies of
the Corporation as provided by Rule 15 of the Rules and Procedures of the Corporation.

SEC. 10. No waiver; Subsequent Recovery Against Loss Amounts. No loss

allocation under this Rule shall constitute a waiver of any claim the Corporation may
have against a Member for any losses or liabilities, including, without limitation, any loss
or liability to which the Member is subject under these Rules and Procedures. If a loss
charged pro rata is afterward recovered by the Corporation, in whole or in part, the net
amount of the recovery shall be credited to the Persons, including the Corporation,
against whom the loss was charged in proportion to the amounts charged against them.

SEC. 11. Substitution or Withdrawal of Pledged Securities. Upon notice to the

Corporation provided in such form and within such timeframe as determined by the
Corporation from time to time, a Member may withdraw or substitute pledged Eligible
Clearing Fund Securities, provided that the Member continues to satisfy at all times its
Required Fund Deposit.

SEC. 12. Authority of Corporation. In furtherance of the rights of the Corporation

pursuant to these Rules and Procedures, the Corporation shall have full power and
authority to pledge, repledge, hypothecate, transfer, create a security interest in, or
assign any or all Actual Deposits and any proceeds thereof for the purpose of securing
loans made to the Corporation (the party making any such loan to the Corporation
hereinafter referred to as the “Lender”); provided that the proceeds of such loans are
used for a purpose permissible under Section 2 of this Rule. Such loans shall be on
terms and conditions deemed necessary or advisable by the Corporation (including
collateralization thereof) in its sole discretion, and may be in amounts greater, and
extend for periods of time longer, than the obligations, if any, of any Member to the
Corporation for which such property and Eligible Letters of Credit (if any) were pledged
to or deposited with the Corporation; provided, however, that if any such loan is made
as a result of a loss or liability suffered by the Corporation, the Corporation will promptly,
but in no event later than 30 calendar days from the day the loan is made, repay the
loan in full. No Member shall have any right, claim or action against any secured
Lender (or any collateral agent of such secured Lender) for the return, or otherwise in
respect, of any such collateral pledged by the Corporation to such secured Lender (or
its collateral agent), so long as any loans made by such Lender to the Corporation or
other obligations, secured by such collateral, are unpaid and outstanding. Subject to
the foregoing and to the terms and conditions of such loan, the Corporation shall remain
obligated to each such Member to return, and to allow substitution for or withdrawal of,
cash, and Eligible Clearing Fund Securities, and Eligible Letters of Credit (if any)
pledged or deposited by such Member as a Clearing Fund deposit, or otherwise to
collateralize such Member’s obligations to the Corporation, under the circumstances
and within the time frames specified in these Rules and Procedures. In the event of any
conflict or inconsistency between this Rule 4 and any agreement between the
Corporation and any Member, this Rule 4 shall govern and prevail.

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 (RULE 4A)

RULE 4A. SUPPLEMENTAL LIQUIDITY DEPOSITS

SEC. 1. Overview. The Corporation requires sufficient liquidity to enable it to

effect the settlement of its payment obligations as a central counterparty and to meet its
regulatory obligations. A substantial proportion of the liquidity needed by the
Corporation for these purposes is attributable to the exposure presented to the
Corporation by its Members who would generate the largest settlement debits in
stressed market conditions. In order to ensure that the Corporation has sufficient
liquidity to meet its payment and regulatory obligations, such Members shall provide
supplemental liquidity deposits to the Clearing Fund to supplement the Corporation’s
other sources of liquidity pursuant to this Rule 4(A). This Rule 4A describes how such
supplemental liquidity deposits to the Clearing Fund shall be calculated and d provided.

SEC. 2. Defined Terms. The following terms shall have the meanings specified
below for purposes of this Rule 4(A):

“Affiliated Family” means a group of Members, excluding from the group any
Member that is a securities clearinghouse, depository, exchange or other market
infrastructure, in which each Member in the group is an Affiliate of at least one other
Member in the group.

“Daily Liquidity Need” means, on any Business Day, the amount of liquid
resources, as calculated and determined by the Corporation, needed to effect the
settlement of its payment obligations as a central counterparty over a three day
settlement cycle, assuming the default on that day of an Unaffiliated Member or
Affiliated Family.

“Intraday Supplemental Liquidity Call” has the meaning given to such term in
Section 7 below.

“Lookback Period” means the 24 month period (or longer period as determined
by the Corporation in its discretion) prior to each Business Day.

“Options Expiration Activity Period” means the period (i) beginning at the opening
of business on the Friday preceding the Saturday that is the monthly expiration date for
stock options (or the Business Day before that if such Friday is not a Business Day) and
(ii) ending at the close of business on the second Settlement Day following such date. If
the monthly expiration date for stock options is changed to a Friday, the “Options
Expiration Activity Period” shall mean the period (i) beginning at the opening of business
on such Friday (or the Business Day before that if such Friday is not a Business Day)
and (ii) ending at the close of business on the second Settlement Day following such
date.

“Peak Liquidity Need” has the meaning given to such term in Section 3 below.

“Qualifying Liquid Resources” means, as of each Business Day, the liquid

resources available to the Corporation to enable it to settle its payment obligations as a
central counterparty in stressed market conditions (as described below), which may

87
 (RULE 4A)

include (i) a commitment to lend under a committed line of credit maintained by the
Corporation to enable it to satisfy losses and liabilities incident to the operation of its
clearance and settlement business; (ii) actual deposits to its Clearing Fund, including
Supplemental Liquidity Deposits; and (iii) any other prefunded or committed liquidity
resources that the Corporation may use to settle its payment obligations as a central
counterparty. Qualifying Liquid Resources would not include Supplemental Liquidity
Deposits for purposes of this Rule 4(A). In order to simulate stressed market
conditions, the Corporation would apply assumptions to the size and availability of its
Qualifying Liquid Resources when applying these resources in the calculations made
under this Rule 4(A).

“Supplemental Liquidity Deposit” shall have the meaning given to such term in
Section 5 and shall include any amount deposited to the Clearing Fund in satisfaction of
(i) a Supplemental Liquidity Obligation (pursuant to Section 4 below) or (ii) an Intraday
Supplemental Liquidity Call (pursuant to Section 7 below). All Supplemental Liquidity
Deposits shall be made in cash by wire transfer to an account designated by the
Corporation.

“Supplemental Liquidity Obligation” has the meaning given to such term in

Section 4 below.

“Supplemental Liquidity Provider” has the meaning given to such term in Section
3 below.

“Unaffiliated Member” means a Member that (i) is not in any Affiliated Family and
(ii) is not a securities clearinghouse, depository, exchange or other market
infrastructure.

Capitalized terms that are used but not defined in this Rule 4A shall have the
meanings given to such terms elsewhere in these Rules.

Supplemental Liquidity Obligations

SEC. 3. Supplemental Liquidity Providers. On each Business Day, the

Corporation shall determine the “Peak Liquidity Need” of each Member, which shall be:

a. For Unaffiliated Members, the largest Daily Liquidity Need that the
Corporation would have in the event of the default of such Unaffiliated
Member on any Business Day during the Lookback Period.

b. For Members of an Affiliated Family, the largest Daily Liquidity Need that
the Corporation would have in the event of the default of such Member on
any Business Day during the applicable Lookback Period; and with
respect to an Affiliated Family, the largest Daily Liquidity Need that the
Corporation would have in the event of the simultaneous default of all
Members of that Affiliated Family on any Business Day during the
Lookback Period.

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 (RULE 4A)

The 30 (or fewer) Unaffiliated Members or Affiliated Families with the largest
Peak Liquidity Need during the Lookback Period shall be “Supplemental Liquidity
Providers” for that Business Day.

SEC 4. Supplemental Liquidity Obligations.

a. On each Business Day, each Supplemental Liquidity Provider shall have a

supplemental liquidity obligation to the Corporation (a “Supplemental
Liquidity Obligation”) determined in accordance with the following formula:

A = B minus C, where --

A is the Supplemental Liquidity Obligation of such Supplemental

Liquidity Provider;

B is the Daily Liquidity Need of the Supplemental Liquidity Provider

calculated for that Business Day; and

C is the sum of all Qualifying Liquid Resources available to the

Corporation on that Business Day assuming stressed market
conditions.

b. If two or more Supplemental Liquidity Providers have a Supplemental

Liquidity Obligation of more than $2 billion, as determined pursuant to
subsection a. above, the Corporation may, in its sole discretion, determine
the Supplemental Liquidity Obligation of each Supplemental Liquidity
Provider as its pro rata share of the largest Supplemental Liquidity
Obligation calculated for that Business Day.

SEC. 5. Satisfaction of Supplemental Liquidity Obligations. In satisfaction of its

Supplemental Liquidity Obligation to the Corporation, a Supplemental Liquidity Provider
shall make a supplemental liquidity deposit (a “Supplemental Liquidity Deposit”) to the
Clearing Fund in an amount equal to its Supplemental Liquidity Obligation.

SEC. 6. Notice of Supplemental Liquidity Obligations and Payment of

Supplemental Liquidity Deposits. On each Business Day, the Corporation shall provide
each Supplemental Liquidity Provider with the amount of its Supplemental Liquidity
Obligation for that Business Day. Such notice shall state if the Supplemental Liquidity
Obligation was calculated pursuant to Section 4b of this Rule. Within one hour of
demand, unless otherwise determined by the Corporation, a Supplemental Liquidity
Provider shall make its Supplemental Liquidity Deposit to the Clearing Fund.

Intraday Supplemental Liquidity Calls

SEC. 7. Determination of Intraday Supplemental Liquidity Calls.

a. If, on the first Business Day of an Options Expiration Activity Period, the
Corporation observes an increase in its Daily Liquidity Need, the Corporation shall call

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 (RULE 4A)

on the Supplemental Liquidity Providers whose increase in activity levels or projected

settlement activity with respect to monthly expiration of stock options caused (or was
the primary cause of) such increase in the Daily Liquidity Need of the Corporation to
deposit to the Clearing Fund, as an addition to its Supplemental Liquidity Deposit, an
amount equal to the difference between (i) the Daily Liquidity Need of the Corporation
on such Business Day, adjusted to account for such increased activity levels and
projected settlement activity, and (ii) the sum, on such Business Day, of all Qualifying
Liquid Resources assuming stressed market conditions (an “Intraday Supplemental
Liquidity Call”). For purposes of this Section 7a, the Corporation would adjust the re-
calculated Daily Liquidity Need using an estimated netting percentage that is based on
that Supplemental Liquidity Provider’s average percentage of netting observed over the
prior 24 months.

b. If, on any Business Day other than the first Business Day of an Options
Expiration Activity Period, the Corporation observes an increase in its Daily Liquidity
Need, the Corporation shall be entitled to call on the Supplemental Liquidity Providers
whose increase in activity levels caused (or was the primary cause of) such increase in
the Daily Liquidity Need of the Corporation to deposit an Intraday Supplemental
Liquidity Call in an amount equal to the difference between (i) the Daily Liquidity Need
of the Corporation on such Business Day, adjusted to account for such increased
activity levels, and (ii) the sum, on such Business Day, of all Qualifying Liquid
Resources assuming stressed market conditions.

SEC. 8. Satisfaction of Intraday Supplemental Liquidity Calls. Unless otherwise

determined by the Corporation within one hour of demand of an Intraday Supplemental
Liquidity Call from the Corporation, a Member shall make an additional Supplemental
Liquidity Deposit to the Clearing Fund in the amount of the Intraday Supplemental
Liquidity Call.

Returns of Special Activity Supplemental Liquidity Deposits

SEC. 9. Deposits Made in Satisfaction of a Supplemental Liquidity Obligation. A

Supplemental Liquidity Provider shall be entitled to a return of the amount of its
Supplemental Liquidity Deposit made in satisfaction of a Supplemental Liquidity
Obligation or Intraday Supplemental Liquidity Call, payable on the Business Day
following the Business Day on which the Supplemental Liquidity Deposit was made,
unless otherwise notified by the Corporation.

SEC. 10. Ceasing to be a Participant. Supplemental Liquidity Deposits shall be

subject to the provisions of Section 7 of Rule 4 relating to the refund of deposits to the
Clearing Fund when a Member ceases to be a participant.

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 (RULE 4A)

Miscellaneous Matters

SEC. 11. Obligations of Affiliated Families and Supplemental Liquidity Providers.

a. The Supplemental Liquidity Obligations of an Affiliated Family shall be the

several obligations of all of the Members of the Affiliated Family ratably in
proportion to their applicable Peak Liquidity Need.

b. In the event of any failure of a Supplemental Liquidity Provider to satisfy a

Supplemental Liquidity Obligation in full when due, the Corporation may (i)
debit the amount of any such deficiency to the account of such Member,
(ii) collect such amount in system wide settlement, and (iii) credit such
amount as a Supplemental Liquidity Deposit for the account of such
Member. The Corporation may also exercise any and all of its other
default rights under these Rules.

SEC. 12. Application of Supplemental Liquidity Deposits.

a. A Supplemental Liquidity Deposit of a Member may not be withdrawn by

the Member unless it is entitled to a return of such deposit pursuant to
Sections 9 or 10 above. Notwithstanding Sections 9 and 10 of this Rule,
the Supplemental Liquidity Deposit of a Member may be held by the
Corporation pursuant to Section 9 of Rule 4.

b. A Supplemental Liquidity Deposit of a Member shall form a part of the

actual deposit of the Member to the Clearing Fund but shall be in addition
to, and separate from, (i) the Required Fund Deposit of the Member and
(ii) any other deposit of the Member to the Clearing Fund.

c. A Supplemental Liquidity Deposit of a Member (i) may be invested, paid,

applied and loaned as provided in Section 2 of Rule 4 and (ii) may be
used to satisfy a loss or liability as provided in Section 3 of Rule 4.

d. A Supplemental Liquidity Deposit of a Member may not be used to

calculate or be applied to satisfy any pro rata charge pursuant to Section 4
of Rule 4.

SEC. 13. Information. To enable Supplemental Liquidity Providers to

understand and manage their obligations to the Corporation, on each Business Day, the
Corporation shall make available to each Supplemental Liquidity Provider the amount of
the Daily Liquidity Need that the Corporation would have had in the event of the default
of such Member on the preceding Business Day.

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 (RULE 5)

RULE 5. GENERAL PROVISIONS

SEC. 1. Receive data covering the buy side and deliver data covering the sell
side of any contract calling for delivery of Cleared Securities may be sent for
comparison by a Member to the Corporation; such contracts shall be compared by the
Corporation to the extent provided for under these Rules and the Procedures. Trade
Data may also be provided to the Corporation on a locked-in basis as provided pursuant
to the Rules and the Procedures. Output made available by the Corporation on: (i)
contracts compared by the Corporation, and (ii) locked-in transactions recorded by the
Corporation from data received from a Member or Self-Regulatory Organization
(collectively, “Compared Contracts”), shall evidence valid, binding and enforceable
compared transactions for purposes of these Rules (notwithstanding with respect to
locked-in transactions that the underlying data is not matched with corresponding data
submitted to the Corporation by the affected contra-Member). Compared Contracts for
CNS Securities and other transactions in respect of CNS Securities submitted to the
Corporation under these Rules (“CNS Contracts”) shall be accounted for in the CNS
System; Compared Contracts for Balance Order Securities and other transactions in
respect of Balance Order Securities submitted to the Corporation under these Rules
(“Balance Order Contracts”) shall be accounted for in the Balance Order System;
Compared Contracts for Foreign Securities and other transactions in respect of Foreign
Securities submitted to the Corporation under these Rules (“Foreign Security
Contracts”) shall be accounted for in the Foreign Security System. Delivery of CNS
Securities to the Corporation, except as specified in Section 9 of Rule 11, shall be made
through the facilities of the Corporation or a Qualified Securities Depository and
payment therefore shall be made through the Corporation or such agent as it may
designate; delivery of Balance Order Securities may be made through the Corporation
in which case payment therefore shall be made through the Corporation or such agent
as it may designate; delivery of Foreign Securities shall be made pursuant to
arrangements mutually agreed upon by the parties, and the Rules of the Corporation
shall not govern such delivery or the failure to deliver such securities; delivery of SFT
Securities and SFT Cash to the Corporation shall be made through the facilities of a
Qualified Securities Depository. Such comparison, accounting, and, with respect to
CNS Securities, Balance Order Securities, SFT Securities and SFT Cash, delivery and
payment shall be effected as hereinafter prescribed in these Rules, in such regulations
with respect thereto as the Corporation may from time to time adopt and in the
Procedures.

When issued and when distributed cleared transactions shall be settled and
payment therefor made at such time, in such manner and by the delivery of securities
and/or other property as the Corporation may determine, or shall be canceled and
thereafter shall be null and void if the Corporation determines that the plan or proposal
pursuant to which the securities were to be issued or distributed has been abandoned
or materially changed.

SEC. 2. Every Member, Mutual Fund/Insurance Services Member, Settling Bank

Only Member, Municipal Comparison Only Member, Insurance Carrier/Retirement
Services Member, TPA Member, TPP Member, Investment Manager/Agent Manager,

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 (RULE 5)

Fund Member, Data Services Only Member and AIP Member (each hereinafter referred
to as a “participant” for purposes of this Rule 5) shall appoint a representative that is
duly authorized in the name of and on behalf of the participant to sign all instruments, to
correct errors and to perform such other duties as may be required under these Rules
and Procedures and to transact all business requisite in connection with the operations
of the Corporation which representative shall be capable of taking such action in a
manner consistent with the daily time schedules and other requirements established by
or pursuant to these Rules and Procedures.

Each participant will be allotted a number which must be included in all

submissions by him in connection with the operations of the Corporation.

The official date of the Comparison Operation, the Accounting Operation and the
settlement of contracts is the Settlement Date for such contracts and summaries,
security balance orders, security orders, CNS System reports, checks relating thereto,
except as may be otherwise directed by the Corporation, either in general or in
particular instances, shall bear that date even though they may be issued on a
preceding day.

SEC. 3. A participant may appoint one or more persons as its agent(s) with
respect to all data, contracts or transactions, transmitted or received, compared,
confirmed, accounted for, settled, delivered or carried out through or by the Corporation
and all matters relating thereto, provided that such appointment has been consented to
by the Corporation and is evidenced by such appointments, authorizations, certifications
and other agreements in such form as may be required by the Corporation.

SEC. 4. The Corporation may, in its discretion, require a participant to provide

appropriate staff in their offices during specified hours on non-Business Days when
such is deemed necessary by the Corporation to insure the integrity of its systems
and/or for the protection of the Corporation.

SEC. 5. All reports in electronic format shall be deemed delivered to and

received by each participant when made available for retrieval by the Corporation, and
each such entity shall be obligated to retrieve and review such reports and notify the
Corporation promptly of any error contained in such reports.

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 (RULE 6)

RULE 6. (RULE NUMBER RESERVED FOR FUTURE USE)

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 (RULE 7)

RULE 7. COMPARISON AND TRADE RECORDING OPERATION

(INCLUDING SPECIAL REPRESENTATIVE/INDEX RECEIPT AGENT)

SEC. 1. A Member acting as a Special Representative or Qualified Special

Representative, may submit to the Corporation for trade recording, trade data on any
transaction calling for delivery of Cleared Securities between it and another person. A
Member may also submit to the Corporation for comparison trade data on any
transaction calling for delivery of Cleared Securities that are also debt securities
between it and another person, or for other transactions as otherwise provided through
the Obligation Warehouse service in accordance with Rule 51 and Procedure II A.

SEC. 2. Special Representatives

(a) For the purposes of these Rules, a “Special Representative” shall be

either a Member or a Registered Clearing Agency which applies to the Corporation for
such status and designates those Members for which it will act. The Corporation will
not act upon any instruction received from a Special Representative which applies
pursuant to this paragraph until each Member for which the Special Representative
proposes to act has consented thereto in a writing delivered to the Corporation.

(b) A Special Representative may submit to the Corporation transaction data

as to the rights and obligations of Members which calls for the delivery of Cleared
Securities and is between Members. The obligations of the Member reflected in such
transaction data shall be deemed to have been confirmed and acknowledged by each
Member designated by the Special Representative as a party thereto and to have been
adopted by such Member and, for the purposes of these Rules and determining the
rights and obligations between the Corporation and any such Member under these
Rules shall be valid and binding upon such Member to the same extent as any
Compared Contract under this Rule. A Member which has been so designated by a
Special Representative shall resolve any differences or claims regarding the rights and
obligations reflected in the transaction data submitted by the Special Representative
with the Special Representative, and the Corporation shall have no responsibility in
respect thereof or to adjust its records or the accounts of the Member in any way,
otherwise than pursuant to the instructions of the Special Representative.

SEC. 3. Qualified Special Representatives

(a) For the purposes of these Rules, a Qualified Special Representative is a

Special Representative who:

(1) operates an automated execution system where it is always the

contra side to each transaction; or

(2) has a parent corporation or affiliated corporation that operates an

automated execution system where the Special Representative is
always the contra side to each transaction; or

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 (RULE 7)

(3) clears for a broker/dealer who operates an automated execution

system where the broker/dealer is always the contra side to each
transaction, and the subscribers to the automated execution system
enter into an agreement with the broker/dealer and the Special
Representative acknowledging the Special Representative’s role in
the clearance of trades executed on the automated execution
system.

(b) A Qualified Special Representative may submit to the Corporation in

automated form trade data from such automated execution system as locked-in trades.
The obligations of the Member reflected in such trade data as the Qualified Special
Representative’s contra-party shall be deemed to have been confirmed and
acknowledged by each Member designated by the Qualified Special Representative as
the contra party thereto and to have been adopted by such Member and, for the
purposes of these Rules and determining the rights and obligations between the
Corporation and any such Member under these Rules, shall be valid and binding upon
such Member to the same extent as any transaction compared under this Rule. A
Member which has been designated as the contra-party to a trade by a Qualified
Special Representative shall resolve any differences or claims regarding the rights and
obligations reflected in the trade data submitted by the Qualified Special Representative
with the Qualified Special Representative, and the Corporation shall have no
responsibility in respect thereof or to adjust its records or the accounts of the Member in
any way, other than pursuant to the instructions of the Qualified Special Representative.

SEC. 4. Index Receipt Agent

(a) For the purposes of these Rules an Index Receipt Agent shall be a
Member which has entered into an Index Receipt Authorization Agreement as required
by the Corporation from time to time. A Member desiring to become an Index Receipt
Agent shall first submit an application to be reviewed by the Corporation.

(b) An Index Receipt Agent may submit to the Corporation transaction data,
which may reflect the netted results of other transactions, as to the rights and
obligations of Members which calls for the delivery of cleared securities and is between
Members. The obligations of the Member reflected in such transaction data shall be
deemed to have been confirmed and acknowledged by each Member or designated by
the Index Receipt Agent as a party thereto and to have been adopted by such Member
and, for the purposes of these Rules and determining the rights and obligations
between the Corporation and any such Member under these Rules shall be valid and
binding upon such Member to the same extent as any Compared Contract under this
Rule.

SEC. 5. Trade data submitted to the Corporation by a Member pursuant to

Section 1 of this Rule or by a Qualified Special Representative pursuant to Section 3 of
this Rule, and transaction data submitted to the Corporation by a Special
Representative or Index Receipt Agent pursuant to Section 2 or 4 of this Rule, as

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 (RULE 7)

applicable, shall be submitted in the form and manner, and in accordance with the time
schedules, prescribed by, or pursuant to, the Procedures.

The name of a Member, Special Representative, Qualified Special

Representative or Index Receipt Agent printed, stamped or written on any form,
document or other item issued by him or used in a transmission received from him
pursuant to this Rule or the Procedures shall be deemed to have been adopted by him
as his signature and shall be valid and binding upon him in all respects as though he
had manually affixed his signature to such form, document or other item or
transmission.

Each Member, Special Representative, Qualified Special Representative and

Index Receipt Agent shall promptly check all information in any format that is made
available to him by the Corporation pursuant to this Rule or the Procedures.

Any trade data submitted to the Corporation by a Member pursuant to Section 1

of this Rule which is not compared by the Corporation, or any such item compared by
the Corporation which is subsequently deleted as provided in the Procedures and not
later compared, or any transaction data received by the Corporation which is
subsequently deleted as provided in the Procedures shall be adjusted directly between
the parties.

Balance Order Contracts produced in accordance with the Procedures on the

basis of trade data submitted by Members or Qualified Special Representatives
pursuant to Section 1 or 3, as applicable, of this Rule or transaction data submitted by
Special Representatives and Index Receipt Agents pursuant to Section 2 or 4, as
applicable, of this Rule will, as specified in the Procedures, either (i) be entered in the
Balance Order Accounting Operation or (ii) be excluded from the Balance Order
Accounting Operation in which case appropriate receive and deliver security orders will
be issued by the Corporation in connection therewith and such security orders shall
have the same status as security balance orders issued in connection with the Balance
Order Accounting Operation and will be subject to all Rules pertaining to such security
balance orders unless otherwise specified by the Corporation.

CNS Contracts produced in accordance with the Procedures on the basis of

trade data submitted by Members or Qualified Special Representatives pursuant to
Section 1 or 3, as applicable, of this Rule or transaction data submitted by Special
Representatives and Index Receipt Agents pursuant to Section 2 or 4, as applicable, of
this Rule will be entered in the CNS Accounting Operation for settlement as provided in
the Procedures and shall be subject to Rule 11.

Foreign Security Contracts produced in accordance with the Procedures on the

basis of trade data submitted pursuant to this Rule will be entered in the Foreign
Security Accounting Operation as provided in the Procedures.

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 (RULE 7)

Notwithstanding the foregoing, Special Trades in Balance Order Securities and

CNS Securities shall not enter the Accounting Operation, but will instead be subject to
the provisions of Section 9 of Rule 11.

SEC. 6. The Corporation may determine, in its discretion, to accept, from self-
regulatory organizations, as defined in the Exchange Act, and/or derivatives clearing
organizations that are registered or deemed to be registered with the CFTC pursuant to
the Commodity Exchange Act (either directly or through subsidiary or affiliated
organizations 1) and/or service bureaus, initial, or supplemental trade data on behalf of
Members for trade recording and input into the Corporation’s Comparison Operation
(with respect to debt securities) or compared trade data, on behalf of Members for input
into the Corporation’s Accounting Operation provided that a Member is a party to the
trade or transaction. In determining whether to accept trade data from an organization,
as described in this Section 6, the Corporation may require such organization to provide
a Cybersecurity Confirmation, and to 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 described in Rule 2B,
Section 2A.

Such data shall be in a form acceptable to the Corporation, in its discretion, and
within such time frames as the Corporation may, in its discretion, require. The
Corporation shall deem the report of any such data by any such organization to have
been authorized by the Member on whose behalf the data shall have been reported.
Data reported by any such organization(s) to the Corporation shall not be deemed to be
reported by the Member to the Corporation until such data is accepted by the
Corporation.

A determination by the Corporation to accept data from such organization(s) on

behalf of a Member shall not be deemed to be an approval of such organization(s), or
an assumption by the Corporation of any responsibility or liability for such organization’s
operation or failure to operate, which shall remain solely between the Member and such
organization(s). The Corporation shall be entitled to rely upon any data so submitted
without inquiry into the accuracy or validity of such data. It shall be the responsibility of
the Member to take appropriate corrective action to resolve any differences resulting
from the submission of incorrect data to the Corporation. Acceptance by the
Corporation of data from such organization(s) shall not relieve the Member from, or
alter, amend or modify, any obligations of the Member pursuant to the Corporation’s
Rules.

SEC. 7. All trade data submitted to the Corporation for trade recording pursuant
to Sections 2(b), 3(b) or 6 of this Rule shall be submitted in Real-time, as that term is
defined in Procedure XIII of these Rules, and on a trade-by-trade basis, in the form
executed without any form of “pre-netting” of such trades prior to their submission. The

1 This may include a trade reporting facility that: (i) is affiliated with, and is operated as a facility of, a
self-regulatory organization (SRO), and (ii) the rules and operations of which are the subject of a rule
change of the SRO that has been duly filed with the SEC and is effective.

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 (RULE 7)

Corporation shall deem any form of trade summarization, compression, or other form of
netting or practice that combines two or more trades prior to their submission to the
Corporation, or any practice or action designed to contravene this prohibition, as a
violation of this Rule, and this prohibition shall apply to any Member (including any
Special Representative or Qualified Special Representative) that, directly or indirectly,
engages in such pre-netting.

Trade data submitted to the Corporation for trade recording pursuant to Section
2(b) of this Rule is not subject to the requirements of this Section if (1) the counterparty
to that trade is an Affiliate of the submitting firm on the Corporation’s records at the time
the trade data is submitted; or (2) the trade data is submitted to facilitate a position
movement between two unaffiliated clearing brokers on behalf of a common client for
custody purposes (“Client Custody Movements”).

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 (RULE 8)

RULE 8. BALANCE ORDER AND FOREIGN SECURITY SYSTEMS

SEC. 1. The Corporation will conduct a Balance Order Accounting Operation

based upon Balance Order Contracts as specified in the Procedures pursuant to which
the Corporation will net the deliver and receive obligations of each Member in each
security issue, allot and match the offsetting obligations of Members and prepare and
issue to Members (i) a separate deliver security balance order for each delivery of each
security to be delivered, showing the Settlement Price in respect thereof established by
the Corporation and (ii) a separate receive security balance order offsetting each such
deliver security balance order showing the Settlement Price in respect thereof
established by the Corporation.

SEC. 2. The Corporation will conduct a Foreign Security Accounting Operation

based upon Foreign Security Contracts as specified in the Procedures pursuant to
which the Corporation will issue receive and deliver security orders representing the
daily netted position of each Member with respect to its transactions with another
Member in each Foreign Security.

SEC. 3. The obligation of a Member to receive and pay for securities and the
obligation of a Member to deliver securities pursuant to deliver or receive security
balance orders or security orders shall be fixed at the time such orders are made
available to the Members, although they may not in fact have been received by such
Members.

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 (RULE 9)

RULE 9. ENVELOPE SETTLEMENT SERVICE

SEC. 1. General

The Corporation may, at its facilities (at those locations as it may determine from
time to time as announced via Important Notice) offer a service, to be known as the
Envelope Settlement Service (“ESS”), through which it may receive envelopes, of the
type approved by the Corporation, from Members (each, a “delivering Member”)
addressed to Members (each, a “receiving Member”) on Business Days. The services
offered by the Corporation through ESS will include the processing and settlement of:
(a) security deliveries and receives and associated charges, (b) money-only settlement-
related charges, and (c) claims for dividends and interest, each of which has been
submitted by Members in accordance with the provisions of these Rules. Such
envelopes will be sorted and made available, at the same facility where received by the
Corporation, to the authorized representatives of the Members to whom they are
addressed as provided in this Section 1. The delivery of envelopes and the related
processing of payments by the Corporation are not guaranteed services of the
Corporation and are subject to reversal as provided in Section 4 of this Rule.

1. Deliveries of envelopes to the Corporation shall be made in accordance with the

schedule from time to time specified by the Corporation.

2. An envelope delivered to the Corporation shall contain only such securities as

permitted by the Corporation from time to time; tickets relating to such securities
contained in the envelope; or such other items as the Corporation may from time
to time permit, including but not limited to, documentation by a delivering Member
necessary for the receiving Member to identify the reason for a money-only
charge, and notices of intent and claim forms associated with claims for
dividends and interest. Envelopes which contain securities other than as
permitted by the Corporation are subject to return by the Corporation to the
delivering Member and the related credit and debit of the payment amount
therefor may be reversed in accordance with Section 4 of this Rule.

3. The envelopes shall be accompanied by a credit list in such form prescribed by

the Corporation. The credit list shall list each of the envelopes delivered with it
and shall show the number of the Member to whom each envelope is addressed
and the total money value, if any, of the items contained in that envelope, and
each credit list shall be totaled. In addition, the envelopes must be accompanied,
in such format as prescribed by the Corporation, with an indicator as to whether
or not the envelope contains a security. Where an envelope contains a security,
the delivering Member must provide the Corporation with identifying information
with respect to the security (including CUSIP or ISIN), and quantity.

Securities may not be comingled in the same envelope with other items permitted
by the Corporation to be processed through ESS. The Corporation may also:
(a) prohibit comingling of any variety of items in a single envelope, and (b) limit
the number of envelopes that may be submitted per credit list, as it determines

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from time to time. However, a Member may deliver no more than one security
(defined by CUSIP or ISIN) per envelope. All envelopes delivered through ESS
must also be accompanied with such other information as required by the
Corporation from time to time, including, when applicable, information regarding
OFAC certification.

4. Each separate item in an envelope shall be accompanied by tickets or orders, in

duplicate, containing such information as may be necessary for the receiving
Member to identify the item. An envelope containing more than one item must
also contain an adding machine tape of the money value of the items included in
such envelope. The total shown on such tape must be the same as the total
money value recorded on the credit list for that envelope.

5. All envelopes delivered to the Corporation will be checked against the credit list
which accompanies them to see that each envelope on the credit list has been
received. If the envelopes delivered are properly listed on the accompanying
credit list, the Corporation will stamp the duplicate credit list and make it
immediately available to the delivering Member’s representative making the
delivery. All envelopes listed on a credit list shall be deemed to have been
accepted by the Corporation when the Corporation stamps the duplicate credit
list on which such envelopes are listed, and at the time of such stamping the
envelope shall be deemed for all purposes, subject to the rights of the
Corporation under Section 4 of this Rule and Section 2 of Rule 12, to have been
delivered to the receiving Member, unless any such envelope shall be found by
the Corporation to contain impermissible items, in which case subsection 2 of this
Section 1 shall apply. Prior to the stamping of the credit list, envelopes will be
held by the Corporation for the delivering Member and after stamping for the
receiving Member.

6. The Corporation will sort the envelopes accepted by it and, subject to the rights
of the Corporation under Section 4 of this Rule and Section 2 of Rule 12, will
make such envelopes available to the authorized representatives of the receiving
Members to whom they are addressed through the Corporation’s facilities.
Except as the Corporation may determine to be appropriate or necessary, the
Corporation will not examine the contents of the envelopes nor verify the
payment amounts shown on the credit list, and it shall not be responsible with
respect thereto, except to deliver the envelopes accepted by it to the authorized
representatives of the receiving Members to whom they are addressed.

7. The Corporation when it stamps a credit list is authorized to, and will, credit the
delivering Member’s account with the payment amount shown on such stamped
credit list and debit the receiving Member’s account with the same amount.

8. Each receiving Member shall send to the Corporation at the times on Business
Days specified by the Corporation and, in addition, at frequent intervals on
Business Days a representative authorized, pursuant to Rule 27, to receive
envelopes delivered through the Corporation’s facilities.

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 (RULE 9)

9. In case of any irregularity or error in an item, the receiving Member may return
such item to the delivering Member outside the Corporation, or through the
service provided under this Rule by putting such item in an envelope and
delivering the envelope in the same manner as provided by this Section 1 for the
delivery by Members, except that the tickets in the envelope and the credit list
accompanying the envelope, which are used in connection therewith, shall bear
the legend “Reclamation”. If such delivery of returned items is to be made
through the Corporation it shall be made on the day received or on the next
Business Day in accordance with the schedule specified by the Corporation. An
irregularity in an item shall be deemed to exist only when the receiving Member
does not know the delivery, such as deliveries of the wrong securities, deliveries
of the wrong number of shares or units, deliveries for the wrong payment
amount, or deliveries which do not meet the requirements of Rule 44, if
applicable. No irregularity in an item shall be deemed to exist solely by reason of
the delivery having been effected through the Corporation, rather than by another
means, unless the delivering Member and the receiving Member shall have
entered into a prior agreement providing for such delivery by another means or
the rules of a self-regulatory organization, as defined in the Exchange Act,
require delivery of such item through other means.

10. Payment amounts which the Corporation has agreed to credit to a Member on
account of deliveries made to receiving Members and payment amounts which
the Corporation has agreed to debit to a receiving Member on account of receipts
from delivering Members pursuant to this Section shall be credited or debited
from time to time during each Business Day and shall be included in the
settlement for that day, pursuant to Rule 12, subject to the rights of the
Corporation pursuant Section 4 of this Rule and Section 2 of Rule 12.

11. The Corporation may enter information relating to ESS securities transactions
into the Obligation Warehouse service where a delivering Member has provided
an OW Control Number (as defined in Procedure IIA).

SEC. 2. The Corporation may provide the services described in Section 1 of this
Rule relating to deliveries and receives of securities in respect of envelopes received by
it from Members at one of its facilities as set forth in Section 1 which envelopes contain
securities and are to be delivered to another Member at a facility other than the facility
at which the envelope is received (an “intercity delivery”). Such services shall be limited
to such securities, tickets and items as specified in subsection 2 of Section 1and any
other Rules or Procedures of the Corporation with respect thereto, and shall be
provided in the same manner as specified in Section 1 of this Rule, except that:

1. Each envelope delivered to the Corporation which involves an intercity delivery

must be sealed.

2. The value of the securities contained in all envelopes which involve intercity
deliveries by a Member on a single day shall not exceed the amount of the
insurance provided by the delivering Member’s blanket bond which covers such

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securities, or, in any event, the amount of the insurance provided by the
Corporation’s blanket bond which covers such securities.

3. The provisions of paragraphs 5, 6 and 7 of Section 1 of this Rule to the contrary

notwithstanding, if an envelope which involves an intercity delivery is properly
sealed, the Corporation will stamp the duplicate credit list as received and make
it immediately available to the party making the delivery. When the Corporation’s
facility at which the envelope is to be received (the “receiving facility”) receives
the envelope and the accompanying credit list, it shall stamp such credit list and
make the envelope available to the receiving party. A sealed envelope with its
accompanying credit list shall be deemed to have been accepted by the
Corporation when stamped at the facility at which the Corporation receives it
from the delivering party (the “delivering facility”). An envelope shall be deemed,
subject to subsection 2 of Section 1 and to the rights of the Corporation under
Section 4 of this Rule and Section 2 of Rule 12, to have been delivered to the
receiving party as of the time when the Corporation stamps the credit list at the
receiving facility.

Before the Corporation has stamped the accompanying credit list at the receiving
facility, it will hold the envelope as the property of the delivering party and, after
such stamping, it will hold the envelope as the property of the receiving party.

The Corporation shall be responsible for an envelope up to the amount indicated

on the accompanying credit list between the time the Corporation has stamped a
copy of the credit list attached to the envelope at the delivering facility and the
time at which the envelope is deemed, subject to the rights of the Corporation
under Section 2 of Rule 12 and Section 4 of this Rule, delivered to the receiving
party if:

(a) the seal on the envelope is broken; or

(b) the sealed envelope with its accompanying credit list is lost, stolen,
destroyed or the like; provided, however, that in no event shall the Corporation
be liable for any amount in excess of the value indicated on the accompanying
credit list.

In any event, it shall be the responsibility of the delivering party to furnish the
Corporation with certificate numbers and such other information as the
Corporation shall deem appropriate.

4. The Corporation, after it has stamped a credit list at the receiving facility, will
credit the delivering party’s account with the amount shown on such stamped
credit list and debit the receiving party’s account with the same amount. Such
debits and credits shall be included in the settlement for the day on which such
credits and debits are made.

5. Returned items which are received by the Corporation prior to the final
reclamation or delivery times designated by the Corporation, and appropriate

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debits and credits therefor, will be entered on the same day they are received in
the case of a reclamation.

SEC. 3. In the event a Member receives an envelope that contains only part of
the securities described by the accompanying ticket or order and the Member does not
reclaim the envelope within the time frame prescribed by the Corporation, the Member
may request the delivering Member to furnish certificate numbers of the missing
securities.

In the event a receiving Member does not receive an envelope or receives an

envelope that does not contain any securities and the receiving Member determines
that he has been charged for the delivery, the receiving Member may request the
delivering Member to identify the securities and furnish certificate numbers related to
the delivery.

Requests for certificate numbers should be made promptly.

If a request is made on the day of delivery, the delivering Member must furnish
certificate numbers no later than the end of the second Business Day following delivery.
If a request is made on the day following delivery or any subsequent day, the delivering
Member must furnish certificate numbers no later than the end of the first Business Day
following the request. If certificate numbers are not furnished to the receiving Member
within the requisite time frame and if the Corporation determines that the receiving
Member’s request was made promptly, the charges related to the delivery will be
subject to reversal.

SEC. 4. Reversal of Payment Amount Credits and Debits.

1. The Corporation may reverse, in whole or in part in its sole discretion, any
payment amount credited to a delivering Member and debited to a respective
receiving Member with respect to any envelope delivery under this Rule 9 if, on
any Business Day:

(a) An envelope has been found to contain anything other than permitted
securities, tickets relating thereto and other items, as provided pursuant to this
Rule, or that the contents of an envelope are otherwise inappropriate for delivery
through the facilities of the Corporation; or

(b) The Corporation reasonably believes that the respective receiving

Member will not pay or has not paid the payment amount in respect of an
envelope, whether by net settlement or otherwise, and regardless of whether the
receiving party that is, or is acting on behalf of, the receiving Member has taken
delivery of the envelope prior to such reversal; or

(c) If the Corporation ceases to act for the delivering Member, the receiving
Member or both.

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2. The delivering Member and the receiving Member shall resolve any disputes or
claims with respect to any such reversal outside the Corporation, including, but
not limited to, any dispute arising because the receiving Member has taken
delivery of the envelope prior to the reversal. If the receiving Member has not, at
the time of a reversal of payment, taken delivery of the envelope, the Corporation
shall return the affected envelope to the appropriate delivering Member.

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RULE 10. FAILURE TO DELIVER ON SECURITY BALANCE ORDERS

If a Member shall not make delivery of all the Cleared Securities to be delivered
pursuant to a security balance order by the time on Business Days specified by the
Corporation, the Member to whom the Cleared Securities are to be delivered may cause
such securities as are not so delivered to be bought-in as provided for in the rules of the
applicable marketplace.

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RULE 11. CNS SYSTEM

SEC. 1. (a) The CNS System is a system for accounting and settling CNS
Contracts whereby a Member’s Settling Trades in CNS Securities are netted so that
with respect to each issue of CNS Securities in which the Member has activity, the
Member is either obligated to deliver units of that security (a “Short Position”) or is
entitled to receive units of that security (a “Long Position”), the delivery obligation being
to the Corporation and the right to receive being against the Corporation as more
specifically set forth in paragraphs (b) and (c) below; whereby Short Positions or Long
Positions outstanding in respect of prior activity are brought forward on a perpetual
basis and, together with stock dividends or distributions payable or receivable in respect
of Short Positions or Long Positions, miscellaneous entries and CNS Securities
delivered to or by Members, are merged, netted and carried forward, leaving in each
Member’s account all transactions which have failed in delivery or receipt; and whereby
the contract money of all Settling Trades is netted with cash dividends or distributions
receivable and payable and increases and decreases in obligations to the Clearing
Fund, if applicable, and miscellaneous items resulting in the closing CNS System
money balance for each Member which, for the purpose of computing the CNS System
money settlement (including marking any Long or Short Position of a Member at the
close of business to the Current Market Price), is adjusted by the net market value of all
Closing Positions.

(b) Each obligation of any Member (the “Receiving Member”) to pay for
securities delivered to that Member by another Member (the “Delivering Member”)
under a transaction which (i) has been compared or reported by the Corporation and (ii)
will be subject to the CNS Accounting Operation (each a “CNS Transaction”), and each
obligation of any Delivering Member to deliver securities to any Receiving Member
under any such transaction, shall be assumed by the Corporation at the point in the
clearance and settlement process determined as set forth in paragraph (c) below.
Simultaneously with the assumption of any such obligations by the Corporation, the
related rights of the Receiving Member to receive securities from the Delivering Member
and the related rights of the Delivering Member to receive payment from the Receiving
Member for securities delivered shall be assigned to the Corporation. The assumption
of these obligations and the assignment of these rights with respect to any CNS
Transaction places the Corporation between the Delivering Member and the Receiving
Member, creating an obligation on the part of the Delivering Member to deliver
securities to the Corporation and on the part of the Receiving Member to receive and
pay for securities delivered by the Corporation, as well as an obligation on the part of
the Corporation to receive and pay for securities delivered by the Delivering Member
and to deliver securities to the Receiving Member.

(c) The assumptions and assignments referred to in the paragraph (b) of this
Section for any CNS Transaction of any Member shall occur when the Corporation’s
guarantee to complete the transaction becomes effective. For purposes of the
preceding sentence, the Corporation shall be deemed to have guaranteed completion of
a CNS Transaction when the clearance and settlement process for the transaction has
reached the stage at which the Corporation will complete the CNS Accounting

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Operation for such transaction notwithstanding that the Corporation may cease to act
for the Member. This stage may be designated in the Corporation’s Rules or
Procedures or in any interpretation or statement of policy relating thereto, and it may be
different for different types of transactions.

(d) Whenever the Corporation shall be required to exit or delete any CNS
Transaction from the CNS System, the obligation to deliver and/or the obligation to pay
for securities delivered, as well as the correlative rights to receive securities and/or to
receive payment for securities delivered, shall be further assumed by and assigned to
such Members as may be designated by the Corporation, in accordance with its Rules
and Procedures, in the appropriate Balance Orders, security orders, reports or as
otherwise may be appropriate.

(e) All rights and liabilities with respect to any CNS Transaction other than
those specifically assigned and assumed by the Corporation as set forth in paragraph
(b) of this subsection shall be retained by the Members who are the original contra-
parties to the transaction as compared or reported by the Corporation. It is specifically
understood that the rights and liabilities retained by such Members shall not include
ownership rights in the securities delivered to the Corporation pursuant to CNS
Transactions (all of which ownership rights shall be in the Corporation) and any other
rights and liabilities that cannot be legally separated from the rights and liabilities
assigned and assumed by the Corporation.

SEC. 2. The Corporation will maintain a position for each Member in each CNS
Security for which the Member has a Short Position (reflecting units which the Member
is obligated to deliver to the Corporation) or a Long Position (reflecting units which the
Member is entitled to receive from the Corporation).

SEC. 3. Pursuant to the instructions of each Member given in the manner

prescribed in the Procedures and on the basis of information provided to the Member by
the Corporation and information otherwise available to the Member, the Corporation will
instruct the Qualified Securities Depository designated by the Member in the manner
prescribed by the Corporation to deliver to the Corporation’s account at the Qualified
Securities Depository on each Settlement Date CNS Securities credited to the
Member’s account for the purpose of reducing or eliminating Short Positions of the
Member; and the Corporation will instruct the Qualified Securities Depository to deliver
from the Corporation’s account at the Qualified Securities Depository, in accordance
with the priorities specified in the Procedures, CNS Securities so received into the
Corporation’s account at the Qualified Securities Depository to the Member necessary
to reduce or eliminate Long Positions of the Member. Notwithstanding the foregoing,
deliveries and receipts of securities may also be effected in such other manner as may
be prescribed in the Procedures.

SEC. 4. On each settlement day the Corporation will issue to each Member
reports which will show each CNS position in each security due to settle that day and on
the next settlement day and such other information as the Corporation may deem
advisable. With respect to obligations due to settle on the next settlement day, the

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obligation of a Member to receive and pay for CNS Securities and the obligation of a
Member to deliver CNS Securities pursuant to the CNS Contracts shall be fixed at the
time the applicable report is made available to the Member, although it may not in fact
have been received by such Member. With respect to obligations due to settle that day,
the obligation of a Member to receive and pay for CNS Securities and the obligation of a
Member to deliver CNS Securities shall be fixed at each time a net settling position is
determined for that Member in accordance with the CNS processing and information in
respect of that new net settling position is made available.

SEC. 5. (a) On the morning of each settlement day the Corporation will issue to
each Member a Cash Reconciliation Statement showing the amount receivable or
payable by the Member in respect of the CNS System for that settlement day on the
basis of settlement activity completed prior to the preparation of the Cash Reconciliation
Statement. On the morning of each settlement day the Corporation will also issue to
each Member a statement which will reflect the receipts and deliveries of securities in
settlement of Long or Short Positions for that date which shall have been completed
prior to the preparation of the Cash Reconciliation Statement. Thereafter on such
settlement day the Corporation will issue to each Member a statement or statements of
other receipts and deliveries of securities in settlement of Long or Short Positions which
are completed on that date. The Member, on the basis of such statements, shall
determine the final amount receivable or payable by the Member in respect of the CNS
system for that settlement day in the manner specified in the Procedures.

(b) On each settlement day the Corporation will issue to each Member an
accounting summary which will reflect each CNS Security in which there was activity or
in which the Member had an opening Long or Short Position, the Member’s opening
Long or Short Position, the Member’s activity in such CNS Securities for that day, the
transactions into and out of its Qualified Securities Depository account or receipts and
deliveries otherwise effected as described in Section 3 of this Rule or in the Procedures,
the Closing Position for that day in each CNS Security and the Closing Position valued
at the Current Market Price, resulting in a net long market value or short market value in
CNS Securities. The accounting summary also will show the Member’s money activity
for that settlement day.

SEC. 6. The Corporation may, when it deems it necessary for the protection of
Members in view of the price fluctuations in or volatility or lack of liquidity of any security
require all Members to make additional mark-to-the-market payments on any Long or
Short Position in respect of such security or to make mark-to-the-market payments in
respect of all transactions in such security prior to the Settlement Date for such
transaction.

SEC. 7. In the event a Member has a Long Position in a CNS Security, the
Member (the “originator”) may demand immediate delivery thereof by submitting, at or
before the time specified in the Procedures, to the Corporation a Buy-In Intent, in the
form prescribed by the Procedures. The originator will be given priority for CNS
allocation, in the manner prescribed by the Procedures, in respect of the allocation by
the Corporation of securities covered by the Buy-In Intent, in the settlement on the

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settlement day prior to the expiration of the buy-in and if the securities are not allocated
to the originator in that settlement, in the settlement on the settlement day the buy-in
expires. The processing of a Buy-In Intent through the delivery of CNS Retransmittal
Notices to Members with Short Positions shall be accomplished in accordance with
Section J of Procedure VII, and the subsequent execution of such buy-in by the
originator, as necessary, shall be accomplished in accordance with Procedure X.

With respect to buy-ins of municipal securities, in lieu of receiving priority for CNS
allocation, the filing of a Buy-In Intent will be treated as an instruction to remove the
securities subject to the buy-in from the CNS System, which shall be accomplished in
accordance with the procedures in Section J of Procedure VII.

SEC. 8. After receipt of notice by the Corporation that the issuer of a CNS
Security has declared a stock or cash dividend on such security or has authorized a
stock-split or a distribution of rights or other property with respect to a CNS Security, the
Corporation will issue a Record Date Report which will show each Member’s record
date Long or Short Position in the security at the close of business on the Record Date
(herein called “Record Date Position”).

(a) On the payable date for a cash dividend (or, if the payable date is not a
settlement day, then on the settlement day immediately following such payable date)
each Member shall be obligated to pay an amount equal to the dividend on any Short
Position included in the Member’s Record Date Position and shall be entitled to receive
an amount equal to the dividend on any Long Position included in the Member’s Record
Date Position. Such amounts, when debited or credited, as appropriate, may be
adjusted as provided for under Section G of Procedure VII.

(b) On the payable date for a stock dividend (or, if the payable date is not a
settlement day, then on the settlement day immediately following such payable date),
the securities position of each Member shall be adjusted to reflect the Member’s
obligation to deliver the amount of the stock dividend on any Short Position included in
the Member’s Record Date Position to the Corporation or to reflect the Member’s right
to receive the amount of the stock dividend on any Long Position included in the
Member’s Record Date Position from the Corporation. Fractional shares shall not be
added to any Short or Long Position in respect of any stock dividend or other
distribution. In lieu thereof, the Corporation shall credit or debit, as the case may be, an
amount of cash in respect of fractional shares based on the Current Market Price of the
security.

(c) The procedure set forth in paragraph (b) shall apply to distributions other
than dividends, provided, however, that in the case of stock-splits or distributions in
respect of which a CNS Security is traded with due bills after the record date for such
stock-split or distribution, the securities position of each Member in such CNS Security
shall be adjusted to reflect the Member’s obligation to deliver the amount of the stock
split or distribution on its Short Position at the close of business on the due bill
redemption date (the “Due Bill Redemption Date”) to the Corporation or to reflect the

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Member’s right to receive the amount of the stock-split or distribution on its Long
Position at the close of business on the Due Bill Redemption Date from the Corporation.

(d) An “as of” trade entered at least two settlement days prior to the payable
date in respect of a cash or stock dividend or other distribution not trading with due bills
after the record date, provided the original trade date for the trade is before the ex-
dividend date for such dividend, will be subject to the same procedures as those set
forth above; an “as of” trade entered at least one settlement day prior to the Due Bill
Redemption Date in respect of other distributions which trade with due bills after the
record date will be subject to the same procedures as those set forth above. Any such
trades entered less than two settlement days or one Business Day, as the case may be,
prior to the payable date or the Due Bill Redemption Date shall not be accorded
dividend protection in the CNS System.

(e) When a dividend or distribution in securities which are not CNS Securities
is declared on a CNS Security or rights which are not CNS Securities are issued in
respect of a CNS Security, the items will be reported to each Member having a Long or
Short Position in the CNS Security on the close of business on Record Date. Such
dividends, distributions or rights shall not, however, be settled in the CNS System; the
Corporation shall match the Short and Long Positions in respect thereof in that manner
which the Corporation in its discretion may provide and issue receive and deliver
security orders in respect thereof, which orders shall have the same status as security
balance orders issued in connection with the Balance Order Accounting Operation and
will be subject to those provisions of these Rules pertaining to such security balance
orders unless otherwise specified by the Corporation.

(f) Dividends which may be paid in the form of securities or cash at the
election of the holder will be processed in the manner prescribed in the Procedures.

(g) Notwithstanding the foregoing provisions of this subsection 8, the

Corporation may adopt any procedures deemed appropriate by it in respect of any
transaction to which such provisions are not fully applicable.

SEC. 9. A trade in a CNS Security or Balance Order Security may be designated

a Special Trade in which case it will be cleared and settled on a Member-to-Member
basis; the parties to the Special Trade shall notify the Corporation at the time and in
manner specified in the Procedures, and the Corporation shall issue receive and deliver
security orders in respect thereof, which orders shall be settled by the parties directly.
To the extent such Special Trade is for a security that is eligible for book-entry transfer
on the books of a Qualified Securities Depository, and the deliverer has filed with the
Corporation a standing instruction, the Corporation will issue an instruction on file to a
Qualified Securities Depository specifying the quantity of such security to be delivered
from the deliverer to the receiver and the money settlement amount related thereto.
The Corporation may enter obligations arising from such Special Trades into the
Obligation Warehouse service in accordance with timeframes as determined by the
Corporation from time to time.

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SEC. 10. In the event a CNS Security is removed from the list of CNS Securities
pursuant to Rule 3, the Corporation shall, on the first settlement day on which such
securities are not deliverable through the facilities of all Qualified Securities
Depositories and on each subsequent settlement day for any CNS Contracts entered in
the CNS Accounting Operation prior to the effective date of removal, or upon such
removal, match with respect to each such settlement day opening Short or Long
Positions in such security in that manner which the Corporation in its discretion may
provide, issue receive and deliver security orders in respect thereof for any such day,
which orders shall have the same status as security balance orders issued in
connection with the Balance Order Accounting Operation and will be subject to those
provisions of these Rules pertaining to such security balance orders unless otherwise
specified by the Corporation and close out such positions in the CNS System.

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RULE 12. SETTLEMENT

SEC. 1. Settlement of money payments with respect to transactions or matters

covered by these Rules, shall be made as provided in this Rule or, with respect to
settlement of money payments with respect to the AIP Service (“AIP Settlement”), as
provided in Rule 53. The Corporation shall debit or credit itself, Members, Mutual
Fund/Insurance Services Members, Insurance Carrier/Retirement Services Members,
Fund Members and AIP Members with the amounts payable and receivable in
accordance with the provisions of such Rules. AIP Settlement shall not be subject to
the remaining provisions of this Rule 12 and shall be subject to the provisions of Rule
53.

At such time as determined by the Corporation, the Corporation shall produce,

each Business Day, a settlement statement which will reflect the debits and credits
which have been entered into a Member’s, Mutual Fund/Insurance Services Member,
Insurance Carrier/Retirement Services Member’s or Fund Member’s (each hereinafter
referred to as a “participant” for purposes of this Rule 12) account with respect to
matters or transactions covered by these Rules, plus debits or credits, if any, reflecting
amounts that the Corporation will pay to or receive from any entity under any Clearing
Agency Cross-Guaranty Agreement, and shall reflect a net amount payable to or
payable by the Corporation. Each such participant shall settle, by such time as
established by the Corporation, through a Settling Bank (unless the Corporation permits
otherwise), by Federal Funds payment in the manner provided in the Procedures, the
net amount reflected on such settlement statement.

A participant will be deemed to have failed to settle when the Corporation

receives a Refusal from such participant’s Settling Bank and the participant has failed to
pay its Net Debit Balance (or it has failed to pay its Net Debit Balance if permitted by the
Corporation to settle otherwise than through a Settling Bank), or when its Settling Bank
has failed to pay the Settling Bank’s net-net debit balance by the time specified by the
Corporation from time to time.

If the Corporation does not produce such settlement statement each such
participant shall settle with the Corporation by a Federal Funds wire transfer, by
determining the amount payable to or by such participant as reflected on such
participant’s records. A participant that fails to timely settle may be subject to action by
the Corporation pursuant to Rule 46 or 48. Such participant shall also be subject to
such fines as the Corporation deems appropriate pursuant to these Rules. Any
difference between said amount and the actual net settlement amount which is not
settled on that Business Day, shall be settled on the next Business Day by Federal
Funds payment by such time as determined by the Corporation.

Notwithstanding any other provisions of these Rules, the Corporation maintains

the right to require a participant to furnish to the Board of Directors all documents relied
upon by such participant in determining amounts payable to or by the Corporation in
respect of this Rule.

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In the event the Board of Directors determines that such books, records and
documents do not appropriately support amounts tendered pursuant to this Rule, such
participant shall be subject to action by the Corporation pursuant to Rule 46 or Rule 48.

At such time as determined by the Corporation, the Corporation shall also

produce, each Business Day, a settlement statement which shall reflect the information
contained in that Business Day’s prior settlement statement, any adjustments to those
amounts and the payments made to or by the Corporation.

SEC. 2. Notwithstanding any provision in these Rules to the contrary, until the
effective time (as defined below):

(a) any action taken by the Corporation or a Qualified Securities Depository

pursuant to an instruction given by the Corporation to deliver securities from the
Corporation’s account at a Qualified Securities Depository to the account of a Member
at a Qualified Securities Depository by book-entry on a Business Day for which payment
is to be made by the Member to the Corporation (a “Depository Instruction”) shall,
notwithstanding the nature of such action, not constitute an appropriate entry on the
books of the Qualified Securities Depository specifically identifying the securities so as
to constitute a delivery thereof or reducing the account of the Corporation and
increasing the account of the Member by the amount of the obligation or the number of
shares or rights subject to the instruction;

(b) any receipt of securities by a Member pursuant to Rule 9 on such

Business Day for which payment is to be made by the Member to the Corporation (a
“physical receipt”) shall, whether or not the securities subject to the physical receipt
remain in the possession of the Corporation, not constitute a voluntary transfer of
possession of such securities by the Corporation to the Member; and

(c) any action taken by the Corporation pursuant to an instruction given to the
Corporation by a Member to move a position to its Fully-Paid-For Subaccount shall not
constitute an appropriate entry on the Corporation’s books so as to constitute such
movement.

The “effective time” referred to in the foregoing sentence shall be the time that is
(A) the earlier of (i) the time it is finally determined by the Corporation on such Business
Day that the Member’s Gross Credit Balance for such Business Day equals or exceeds
his Gross Debit Balance for such Business Day, or (ii) if the Member’s Gross Debit
Balance exceeds his Gross Credit Balance and the Member settles through a Settling
Bank, the time as finally determined by the Corporation, that the Settling Bank
representing such Member has a net-net credit balance or (iii) if the Member’s Gross
Debit Balance exceeds his Gross Credit Balance, the time as finally determined by the
Corporation that the Member has paid its Net Debit Balance or, if the Member settles
through a Settling Bank, the Settling Bank representing such Member has settled its
net-net debit balance; and (B) when the Corporation has no obligation on account of a
receive or deliver obligation of a Member under the terms of any Clearing Agency Cross
Guaranty Agreement which creates an obligation on the part of the Corporation

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irrespective of whether the Member is in a net credit or net debit position with the
Corporation. In the event the Corporation, prior to the effective time, ceases to act for
the Member with respect to transactions generally pursuant to Rule 46 or Rule 48, the
Corporation shall have the right

(A) in respect of securities subject to a Depository Instruction to take such actions as

permitted under the terms of any Clearing Agency Cross-Guaranty Agreement or
as otherwise specified in these Rules and

(B) in respect of securities subject to a physical receipt, to retain possession of such

securities and sell out such securities in the manner specified in Section 3 of this
Rule provided, however, that if

(i) in the case of a Depository Instruction, any security subject thereto is

(A) transferred out of the Member’s account at the Qualified Securities

Depository by book-entry or

(B) physically withdrawn by the Member from his account at the

Qualified Securities Depository and physically delivered by the
Member to a third party for value, or

(ii) in the case of a physical receipt and physical possession by the Member,
any security is physically delivered by the Member to a third party for value, such
security shall be deemed for all purposes to have been delivered by the
Corporation to the Member; and provided, further, that, to the extent that a
Member shall obtain physical possession of any such security by physical
withdrawal thereof from the Qualified Securities Depository or receipt from the
Corporation or obtain control of any such security, the Member shall hold the
same in trust for the benefit of the Corporation and the Corporation shall have the
right to reclaim possession thereof from the Member and if the Member shall
transfer or pledge the securities to a third party for value by a book-entry
transaction on the books of the Qualified Securities Depository or by a physical
delivery of securities of which it has obtained physical possession, the
Corporation shall have the right to reclaim, and shall be entitled to, any proceeds
obtained by the Member as a result thereof. Notwithstanding the foregoing, the
Corporation shall not have the right to instruct a Qualified Securities Depository
to retain securities pursuant to clause (A) of the foregoing sentence until the
Qualified Securities Depository has effected any retention or sale which the
Qualified Securities Depository elects to effect pursuant to the rules of the
Qualified Securities Depository or the Qualified Securities Depository elects not
to effect any such retention and then the Corporation’s right to instruct the
Qualified Securities Depository to retain securities pursuant to said clause (A)
shall be limited to instructing the Qualified Securities Depository to retain such
amount of securities as shall not reduce the amount of securities of any issue
remaining in the Member’s account below the Minimum Amount (as defined in
the rules of the Qualified Securities Depository). In the event a Settling Bank

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which represents a Member with a Net Debit Balance, which Settling Bank has a
net-net credit balance or has paid its net-net debit balance to the Corporation
prior to such time as the Corporation ceases to act for such Member with respect
to transactions generally pursuant to Rule 46 or Rule 48, the Corporation shall
thereafter (a) instruct the Qualified Securities Depository to transfer the securities
covered by any Depository Instruction from the Corporation’s account at the
Qualified Securities Depository to the Member’s account at the Qualified
Securities Depository by book-entry and such instruction shall constitute an entry
on the books of the Qualified Securities Depository reducing the account of the
Corporation at the Qualified Securities Depository and increasing the account of
the Member at the Qualified Securities Depository by the amount of the
obligation or the number of shares or rights subject to the instruction, and
(b) deliver the securities covered by any physical receipt to the Member and
possession of any securities shall be deemed to have been voluntarily
transferred by the Corporation to the Member, and the Corporation shall make
appropriate adjustments in the accounts of the Members to reflect such
transactions.

SEC. 3. In the event the Corporation shall sell any securities pursuant to any
Clearing Agency Cross-Guaranty Agreement or these Rules, such sale may be made in
any available market or at public auction or by private sale, including the sale to a
Member or Members having Long Positions in the CNS System, and may be made
without further demand or notice to the Member. If the sale is made on any market, or if
the sale is at public auction, the Corporation may purchase the securities sold for its
own account. The Corporation shall retain the Gross Credit Balance of the Member for
the Business Day on which the instruction to deliver was given and shall, upon receipt
of the proceeds of the sale of such securities, apply the Gross Credit Balance and such
proceeds to the payment of the Member’s Gross Debit Balance for such Business Day
and any surplus shall be credited to the account of the Member with the Corporation.

SEC. 4. Any action taken by the Corporation or a Qualified Securities Depository

pursuant to an instruction given by the Corporation or a Member to the Qualified
Securities Depository to deliver securities from the Member’s account at the Qualified
Securities Depository to the Corporation’s account at the Qualified Securities Depository
on a Business Day for which payment is to be made by the Corporation which does not
become effective under the rules of the Qualified Securities Depository shall not result
in a reduction in the Member’s Short Position in the CNS System in the amount of such
securities. If the amount of money to be paid to the Member in respect of such an
attempted delivery shall have been credited to the Member’s money account with the
Corporation, the Corporation may deduct such amount from the Member’s Gross Credit
Balance for such Business Day (the “withheld amount”) and may apply such withheld
amount to the purchase of equivalent securities for delivery to the Qualified Securities
Depository in order to eliminate any Short Position of the Corporation in its account at
the Qualified Securities Depository and, prior to such purchase, may upon demand of
the Qualified Securities Depository, pay the withheld amount to the Qualified Securities
Depository for its retention subject to return to the Corporation upon the Corporation’s
delivery to the Qualified Securities Depository of the purchased securities. Such

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securities may be purchased by the Corporation in any available market or by private

purchase, including purchase from the Qualified Securities Depository. If the purchase
price of such securities is less than the withheld amount, the difference between the
purchase price and the withheld amount shall be credited to the account of the Member
with the Corporation. If the purchase price of such securities is more than the withheld
amount, the difference between the purchase price and the withheld amount shall be
debited to the account of the Member with the Corporation.

SEC. 5. Notwithstanding any provision in these Rules to the contrary, for so long
as any Clearing Agency Cross-Guaranty Agreement shall be in effect, any net amount
payable or balance due to a Member under this Rule 12 (hereinafter a “Net Payment
Amount”) shall, to the extent and under the circumstances specified in such Clearing
Agency Cross-Guaranty Agreement, take into account amounts owed by such Member
to any Cross-Guaranty Party and the Corporation shall apply against any Net Payment
Amount due to a Member any amounts owed by such Member to such Cross-Guaranty
Party in accordance with the terms of the relevant Clearing Agency Cross-Guaranty
Agreement. A Member’s entitlement to receive any Net Payment Amount from the
Corporation shall be limited to any amount remaining after application of settlement
payment balances in accordance with such Clearing Agency Cross-Guaranty
Agreement and may be satisfied by payment to the Member from the Corporation or a
Cross-Guaranty Party.

SEC. 6. Notwithstanding any agreement between the Corporation and the

participant to the contrary, the Corporation shall have the right at any time and from time
to time to aggregate and net all or any balances due from the Corporation against all or
any balances due to the Corporation.

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RULE 13. EXCEPTION PROCESSING

Notwithstanding any provisions in these Rules and Procedures to the contrary, in

the event that a security may not otherwise be eligible for processing through the CNS,
Balance Order or other system, the Corporation, in its sole discretion, may adopt, from
time to time, procedures deemed appropriate for the processing of such security. Any
such procedures shall be promptly communicated to Members by the Corporation and
the Members shall be bound by the procedures set forth in such notice as fully as
though such procedures were now a part of the Rules and Procedures of the
Corporation. Each such notice shall be effective only for the security covered therein.

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RULE 14. TRANSFER TAXES

SEC. 1. The Corporation may accept New York State Stock Transfer Tax reports
and remittances from Members pursuant to the provisions of the New York State Tax
Law and the regulations promulgated thereunder. Remittances shall be forwarded to
the New York State Stock Tax Commission on behalf of the Member.

SEC. 2. The Corporation shall charge each Member’s settlement account the
amount of the New York State Stock Transfer Tax indicated on reports filed by the
Member on its own behalf.

SEC. 3. New York State Stock Transfer Tax credits received by the Corporation
shall be returned to the Member in accordance with the instructions of the New York
State Tax Commission.

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RULE 15. ASSURANCES OF FINANCIAL RESPONSIBILITY AND

OPERATIONAL CAPABILITY

SEC. 1. The Corporation shall have the authority to examine the financial
responsibility and operational capability of any Member or Limited Member or any
applicant to become such, to determine whether the requisite standards of financial
responsibility and operational capability are met. In conducting such examinations, the
Corporation may require a participant or applicant to furnish such information, to make
its books and records available and to provide sworn or unsworn testimony, as will be
sufficient, in the opinion of the Corporation, to demonstrate the financial responsibility
and operational capability of the participant. In connection with such examinations, the
Corporation may also require testimony from the employees of the participant or
applicant under examination or from any other person and may request and receive
records, reports or other information as may be relevant to the matter under
examination from any other self-regulatory organization (as defined by Section 3(a)(26)
of the Exchange Act) or other examining authority or regulator having authority to
examine, regulate or license such participant or applicant.

SEC. 2. (a) Each Member or Limited 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, its participants,
creditors or investors, 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.

(b) Adequate assurances of the financial responsibility or operational

capability of a participant or applicant to become such, as may be required pursuant to
these Rules and Procedures, may include, but shall not be limited to, as appropriate
under the context of the participant’s use of the Corporation’s services:

(i) additional reporting by the participant (or by the entity providing a

guarantee) of its financial or operational condition at such intervals
and in such detail as the Corporation shall determine;

(ii) entering into agreements concerning the provision of operational

support services by an entity acceptable to the Corporation;

(iii) restrictions on the participant’s use of the Corporation’s services;

(iv) increased Clearing Fund deposits (including additional amounts

required in respect of trade activity received by the Corporation
after calculation of the applicable Required Fund Deposit);

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(v) additional payments to the Corporation in such amounts as may be

determined by the Corporation each morning reflecting a
percentage of up to 100 percent of the participant’s (i) average
amount of total daily net debit positions or (ii) morning gross debit
activity;

(vi) delivering securities to the Member only against immediate

payment by the Member to the Corporation; and

(vii) assurances as may be required pursuant to the Corporation’s

guidelines and/or Procedures.

SEC. 3. 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.

SEC. 4. A participant’s failure to furnish information or otherwise comply with the

requirements of this Rule may subject the participant to restrictions on access to the
Corporation’s services pursuant to Rule 46 or the imposition of a fine or disciplinary
proceedings pursuant to Rule 48, amongst other rights of the Corporation as provided
under these Rules.

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 (RULE 16)

RULE 16. (RULE NUMBER RESERVED FOR FUTURE USE)

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 (RULE 17)

RULE 17. (RULE NUMBER RESERVED FOR FUTURE USE)

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 (RULE 18)

RULE 18. PROCEDURES FOR WHEN THE CORPORATION CEASES TO ACT

SEC. 1. When the Corporation has ceased to act for a Member, Mutual
Fund/Insurance Services Member, Municipal Comparison Only Member, Insurance
Carrier/Retirement Services Member, TPA Member, TPP Member, Investment
Manager/Agent Member, Fund Member, Data Services Only Member or AIP Member
(each hereinafter referred to as a “participant” for purposes of this Rule 18) pursuant to
Rule 46, it shall provide participants with notice pursuant to the provisions of Section 3
of Rule 45.

SEC. 2. (a) Except as otherwise may be determined by the Board of Directors

the following transactions of a Member for which the Corporation has ceased to act
shall be excluded from all operations of the Corporation applicable to such transactions:

(i) any CNS trade which, at the time the Corporation ceased to act for such
Member, was not guaranteed by the Corporation pursuant to Addendum K;

(ii) any Balance Order trade which, at the time the Corporation ceased to act
for such Member, was not guaranteed by the Corporation pursuant to Addendum
K;

(iii) any security orders issued in respect of Special Trades and transactions in
Foreign Securities;

(iv) any Long and Short Positions resulting from OW Obligations of the
Member, in whole or in part, that were entered into the CNS Accounting
Operation;

(v) any cash adjustment relating to OW Obligations of the Member forwarded

to settlement in accordance with the Obligation Warehouse procedure;

(vi) any uncompleted ACATS transaction in accordance with Rule 50; and

(vii) any uncompleted transaction processed through the ID Net Service in

accordance with Rule 65.

Any transactions so excluded shall be settled between the parties and not
through the Corporation.

(b) All CNS transactions and Balance Order transactions not excluded
pursuant to paragraph (a) of this Section shall be handled as provided for in this Rule,
or, if applicable, as may otherwise be provided for in these Rules and Procedures.

SEC. 3. (a) Notwithstanding any other provision of this Rule, promptly after the
Corporation has ceased to act for a Member, the Corporation shall attempt to complete,
in accordance with the provisions of this Section, the open RVP/DVP Transactions of
such Member. The Corporation shall notify the relevant RVP/DVP Customer and the
trustee or receiver of the Member (if one has been appointed) of the Corporation’s intent

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 (RULE 18)

to attempt to complete such RVP/DVP Transactions. Such notice shall also contain a
statement notifying RVP/DVP Customers of the presumed waiver stated in paragraph (f)
of this Section. Such notice shall be given by any commercially reasonable means,
which shall not be limited to those means specified in Rule 45, and include, but are not
limited to, Important Notice or notification to the RVP/DVP Customer’s depository agent
or its depository agent’s depository.

(b) For purposes of this Rule 18, (i) the “CNS Position” shall be equal to the
net of the Member’s Long Positions and Short Positions in a CNS Security (which
includes, without limitation, any position not excluded by the Corporation pursuant to
Section 2), and (ii) the “Net Close Out Position” with respect to a CNS Security shall be
equal to the sum of the (X) Long Position or Short Position in such CNS Security plus
(Y) the quantity of each RVP/DVP Transaction pertaining to that CNS Security that the
Corporation has completed pursuant to this Rule. In determining a CNS Position, the
Corporation shall consider Long Positions to be positive numbers and Short Positions to
be negative numbers. In determining the Net Close Out Position, the Corporation shall
consider any quantity of securities it receives upon completion of an RVP/DVP
transaction to be a positive number, and any quantity of securities it delivers upon
completion of an RVP/DVP Transaction, to be a negative number.

(c) (i) Subject to paragraph (d) below, the Corporation shall be obligated
to attempt to complete all RVP/DVP Transactions in a CNS Security of which the
Corporation is aware prior to declining or ceasing to act, but only to the extent
that the completion of such RVP/DVP Transactions would not cause the absolute
value of the Net Close Out Position in such CNS Security to be greater than the
absolute value of the CNS Position in such CNS Security. To the extent that this
paragraph requires the Corporation to attempt to complete some but not all of the
RVP/DVP Transactions in a particular CNS Security, the Corporation shall
determine which of those RVP/DVP Transactions it shall attempt to complete in
the same manner that it may, pursuant to subparagraph (ii), determine to attempt
to complete any additional RVP/DVP Transactions.

(ii) In determining whether to attempt to complete any additional

RVP/DVP Transaction beyond those RVP/DVP Transactions that the Corporation
is required to attempt to complete pursuant to subparagraph (c)(i), the Board of
Directors may consider any factor it, in its sole discretion, deems appropriate,
including the willingness of an RVP/DVP Customer to guaranty fulfillment of its
obligation to receive or deliver securities from or to the Corporation, but shall not
consider the expected profit or loss arising from any individual RVP/DVP
Transaction.

(d) Notwithstanding the provisions of paragraph (c), the Corporation may

determine not to complete any open RVP/DVP Transaction pertaining to a particular
CNS Security if (i) the Corporation reasonably believes that it cannot complete all
RVP/DVP transactions in such CNS Security that it would be obligated to attempt to
complete pursuant to paragraph (c)(i), whether due to the inability of the Corporation or
the RVP/DVP Customer to make delivery or payment, the unwillingness of the

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RVP/DVP Customer to make delivery or payment, or otherwise, (ii) there exists

allegations of fraud or otherwise questionable activities with respect to such CNS
Security, or (iii) the Corporation believes that the completion of an RVP/DVP
Transaction in such CNS Security can not be consummated on a timely basis. If the
Corporation makes such a determination, then it shall have no further obligations with
respect to completing such RVP/DVP Transactions, and shall notify the RVP/DVP
Customer (or its depository agent or its depository agent’s depository) and the trustee or
receiver of the Member (if any) of such determination.

(e) The Corporation will apply the same procedures to open positions arising
from security Balance Orders 1 with respect to which there are RVP/DVP Transactions,
to the extent to do so is practicable.

(f) All notices to RVP/DVP Customers (or the RVP/DVP Customer’s

depository agent or its depository agent’s depository) shall include language to the
effect that the RVP/DVP Customer, by completing the RVP/DVP Transaction, shall be
conclusively presumed to have waived any claim with respect to such completed
RVP/DVP Transaction, including, but not limited to, any net equity claim, against (i) the
Member, (ii) the Member’s appointed trustee or receiver (or any successor trustee or
receiver), if any, or (iii) the Securities Investor Protection Corporation (SIPC), if the
Member is subject to a SIPC liquidation order.

(g) The Net Close Out Positions shall be closed out by the Corporation as
provided in Section 6.

SEC. 4. (a) (i) After the Corporation has ceased to act for a Member generally,
the Corporation may accept from him envelopes to be delivered to other
Members (whether such deliveries are pursuant to security balance orders
issued by the Corporation or are otherwise provided for in these Rules) or it may
decline to accept any such deliveries, in which case such Member shall make
such deliveries and obtain payment therefor otherwise than through the
Corporation.

(ii) After the Corporation has ceased to act for a Member generally, it
shall decline to accept from other Members envelopes or orders to be delivered
to such Member, in which case such other Members shall make such deliveries
to such Member and obtain payment therefor otherwise than through the
Corporation; provided, however, that the Corporation may accept such envelopes
in order to complete open RVP/DVP Transactions pursuant to paragraph (e) of
Section 3.

1 The definitions contained in subsection (c)(ii) shall be deemed modified as follows when used in
connection with Balance Orders: the term “CNS Position” shall refer to the Member’s net Balance
Order position, the term “Long Position” shall refer to such Member’s net Balance Order receive
obligations and the term “Short Position” shall refer to such Member’s net Balance Order deliver
obligations.

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SEC. 5 After the Corporation has ceased to act for a Member generally, the
Corporation may, in respect of the CNS System, take any of the following actions:

(i) accept from such Member deliveries through the facilities of a Qualified
Securities Depository;

(ii) continue to instruct the Qualified Securities Depository designated by such

Member to deliver CNS Securities from such Member’s account at the Qualified
Securities Depository to the Corporation’s account in respect of such Member’s
Short Positions; or

(iii) continue to instruct the Qualified Securities Depository designated by such

Member to deliver from the Corporation’s account at the Qualified Securities
Depository CNS Securities received into the Corporation’s account to the
Member in respect of his Long Positions and may in connection therewith accord
the Member priority, as provided in the Procedures, in respect of all other
Members;

provided however, in the event insolvency proceedings have commenced against such
Member, the actions contemplated by subparagraphs (ii) and (iii) may be taken to the
extent permitted by the applicable rules of the relevant insolvency regime. In the event
the Corporation declines to take the actions permitted by the foregoing subparagraphs,
the open positions of such Member shall be closed out as provided in paragraph (a) of
Section 6.

SEC. 6. (a) Promptly after the Corporation has given notice that it has ceased
to act for the Member, and in a manner consistent with the provisions of Section 3, the
Net Close Out Position with respect to each CNS Security shall be closed out (whether
it be by buying in, selling out or otherwise liquidating the position) by the Corporation;
provided however, if, in the opinion of the Corporation, the close out of a position in a
specific security would create a disorderly market in that security, then the completion of
such close-out shall be in the discretion of the Corporation.

If, in the aggregate, the closing out of CNS securities deliverable to or deliverable
by such Member results in a profit, said profit shall be credited to the account of such
Member with the Corporation. If, in the aggregate, the selling out and buying in of CNS
securities deliverable to or deliverable by such Member results in a loss, said loss shall
be debited to the account of such Member with the Corporation.

(b) Except as otherwise may be determined by the Board of Directors:

(i) securities deliverable to or by the Member for whom the

Corporation has ceased to act pursuant to security balance orders (except such
securities as shall at the time the Corporation so ceased to act have been
delivered pursuant to such orders) relating to Balance Order transactions not
excluded pursuant to paragraph (a) of Section 2 shall be sold out or bought in by
the Members named in such security balance orders without unnecessary delay
in the best available market, subject to such terms and conditions as the

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Corporation may require, and the delivery of and payment for securities
deliverable pursuant to such balance orders shall be governed by the provisions
of this paragraph (b);

(ii) Separate accountings as to each Business Day, as hereinafter

provided, shall be had with respect to the profits and losses of other Members
(computed on the basis of the Settlement Prices shown on the security balance
orders) resulting from the buying in or selling out of Balance Order Securities
deliverable to or by the Member for whom the Corporation has ceased to act
under security balance orders calling for such delivery on such day; provided,
however, in the event that the Corporation instructs a Member that the buy in or
sell out of an open Balance Order position must be for cash or guaranteed
delivery, as the case may be, then any loss relating to such a buy in or sell out
shall only be included in such accountings if such Member complied with such
instructions.

(iii) With respect to each separate accounting for the close outs of
Balance Order transactions directed by the Corporation:

(A) If a profit results from the selling out or the buying in of

Balance Order Securities deliverable to or deliverable by the
Member for whom the Corporation has ceased to act under a
security balance order, the Member realizing such profit shall at
once send a statement of the transaction to the Corporation and
shall pay over such profit to it. Such profit shall be applied by the
Corporation to the payment of losses incurred by such Member or
by other Members in selling out or buying in Balance Order
Securities deliverable to or deliverable by the Member, for whom
the Corporation has ceased to act, under other security balance
orders calling for delivery on the same day.

(B) If a loss results from the selling out or buying in of Balance

Order Securities deliverable by the Member for whom the
Corporation has ceased to act, under a security balance order the
Member sustaining such loss shall at once send a statement of the
transaction to the Corporation, which shall pay him the amount of
the loss in the manner and to the extent hereinafter provided.

(C) (i) If, in the aggregate, the selling out and buying in of
Balance Order Securities deliverable to or deliverable by the
Member for whom the Corporation has ceased to act under
security balance orders calling for delivery on the same day
results in a profit, said profit shall be credited to the account
with the Corporation of the Member for whom the
Corporation has ceased to act.

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(ii) If, in the aggregate, the selling out and buying in of

Balance Order Securities deliverable to or deliverable by the
Member for whom the Corporation has ceased to act under
security balance orders calling for delivery on the same day
results in a loss, the Corporation shall pay the same to the
Members sustaining such losses, and debit the net amount
to the account with the Corporation of the Member for whom
the Corporation has ceased to act.

SEC 7. After the Corporation has ceased to act for a Member, the Corporation
shall exclude any OW Obligations of that Member from further processing in the OW
service.

SEC. 8. (a) After the Corporation has ceased to act for a participant either in
respect to a particular transaction or transactions generally, the Corporation shall
nevertheless have the same rights and remedies in respect to any debit balance due
from such participant or any liability incurred on his behalf as though it had not ceased
to act for him.

(b) As security for any and all liabilities now existing, or hereafter arising, of a
Member or Mutual Fund/Insurance Services Member to the Corporation, the
Corporation shall maintain a lien on all property placed by such participant in its
possession, including but not limited to, securities and cash in the process of clearance
or on deposit with, or pledged to, the Corporation in satisfaction and/or in excess of
such participant’s Clearing Fund deposit pursuant to Rule 4, Section 1, and Rule 12,
Section 1; provided, however, that in no event shall the Corporation have any lien on
securities carried by a Member or Mutual Fund/Insurance Services Member for the
account of its customers where: (i) such lien would be prohibited under Rules 8c-1 and
15c2-1 of the Exchange Act, or (ii) such securities have been delivered from the
Corporation’s account at a Qualified Securities Depository pursuant to the ACATS
Settlement Accounting Operation, and received into a Receiving Member’s account at
a Qualified Securities Depository.

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 (RULE 19)

RULE 19. MISCELLANEOUS RIGHTS OF THE CORPORATION

In connection with any sale of securities by the Corporation required pursuant to

these Rules or the Procedures (including, without limitation, any sale of securities
pursuant to Rule 12 or Rule 18), the Corporation may pledge, hypothecate, transfer,
create a security interest in, or assign any or all of such securities for the purpose of
securing loans to, or other financing for, the Corporation, such loans or other financing
to be on terms and conditions deemed necessary or advisable by the Corporation
(including, without limitation, loans or other financing obtained for the purpose of
facilitating the disposition of securities and/or financing any settlement obligation of the
Corporation). The purpose of this Rule is to clarify that provisions in the Rules or
Procedures requiring the Corporation to sell securities do not prevent the Corporation
from taking other actions with respect to those securities that are consistent with the
required sale. Consequently, this Rule shall not be construed to limit the Corporation’s
right to pledge, hypothecate, transfer, create a security interest in, or assign any
securities or instruments in any other situation, whether or not there is a provision of the
Rules or Procedures specifically authorizing any such action.

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 (RULE 20)

RULE 20. INSOLVENCY

SEC. 1. A Member, Mutual Fund/Insurance Services Member, Municipal

Comparison Only Member, Insurance Carrier/Retirement Services Member, TPA
Member, TPP Member, Investment Manager/Agent Member, Fund Member, Data
Services Only Member or AIP Member (each hereinafter referred to as a “participant”
for purposes of this Rule 20) who fails to perform his contracts or obligations or
determines that he is unable to do so or is insolvent shall immediately notify the
Corporation pursuant to Section 4 of Rule 45.

SEC. 2. A participant shall be treated by the Corporation in all respects as

insolvent:

(a) upon receipt of oral or written notice, pursuant to Section 1 of this

Rule, or

(b) if the participant shall be a member of Securities Investor Protection

Corporation, in the event that a court finds that the participant meets any one of
the conditions set forth in clauses (i), (ii), (iii), (iv) or (v) of Section 5(b)(1)(A) of
the Securities Investor Protection Act of 1970, or

(c) in the event that the participant is determined by the Corporation to

be insolvent or in the event of the entry of a decree or order by a court having
jurisdiction in the premises adjudging the participant bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the participant under the Federal
Bankruptcy Code or any other applicable Federal or State law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the
participant or of any substantial part of his property, or ordering the winding up or
liquidation of his affairs or the institution by the participant of proceedings to be
adjudicated a bankrupt or insolvent or the consent by him to the institution of
bankruptcy or insolvency proceedings against him, or the filing by him of a
petition or answer or consent seeking reorganization or relief under the Federal
Bankruptcy Code or any other applicable Federal or State law, or the consent by
him to the filing of any such petition, or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
participant or of any substantial part of his property, or the making by him of an
assignment for the benefit of creditors, or the admission by him in writing of his
inability to pay his debts generally as they become due, or the taking of corporate
action by the participant in furtherance of any such action.

SEC. 3. The Corporation shall notify participants pursuant to the provisions of

Section 4 of Rule 45, of actions taken by the Corporation pursuant to Rule 46.

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RULE 21. HONEST BROKER

Any Member who activates The Depository Trust Company’s “Honest Broker”
procedures authorizes the Corporation to submit to The Depository Trust Company, on
such Member’s behalf, for each open CNS short position, such data as is necessary to
identify the Corporation as The Depository Trust Company participant account to which
a redelivery of released pledged securities is to be made. Such authorization shall
continue for the entire time period the Member utilizes the Honest Broker procedure.
Any CNS credit for a delivery which is completed through this procedure shall not be
included with the Member’s other CNS daily credits as provided in Rule 12, but shall be
payable by the Corporation to The Depository Trust Company on the day such delivery
is completed.

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RULE 22. SUSPENSION OF RULES

The time fixed by these Rules, the Procedures or any regulations issued by the
Corporation for the doing of any act or acts may be extended or the doing of any act or
acts required by these Rules, the Procedures or any regulations issued by the
Corporation may be waived or any provision of these Rules, the Procedures or any
regulations issued by the Corporation may be suspended by the Board of Directors or
by the Chairman of the Board, the President, the General Counsel or such other officers
of the Corporation having a rank of Managing Director or higher whenever, in its or his
judgment, such extension, waiver or suspension is necessary or expedient.

A written report of any such extension, waiver or suspension (other than an

extension of time of less than eight hours), stating the pertinent facts, the identity of the
person or persons who authorized such extension, waiver or suspension and the reason
such extension, waiver or suspension was deemed necessary or expedient, shall be
promptly made and filed with the Corporation’s records and shall be available for
inspection by any Member, Mutual Fund/Insurance Services Member, Municipal
Comparison Only Member, Insurance Carrier/Retirement Services Member, TPA
Member, TPP Member, Investment Manager/Agent Member, Fund Member, Data
Services Only Member or AIP Member during regular business hours on Business
Days. Any such extension or waiver may continue in effect after the event or events
giving rise thereto but shall not continue in effect for more than 60 calendar days after
the date thereof unless it shall be approved the Board of Directors within such period of
60 calendar days.

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RULE 23. ACTION BY THE CORPORATION

Where action by the Board of Directors is required by these Rules, the

Corporation may act, to the full extent permitted by law, by the Chairman of the Board,
the President, or any Managing Director or Executive Director, or by such other Person
or Persons, whether or not employed by the Corporation, as may be designated by the
Board of Directors from time to time.

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 (RULE 24)

RULE 24. CHARGES FOR SERVICES RENDERED

SEC. 1. Each Member, Sponsored Member, Mutual Fund/Insurance Services

Member, Municipal Comparison Only Member, Insurance Carrier/Retirement Services
Member, TPA Member, TPP Member, Investment Manager/Agent Member, Fund
Member, Data Services Only Member and AIP Member (each hereinafter referred to as
a “participant” for purposes of this Rule 24) shall pay such fees and charges to the
Corporation as shall be specified by the Corporation or in the Procedures and approved
by the Board of Directors on a reasonable and non-discriminatory basis.

Members shall be responsible for all fees pertaining to their respective

Sponsoring Member activity or Agent Clearing Member activity, if applicable, as set
forth in the Corporation’s Fee Structure.

SEC. 2. A participant may be charged for any unusual expenses caused directly
or indirectly by such participant including, but without limitation, the cost of producing
records pursuant to a court order or other legal process in any litigation or other legal
proceeding to which such participant is a party or in which such records relating to such
participant are so required to be produced, whether such production is required at the
instance of such, or of any other party other than the Corporation.

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RULE 25. CROSS-GUARANTY OBLIGATION

The Corporation may, from time to time, enter into one or more Clearing Agency
Cross-Guaranty Agreements. In addition to a Member’s or Mutual Fund/Insurance
Services Member’s other obligations to the Corporation under these Rules, each
Member and Mutual Fund/Insurance Services Member is obligated to the Corporation
for an amount equal to any guaranty payment the Corporation is required to make to a
Cross-Guaranty Party pursuant to the terms of any Clearing Agency Cross-Guaranty
Agreement.

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 (RULE 26)

RULE 26. BILLS RENDERED

The Corporation will render bills to Members, Sponsored Members, Mutual

Fund/Insurance Services Members, Insurance Carrier/Retirement Services Members,
TPA Members, TPP Members, Investment Manager/Agent Members, Fund Members
and AIP Members for charges on account of the business of any month and will charge
their respective accounts with the amounts thereof on or before such date as
determined by the Corporation from time to time. Members shall receive bills for their
respective aggregate Sponsoring Member activity and Agent Clearing Member activity,
if applicable, as set forth in the Fee Structure.

The Corporation will render bills to Data Services Only Members monthly for
charges, if any, in connection with the use of the Corporation’s services, and such bills
shall be paid immediately.

The Corporation will render bills to Municipal Comparison Only Members monthly
for charges in connection with the comparison of municipal securities transactions and
such bills shall be paid immediately.

Please refer to Addendum A (Fee Structure) for fee descriptions and charges.

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 (RULE 27)

RULE 27. ADMISSION TO PREMISES OF THE CORPORATION –

POWERS OF ATTORNEY, ETC.

No Person will be permitted to enter the premises of the Corporation as the

representative of any Member, Mutual Fund/Insurance Services Member, Municipal
Comparison Only Member, Insurance Carrier/Retirement Services Member, TPA
Member, TPP Member, Investment Manager/Agent Member, Fund Member, Data
Services Only Member or AIP Member (each hereinafter referred to as a “participant”
for purposes of this Rule 27) unless he has first been approved by the Corporation and
has been issued such credentials as the Corporation may from time to time prescribe
and such credentials have not been canceled or revoked. Such credentials must be
shown on demand, and to gain entry to the Corporation’s premises, must be
prominently displayed while on said premises, and may limit the portions of the
premises to which access is permitted thereunder. Any credentials issued pursuant to
this Rule may be revoked at any time by the Corporation in its discretion, and prompt
notice of such revocation shall be given to the employer of the person whose
credentials have been so revoked.

Every Person to whom, as a representative of a Member credentials have been

or may hereafter be issued by the Corporation authorizing such person to have access,
during the hours when securities or envelopes are to be received and delivered, to the
portion of the Corporation’s premises in which such activity occurs, shall be deemed to
have been authorized by such Member to receive and deliver securities or envelopes on
behalf of such Member.

Any participant or AIP Member shall, if any person in its employ to whom any
credentials have been issued pursuant to this Rule or to whom a power of attorney or
other authorization has been given to act for it in connection with the work of the
Corporation shall for any reason cease to be so employed, give to the Corporation
immediate notice in writing of such termination of employment and if any such power of
attorney or other authorization is otherwise revoked or canceled, shall likewise give to
the Corporation immediate notice in writing of such revocation or cancellation. All
credentials issued pursuant to this Rule shall be immediately surrendered to the
Corporation upon their revocation by the Corporation or by the employer or upon the
termination of the employment of the holder thereof.

Unless revoked by the Corporation, all credentials, authorizations, and powers of

attorney issued pursuant to this Rule or in connection with the work of the Corporation
shall remain in full force and effect until the Corporation shall have received written
notice of the revocation thereof or of the termination of the holder’s employment.

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RULE 28. FORMS

In connection with any transactions or matters handled through, with or by the

Corporation under or pursuant to the Rules, such forms of tickets, lists, notices and
other documents shall be used as the Corporation may from time to time prescribe, and
additions to, changes in and elimination of any such forms may be made by the
Corporation at any time in its discretion. In addition, any information required to be
delivered to the Corporation by use of any such forms may be delivered by the use of
any media as shall be prescribed in the Procedures or by the Corporation from time to
time.

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 (RULE 29)

RULE 29. QUALIFIED SECURITIES DEPOSITORIES

Each Member shall be a participant in a Qualified Securities Depository. If any

such Member shall not at any time be a participant in a Qualified Securities Depository,
the Corporation may cease to act for such Member pursuant to Rule 46. Unless
permitted to take summary action pursuant to Rule 46 the Corporation shall promptly
hold a hearing prior to ceasing to act. During the interim between the time that such
Member is no longer a participant in a Qualified Securities Depository and the time that
the Corporation ceases to act for such Member, such Member shall be required to effect
securities settlement by physical delivery.

141
 (RULE 30)

RULE 30. (RULE NUMBER RESERVED FOR FUTURE USE)

142
 (RULE 31)

RULE 31. (RULE NUMBER RESERVED FOR FUTURE USE)

143
 (RULE 32)

RULE 32. SIGNATURES

With respect to any and all agreements and other documents entered into
between a Member, Sponsored Member and Limited Member and the Corporation, or
otherwise delivered to or by the Corporation pursuant to these Rules and Procedures,
the use of an electronic signature shall have the same validity and effect as the use of a
signature affixed by hand.

144
 (RULE 33)

RULE 33. PROCEDURES

The Board of Directors shall, pursuant to these Rules, prescribe from time to time
Procedures and other regulations in respect of the business of the Corporation. The
Board of Directors may, by resolution, delegate to the Chairman of the Board, the
President, any Senior Managing Director, Managing Director or any other officer of the
Corporation the power to prescribe Procedures and regulations. Each Member and
Limited Member (each hereinafter referred to as a “participant” for purposes of this Rule
33) will be bound by such Procedures and regulations and any amendment thereto in
the same manner as it is bound by the provisions of these Rules.

145
 (RULE 34)

RULE 34. INSURANCE

The Corporation shall use its best efforts to maintain, or arrange for the
maintenance of, such insurance, including fidelity bonds, in such amounts and having
such coverage regarding the business of the Corporation as the Board of Directors shall
deem appropriate. The insurance policies or contracts pursuant to which such
insurance is provided shall be open to the inspection of the Members, Mutual
Fund/Insurance Services Members, Municipal Comparison Only Members, Insurance
Carrier/Retirement Services Members, TPA Members, TPP Members, Investment
Manager/Agent Members, Fund Members, Data Services Only Members and AIP
Members (each hereinafter referred to as a “participant” for purposes of this Rule 34) at
the offices of the Corporation during regular business hours on Business Days. If the
Corporation shall materially reduce the amount or coverage of any such insurance or
the persons providing such insurance shall notify the Corporation of a material reduction
in the amount of coverage thereof, the Corporation shall promptly notify each participant
and the SEC thereof stating the effective date of such reduction.

146
 (RULE 35)

RULE 35. FINANCIAL REPORTS

As soon as practicable after the end of each calendar year, the Corporation shall
make available to each Member, Mutual Fund/Insurance Services Member, Municipal
Comparison Only Member, Insurance Carrier/Retirement Services Member, TPA
Member, TPP Member, Investment Manager/Agent Member, Fund Member, Data
Services Only Member and AIP Member (each hereinafter referred to as a “participant”
for purposes of this Rule 35) audited U.S. GAAP financial statements of the
Corporation, including the independent auditors’ report on the financial statements for
such calendar year. The Corporation shall undertake to make available such financial
statements and report to participants within 60 days following the last day of the
Corporation’s fiscal year.

The Corporation shall also undertake to make available to participants unaudited

U.S. GAAP financial statements of the Corporation within 30 days following the last day
of the Corporation’s fiscal quarter for each of the first three fiscal quarters of each year.

147
 (RULE 36)

RULE 36. RULE CHANGES

The Corporation shall promptly notify all Members, Limited Members and
Registered Clearing Agencies of any proposal it has made to change, revise, add or
repeal any Rule or Procedure, and of the text or a brief description of the proposed Rule
or Procedure and its purpose and effect, by posting such proposal on the NSCC
Website. Members, Limited Members and Registered Clearing Agencies may submit to
the Corporation for its consideration their comments with respect to any such proposal,
and such comments shall be filed with the Corporation’s records and copies thereof
delivered to the SEC.

148
 (RULE 37)

RULE 37. HEARING PROCEDURES

SEC. 1. A Member, a Mutual Fund/Insurance Services Member, Settling Bank

Only Member, Municipal Comparison Only Member, Insurance Carrier/Retirement
Services Member, TPA Member, TPP Member, Investment Manager/Agent Member,
Fund Member, a Data Services Only Member, AIP Member or applicant (each
hereinafter in this Rule referred to as the “Interested Person”) may, when permitted by
these Rules, request a hearing by filing with the Secretary of the Corporation within 5
Business Days from the date on which the Corporation informed it of an action or
proposed action of the Corporation with respect to the Interested Person, or 2 Business
Days in the case of summary action taken against the Interested Person pursuant to
Rule 46 (or such other applicable time period specified by these Rules), a written
request for a hearing setting forth (i) the action or proposed action of the Corporation
with respect to which the hearing is requested and (ii) the name of the representative of
the Interested Person who may be contacted with respect to the hearing. Within 7
Business Days after the Interested Person files such written request with the
Corporation, or 3 Business Days in the case of summary action taken against the
Interested Person pursuant to Rule 46, the Interested Person shall submit to the
Corporation a clear and concise written statement setting forth with particularity the
action or proposed action of the Corporation with respect to which the hearing is
requested, the basis for objection to such action, whether the Interested Person intends
to attend the hearing and whether the Interested Person chooses to be represented by
counsel at the hearing. If the written statement contests the Corporation’s
determination that the Interested Person has violated a Rule or procedure, the
statement must specifically admit or deny each violation alleged and detail the reasons
why the Rules or procedures alleged to have been violated are being contested. Any
alleged violation not specifically denied shall constitute an admission to that violation.
The Corporation may deny the statement if it fails to set forth a prima facie basis for
contesting the violation. The failure of the Interested Person to file the written request
referred to above within the time period required by these Rules and/or the failure of the
Interested Person to submit the written statement within the time period specified above
will be deemed to be an election to waive the right to a hearing. The Corporation shall
notify the Interested Person in writing of the date, place and hour of the hearing at least
5 Business Days prior to the hearing (unless the parties agree to waive the 5 Business
Day requirement).

SEC. 2. If the Corporation has assessed a fine and an Interested Person desires
to dispute the fine and complies with the requirements described above regarding filing
a written request for a hearing and a written statement, the Corporation shall
automatically conduct a review of the disputed fine. The Corporation may examine the
written statement submitted by the Interested Person and/or arrange a meeting with the
Interested Person to discuss the disputed fine. If the Corporation determines to waive
the fine, it shall inform the Board of its determination and its reasons thereof. The
Board may, in its discretion, determine to reinstate any fine waived by the Corporation.
If the Corporation determines not to waive the fine as a result of the review process, the
Interested Person shall be entitled to a hearing before a panel pursuant to Section 3 or

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 (RULE 37)

Section 4 of this Rule 37. The Corporation shall advise the Interested Person of the
result of the review process.

SEC. 3. Minor Rule Violations.

A hearing requested in connection with a violation of the Rules of the Corporation

for which a fine may be assessed against the Interested Person in an amount not to
exceed $5,000 (a “Minor Rule Violation”), shall be held before a panel of three officers
of the Corporation (a “Minor Violation Panel”). The members of the Minor Violation
Panel shall select one of their numbers to be the chairman, and the chairman shall be
the person in charge of the conduct of the hearing. At the hearing, an officer of the
Corporation shall present the case against the Interested Person. The Interested
Person shall have an opportunity to be heard and may be represented by counsel. A
record shall be kept of the hearing and the costs associated with the hearing may, in the
discretion of the Corporation, be charged in whole or in part to the Interested Person if
the decision is adverse to the Interested Person. The Minor Violation Panel shall
provide the Interested Person with a written statement of its decision no later than 10
Business Days after the conclusion of the hearing. If the decision of the Minor Violation
Panel is adverse to the Interested Person, the Interested Person may request a further
hearing under Section 4 of this Rule by filing a written request with the Secretary of the
Corporation within 5 Business Days of receipt of such written statement. The
Corporation shall notify the Interested Person of the date, time and place of the hearing
at least 5 Business Days prior to the hearing. The failure of the Interested Person to
submit the written request within the required time period shall be deemed an election to
waive the right to any further hearing.

A Minor Rule Violation as defined in this Rule shall be deemed a minor rule
violation within the meaning of Rule 19d-1(c)(2) under the Exchange Act, and this Rule
shall be deemed a “plan” within the meaning thereof. The action imposed by the
Corporation shall not be considered “final” for purposes of paragraph (c) (1) of Rule
19d-1 of the Exchange Act in any instance in which the fine is in an amount that does
not exceed $2,500, imposed against an Interested Person that is not a Member and
with respect to which the Interested Person does not seek an adjudication pursuant to
Section 4 of this Rule 37.

SEC. 4. A hearing on any matter not covered by Section 2 of this rule, or a

further hearing requested pursuant to Section 2 shall be before a panel (hereinafter the
“Panel”) of three individuals drawn from members of the Board of Directors or their
designees. The members of the Panel shall be selected by the Chairman of the Board.

Notwithstanding the above, the Panel shall not include any individual
representing the Interested Person against which the proposed action is to be taken,
nor any person who had responsibility for the action or proposed action of the
Corporation as to which the hearing relates.

At the hearing, the Interested Person shall be afforded an opportunity to be heard

and may be represented by counsel if the Interested Person has so elected pursuant to

150
 (RULE 37)

Section 1 of this Rule. A record shall be kept of the hearing, and the cost associated
with the hearing may, in the discretion of the Panel, be charged in whole or in part to the
Interested Person in the event that the decision at the hearing is adverse to the
Interested Person.

SEC 5. The Panel shall advise the Interested Person of its decision within 10
Business Days after the conclusion of the hearing. If the decision of the Panel shall
have been to deny the Interested Person’s application to become a Member, a Mutual
Fund/Insurance Services Member, a Settling Bank Only Member, a Municipal
Comparison Only Member, an Insurance Carrier/Retirement Services Member, a TPA
Member, a TPP Member, an Investment Manager/Agent Member, a Fund Member, a
Data Services Only Member or an AIP Member or to prohibit or limit the Interested
Person’s access to the services offered by the Corporation in accordance with Rule 46,
a notice of decision setting forth the specific grounds upon which the decision is based
shall be furnished to the Interested Person. If the decision of the Panel shall have been
to impose a disciplinary sanction on the Interested Person in accordance with Rule 48
or to affirm any summary action previously taken against the Interested Person
pursuant to Section 3 of Rule 46, a notice of decision setting forth (i) any act or practice
in which the Interested Person has been found to have engaged, or which the
Interested Person has been found to have omitted, (ii) the specific provision(s) of the
Rules or Procedures of the Corporation or of the applicable agreements with the
Corporation which any such act or practice or omission to act has been deemed to
violate, and (iii) the sanction imposed and the reasons therefor shall be furnished to the
Interested Person. A copy of the Panel’s notice of decision shall also be furnished to
the Chairman of the Board.

Decisions of the Panel are final, but the Board of Directors may in its discretion
modify any sanction or reverse any decision of the Panel that is adverse to the
Interested Person.

SEC. 6. The reversal or modification at the hearing or subsequently by the Board

of Directors of any action previously taken against the Interested Person pursuant to
these Rules shall not invalidate the acts of the Corporation or its officers or directors
taken prior to such reversal or modification.

SEC. 7. Any action or proposed action of the Corporation as to which an

Interested Person has the right to request a hearing pursuant to Rule 37 shall be
deemed final (i) when the Interested Person stipulates to the taking of such action by
the Corporation, at which time the Corporation shall furnish the Interested Person with a
statement containing the information referred to in Section 4 of this Rule, or (ii) upon the
expiration of the applicable time period provided in these Rules for the filing of a written
request for a hearing or a written statement pursuant to Section 1 of this Rule, at which
time any such proposed action of the Corporation shall become effective and at which
time the Corporation shall furnish the Interested Person with a statement containing the
information referred to in Section 4 of this Rule, or (iii) if a hearing has been held
pursuant to Section 4 of this Rule 37, when the Corporation gives notice to the
Interested Person of the Panel’s decision.

151
 (RULE 37)

SEC. 8. The Corporation may at any time establish procedures for a hearing not
otherwise provided for by these Rules with respect to any action or proposed action of
the Corporation.

152
 (RULE 38)

RULE 38. GOVERNING LAW AND CAPTIONS

SEC. 1 Governing Law

These Rules and Procedures and all agreements and other documents entered
into between a Member, Sponsored Member or Limited Member and the Corporation, or
otherwise delivered to or by the Corporation pursuant to these Rules and Procedures,
and the rights and obligations thereunder, shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts executed
and performed therein, unless otherwise expressly provided.

SEC. 2 Captions

Captions to any Rules are for information and guidance only, are not part of any
Rule and are to be given no consideration in applying or construing any Rules.

153
 (RULE 39)

RULE 39. RELIANCE ON INSTRUCTIONS

The Corporation may accept or rely upon any instruction given to the Corporation
by a Member, Sponsored Member, Mutual Fund/Insurance Services Member, Municipal
Comparison Only Member, Fund Member, Insurance Carrier/Retirement Services
Member, TPA Member, TPP Member, Data Services Only Member, AIP Member or
Special Representative, Index Receipt Agent or Approved SFT Submitter (each
hereinafter referred to as a “participant” for purposes of this Rule 39) in any form
acceptable to the Corporation and in accordance with the Procedures, which reasonably
is understood by the Corporation to have been delivered to the Corporation by such
participant. In the case of instructions given by a Special Representative, Index Receipt
Agent or Approved SFT Submitter, Investment Manager/Agent Member, TPP Member,
or TPA Member, the Corporation shall be entitled to act pursuant to any such instruction
as though such instruction had been received from the Member or Sponsored Member
for which the Special Representative, Index Receipt Agent or Approved SFT Submitter
or TPP Member, TPA Member or Investment Manager/Agent Member is acting.

Any participant delivering instructions as provided above, or on whose behalf a

Special Representative, Approved SFT Submitter, TPA Member, TPP Member, or
Investment Manager/Agent Member, shall deliver instructions as provided above, shall
indemnify the Corporation, and any of its employees, officers, directors, shareholders,
agents, and participants who may sustain any loss, liability or expense as a result of (a)
any act done in reliance upon the authenticity of any instruction received by the
Corporation, (b) the inaccuracy of the information contained therein or (c) effecting
transactions in reliance upon such information or instruction against any such loss,
liability or expense so long as such transactions are effected in accordance with such
information and instructions even though they are inaccurate or not authentic and so
long as the person asserting a right to indemnification shall not have knowledge of such
inaccuracy or lack of authenticity at the time of the event or events giving rise to such
loss, liability or expense.

Notwithstanding the foregoing, the Corporation will not act upon any instruction
purporting to have been given by a participant or from a Special Representative,
Approved SFT Submitter, TPA Member, TPP Member, or Investment Manager/Agent
Member, commencing one Business Day after the Corporation receives written notice
from the participant that the Corporation shall not accept such instructions until such
time as the participant shall withdraw such notice.

154
 (RULE 40)

RULE 40. WIND-DOWN OF A MEMBER, FUND MEMBER OR INSURANCE

CARRIER/RETIREMENT SERVICES MEMBER

When a Member, Mutual Fund/Insurance Services Member, Fund Member,

Insurance Carrier/Retirement Services Member or AIP Member notifies the Corporation
that it intends to wind down its activities, the Corporation may, in its sole discretion, in
order to protect itself and its participants, determine that such Member, Mutual
Fund/Insurance Services Member, Fund Member, Insurance Carrier/Retirement
Services Member or AIP Member is a “Wind-Down Member”. In that event and, without
limiting any other rights of the Corporation under these Rules and Procedures, the
Corporation may impose conditions on, or take actions with respect to, the Wind-Down
Member as provided below.

As soon as practicable after the Corporation determines that a Member, Mutual

Fund/Insurance Services Member, Fund Member, Insurance Carrier/Retirement
Services Member or AIP Member is a Wind-Down Member, the Corporation shall notify
the Wind-Down Member, all other participants and the SEC of such determination.

The Corporation may, in its discretion, impose conditions on, or take actions with
respect to, the Wind-Down Member as appropriate to mitigate risk the Corporation
perceives may be presented by the Wind-Down Member, including but not limited to,
the following:

(i) Permitting the Wind-Down Member to submit to the Corporation only

transactions that serve to support the wind-down;

(ii) Permitting the Wind-Down Member to continue use of one or more of the
Corporation’s services, notwithstanding that it may not meet some or all of
the financial or operational requirements for continuance as a Member or
Limited Member, as applicable;

(iii) Restricting or modifying the Wind-Down Member’s use of any or all of the
Corporation’s services (whether generally, or with respect to certain
transactions);

(iv) Requiring additional assurances of the financial responsibility or

operational capability of the Wind-Down Member through, for example,
submission of a guaranty of the Wind-Down Member’s obligations to the
Corporation by an entity acceptable to the Corporation and/or additional
reporting by the Wind-Down Member;

(v) Agreeing to complete one or more trades to which the Wind-Down

Member is a party prior to the time the Corporation’s guaranty otherwise
would become effective pursuant to these Rules and Procedures;

(vi) Requiring the Wind-Down Member to post increased Clearing Fund

deposits and/or to post its Required Fund Deposit all in cash or in

155
 (RULE 40)

proportions of cash, qualifying bonds and Eligible Letters of Credit

different from those permitted under Rule 4;

(vii) Prohibiting the Wind-Down Member from withdrawing Clearing Fund on

deposit in excess of its Required Fund Deposit;

(viii) Calculating the Required Fund Deposit of the Wind-Down Member in a

manner different from the applicable formulae provided in the Procedures,
in order to more appropriately reflect the risk presented by the Wind-Down
Member to the Corporation, such as for example, not applying certain
components of such calculation; or

(ix) Liquidating by buying-in or selling-out, as applicable, any open positions of

the Wind-Down Member, for the benefit of such Wind-Down Member with
any profit or loss resulting therefrom being debited or credited, as
applicable, to the settlement account of the Wind-Down Member.

If the Corporation takes, or mandates, any action pursuant to this Rule, the
Corporation shall, as soon as practicable thereafter, notify the SEC and such other
participants as it deems proper due to the nature of such action.

Notwithstanding the foregoing, the Corporation shall not be restricted from

exercising any of its rights in these Rules or in any agreements between itself and the
Wind-Down Member at any time, including the Corporation’s right at any time to cease
to act for the Wind-Down Member pursuant to Rule 46.

156
 (RULE 41)

RULE 41. CORPORATION DEFAULT

SEC. 1. If a “Corporation Default” occurs pursuant to Section 2 below, all CNS

Transactions which have been guaranteed but have not yet settled, and all obligations
and related rights arising thereunder which have been assigned to and assumed by the
Corporation pursuant to these Rules, shall be immediately terminated, and the Board
shall determine a single net amount owed by or to each Member with respect to such
CNS Transactions by applying the valuation and netting procedures set forth in Section
3 of this Rule 41 below. Notwithstanding the foregoing, (a) the occurrence of a
Corporation Default shall not affect the rights and obligations of Members party to
Balance Orders that they would otherwise have on account of such transactions under
these Rules and applicable law; and (b) the treatment of any pending non-guaranteed
transactions shall be determined in accordance with the provisions of Rule 42 (Wind-
down of the Corporation).

SEC. 2. Certain Definitions. For purposes of this Rule 41:

(a) Notwithstanding anything to the contrary in the Rules, the following events
shall constitute a “Corporation Default”:

(i) Failure by the Corporation to make, when due, any undisputed

payment or delivery to a Member required to be made by it under
and in accordance with these Rules and such failure is not
remedied within 7 days after notice of such failure is given to the
Corporation by the affected Member; provided that this clause (i)
shall not apply to (A) obligations of the Corporation to Wind-Down
Members, or Members for whom the Corporation has otherwise
ceased to act pursuant to Rule 46 (including an insolvent Member),
(B) any payment or delivery which the Corporation satisfies by
alternate means as provided in these Rules, or (C) any obligation of
the Corporation that is not a payment or delivery obligation of the
Corporation to a Member under these Rules; or

(ii) The Corporation (A) is dissolved (other than pursuant to a

consolidation, amalgamation or merger); (B) institutes a proceeding
seeking a judgment of insolvency or bankruptcy or any other relief
under any bankruptcy or insolvency law or other similar law
affecting creditors’ rights, or presents a petition for its winding-up or
liquidation or makes a general assignment for the benefit of
creditors; (C) has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting creditors’
rights, or a petition is presented for its winding-up or liquidation and,
in each case, such proceeding or petition results in a judgment of
insolvency or bankruptcy or the entry of an order for relief or the
making of an order for its winding-up or liquidation; or (D) seeks or
becomes subject to the appointment of a receiver, trustee, or other

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 (RULE 41)

similar official pursuant to the federal securities laws or Title II of

the Dodd-Frank Wall Street Reform and Consumer Protection Act
for it or for all or substantially all its assets.

(b) the “CNS Position” of a Member in any CNS Security shall be equal to the
net of the Member’s unsettled Long Positions and Short Positions in such security as of
the close of Business on the Default Date (and, for the avoidance of doubt, this shall
include both CNS positions that have not yet passed Settlement Date and fail positions);

(c) “Default Date” means the date on which the event that constitutes the
Corporation Default occurs; and

(d) “Net Contract Value” means, for each Member’s CNS Position in a given
CNS Security, the net of the Member’s (x) contract price for such net position that, as of
the Default Date, has not yet passed Settlement Date, and (y) the Current Market Price
in the CNS System on the Default Date for its fail positions, in each case as shown on
the applicable reports issued by the Corporation to the Member in accordance with the
Procedures applicable to the CNS System.

SEC. 3 Valuation and Calculation of Claims.

(a) As promptly as practicable, but in any event within 45 days after the
Default Date, the Corporation shall fix a dollar amount to be paid or received by each
Member to or from the Corporation in connection with the termination of a CNS
Transaction, after taking into account all of the applicable following netting and
offsetting:

(i) The Corporation shall value all CNS Positions by using the Current
Market Price, as determined for the CNS System, as of the close of
business on the next Business Day immediately following the
Default Date, so that each Member shall have the same per share
price for a given security in which it had an open CNS Position (the
resulting value referred to as the “CNS Market Value”);

(ii) For each Member, the Net Contract Value of its terminated CNS
Positions shall be determined as provided in subsection 2(d) above;
which amount shall be positive or negative, as applicable;

(iii) To determine each Member’s CNS Close-out Value, (x) the Net
Contract Value for each CUSIP shall be subtracted from the CNS
Market Value for such CUSIP, and (y) the resulting difference for
all CUSIPS in which the Member had a CNS Position shall be
summed, and the resulting amount shall be positive or negative, as
applicable.

(iv) The CNS Close-out Value shall be further netted and offset against
any other amounts, or the value of any property, as valued by the
Corporation, that may be due to, or owing from, the Member under

158
 (RULE 41)

these Rules, taking into account the application of any provisions of

Rule 4 relating to loss allocation, including in the event that the
Member is in default of its obligations to deliver funds to the
Corporation, or the Corporation has prior to the Default Date
Ceased to Act for the Member.

(b) The Board shall notify each Member of the CNS Close-out Value, taking
into account the netting and offsetting provided for in subsections 3(a)(i) to (iv) above.
Members who have been notified that they owe an amount to the Corporation shall pay
that amount on or prior to the date specified by the Board, subject to any applicable
setoff rights. Members who have a net claim against the Corporation shall be entitled to
payment thereof along with other Members’ and any other creditors’ claims pursuant to
the underlying contracts with respect thereto, these Rules and applicable law. For the
avoidance of doubt, nothing herein shall limit the rights of the Corporation upon a
Member default (including following a Corporation Default), including any rights under
any Clearing Agency Cross-Guaranty Agreement or otherwise.

SEC. 4. Interpretation in Relation to the Federal Deposit Insurance Corporation

Act of 1991:

The Corporation and the Members intend that these Rules be interpreted in
relation to certain terms (identified below) that are defined in the Federal Deposit
Insurance Corporation Act of 1991 (“FDICIA”), as amended, as follows:

The Corporation is a “clearing organization”;

Any obligation of a Member or the Corporation to make any payments to the

other is a “covered clearing obligation” and a “covered contractual payment obligation”;

An entitlement of a Member or the Corporation to receive a payment from the

other is a “covered contractual payment entitlement”;

The Corporation and each Member is a “member” of the “clearing organization”;

The amount by which the covered contractual payment entitlements of a Member

or the Corporation exceed the covered contractual payment obligations of such Member
or the Corporation after netting pursuant to Rule 18 or this Rule 41 is its “net
entitlement”;

The amount by which the covered contractual payment obligations of a Member

or the Corporation exceed the covered contractual payment entitlements of such
Member or the Corporation after netting under a netting pursuant to Rule 18 or this Rule
41 is its “net obligation”; and

These Rules, together with all other agreements between the Corporation and a
Clearing Member, are a “netting contract”, the margin, Clearing Fund and other
provisions of these Rules granting an interest in any funds or property of a member to
the Corporation constitute a “security agreement or arrangement or other credit

159
 (RULE 41)

enhancement” relating to such netting contract and the close-out process in Rule 18 or
this Rule 41 constitutes the “terminat[ion], liquidat[ion], accelerat[ion], and nett[ing]” of
obligations.

160
 (RULE 42)

RULE 42. WIND-DOWN OF THE CORPORATION

SEC. 1. Defined Terms

(a) For purposes of this Rule 42:

“Bridge Entity” has the meaning given to such term in the definition of
“Transferee” in this Section 1(a).

“Business” means the Critical Services and any Non-Critical Services of the
Corporation included in a Transfer.

“Comparability Period” means a period of time following the Transfer, to be

agreed between the Corporation and a Transferee, during which the Business
transferred from the Corporation to the Transferee shall be operated by the Transferee
in a manner comparable to the manner in which the Business was previously operated
by the Corporation, as more specifically set forth in Section 9 of this Rule 42.

“Corporation Default Rule” means Rule 41 of the Corporation.

“Critical Services” means the services of the Corporation described in the Rules
and Procedures of the Corporation that have been identified as critical services in the
Recovery and Wind-down Plan.

“Delinquent Limited Member” means a Limited Member of the Corporation that is

delinquent in the performance of any of its obligations to the Corporation (as determined
by the Corporation).

“Delinquent Member” means a Member of the Corporation that is delinquent in

the performance of any of its obligations to the Corporation (as determined by the
Corporation).

“Eligible Limited Member” means a Limited Member of the Corporation other than
a Non-Eligible Limited Member.

“Eligible Member” means a Member of the Corporation other than a Non-Eligible

Member.

“Failover Entity” has the meaning given to such term in the definition of
“Transferee” in this Section 1(a).

“Guaranteed Transaction” means a transaction in CNS Securities or Balance

Order Securities that is processed through the facilities of the Corporation and
guaranteed by the Corporation.

“Last Settlement Date” has the meaning given to such term in Section 2(c)(3) of
this Rule 42.

161
 (RULE 42)

“Last Transaction Acceptance Date” has the meaning given to such term in
Section 2(c)(2) of this Rule 42.

“Limited Member” means a Limited Member or Sponsored Member of the

Corporation (other than a Settling Bank Only Member) or a Limited Member or
Sponsored Member of the Transferee (other than a Settling Bank Only Member), as the
context requires.

“Limited Member Agreement” means the form of agreement between a Limited

Member and the Corporation or between a Limited Member and the Transferee, as the
context requires, providing, inter alia, for the Limited Member to be bound by the Rules
and Procedures of the Corporation or the Rules and Procedures of the Transferee, as
applicable to such Limited Member.

“Member” means a Member of the Corporation (other than a Settling Bank or AIP
Settling Bank) or a Member of the Transferee (other than a Settling Bank or AIP Settling
Bank), as the context requires.

“Member Agreement” means the form of agreement between a Member and the
Corporation or between a Member and the Transferee, as the context requires,
providing, inter alia, for the Member to be bound by the Rules and Procedures of the
Corporation or the Rules and Procedures of the Transferee, as applicable to such
Member.

“Non-Critical Services” means the services of the Corporation described in the

Rules and Procedures of the Corporation other than the Critical Services.

“Non-Eligible Limited Member” means a Limited Member of the Corporation that

is a Delinquent Limited Member or Withdrawing Limited Member.

“Non-Eligible Member” means a Member of the Corporation that is a Delinquent

Member or Withdrawing Member.

“Non-Guaranteed Transaction” means any transaction that is processed through

the facilities of the Corporation other than a Guaranteed Transaction.

“Recovery and Wind-down Plan” means the plan for the recovery and orderly
wind-down of the Corporation necessitated by credit losses, liquidity shortfalls, losses
from general business risk or any other losses, adopted by the Corporation pursuant to
Rule 17Ad-22(e)(3)(ii) under the Exchange Act.

“Recovery Plan” means the portion of the Recovery and Wind-down Plan
addressing recovery.

“Risk Reducing Transaction” means a Guaranteed Transaction that offsets one

or more other Guaranteed Transactions, and thereby reduces the potential exposure of
the Corporation with respect to such Guaranteed Transactions.

162
 (RULE 42)

“Rules and Procedures” means the Rules and Procedures of the Corporation or
the Rules and Procedures of the Transferee, as the context requires.

“Settling Bank” means a Settling Bank, Settling Bank Only Member or AIP
Settling Bank for Members and Limited Members of the Corporation or a Settling Bank,
Settling Bank Only Member or AIP Settling Bank for Members and Limited Members of
the Transferee, as the context requires.

“Settling Bank Agreement” means the form of agreement between a Settling

Bank and the Corporation or between a Settling Bank and the Transferee, as the
context requires, providing, inter alia, for the Settling Bank to be bound by the Rules and
Procedures of the Corporation or the Rules and Procedures of the Transferee, as
applicable to such Settling Bank.

“Third Party Entity” has the meaning given to such term in the definition of
“Transferee” in this Section 1(a).

“Transfer” means a transfer of the Business of the Corporation pursuant to the

Wind-down Plan.

“Transferee” means an entity to which the Business of the Corporation is

transferred pursuant to the Wind-down Plan, and may include (i) a failover entity
established by DTCC (a “Failover Entity”), (ii) a then-existing or newly-established third
party entity (a “Third Party Entity”) or (iii) a bridge entity formed to operate the Business
on an interim basis (a “Bridge Entity”). The Transferee shall be an entity that is legally,
financially and operationally qualified to continue to operate the Business that is to be
transferred from the Corporation to the Transferee.

“Transferee Documents” means the Rules and Procedures, Member Agreement,

Limited Member Agreement and Settling Bank Agreement of the Transferee.

“Transfer Notice” has the meaning given to such term in Section 3 of this
Rule 42.

“Transfer Time” has the meaning given to such term in Section 2(c)(1) of this
Rule 42.

“Wind-down Plan” means the portion of the Recovery and Wind-down Plan
addressing wind-down.

“Withdrawing Limited Member” means a Limited Member of the Corporation that

has given notice to the Corporation of its election to withdraw as a Limited Member but
that, at the Transfer Time, has not yet ceased to be a Limited Member (as determined
by the Corporation).

“Withdrawing Member” means a Member of the Corporation that has given notice
to the Corporation of its election to withdraw as a Member but that, at the Transfer
Time, has not yet ceased to be a Member (as determined by the Corporation).

163
 (RULE 42)

(b) Capitalized terms that are used in this Rule 42 but not defined in Section
1(a) above shall have the meanings given to such terms in other Rules and Procedures
of the Corporation.

SEC. 2. Initiation of Wind-down Plan

(a) The Board of Directors may authorize the initiation of the Wind-down Plan
and a transfer of the Business from the Corporation to a Transferee if the Board of
Directors determines, in the exercise of its business judgment and subject to its
fiduciary duties:

(1) that the application of some or all of the recovery tools set forth in
the Recovery Plan, necessitated by credit losses, liquidity shortfalls,
losses from general business risk or any other losses:

A. has not restored the Corporation to viability as a going

concern, able to continue to provide its Critical Services to
Members and Limited Members of the Corporation in a safe
and efficient manner; or

B. will not likely restore the Corporation to viability as a going

concern, able to continue to provide its Critical Services to
Members and Limited Members of the Corporation in a safe
and efficient manner; and

(2) that the implementation of the Wind-down Plan and a Transfer of

the Business from the Corporation to a Transferee is in the best
interests of the Corporation, its shareholders and creditors,
Members and Limited Members and the US financial markets.

(b) The Board of Directors shall identify:

(1) the Critical Services and any Non-Critical Services that shall be
transferred from the Corporation to the Transferee at the Transfer
Time; and

(2) any Non-Critical Services that shall not be transferred from the
Corporation to the Transferee.

The Critical Services and any Non-Critical Services that are transferred from the
Corporation to the Transferee at the Transfer Time shall be provided by the Transferee
following the Transfer Time. Any Non-Critical Services that are not transferred from the
Corporation to the Transferee shall be terminated at the Transfer Time.

164
 (RULE 42)

(c) The Board of Directors shall establish:

(1) the date and time (the “Transfer Time”) of the Transfer;

(2) the last day that transactions may be submitted to the Corporation
for processing (the “Last Transaction Acceptance Date”); and

(3) the last day that transactions submitted to the Corporation for
processing will be settled (the “Last Settlement Date”).

The Corporation shall not accept any transactions (i) for processing after the Last
Transaction Acceptance Date or (ii) which have a designated Settlement Date that
occurs after the Last Settlement Date. All transactions to be processed and/or settled
after the Transfer Time shall be submitted to the Transferee in accordance with the
Rules and Procedures of the Transferee, and the Corporation shall have no
responsibility for such transactions.

(d) To the extent that the Board of Directors deems it to be practicable based
on the available resources of the Corporation, the Board of Directors may provide for
pending transactions to be run off and settled prior to the Transfer Time, with the
objective of facilitating the settlement of transactions in the ordinary course. In
furtherance of this objective, so long as a Corporation Default has not occurred, the
Board of Directors may provide for how such transactions accepted by the Corporation
on or prior to the Last Transaction Acceptance Date shall be processed and settled,
including:

(1) whether such transactions must be Risk Reducing Transactions;

and

(2) whether such transactions will be processed (i) in the ordinary

course or (ii) in accordance with any special or exception
processing procedures that will apply through the close of business
on the Last Settlement Date.

SEC. 3. Notice of Transfer of the Business

If the Board of Directors determines to implement a Transfer of the Business

from the Corporation to a Transferee in accordance with this Rule 42 and the terms and
conditions of the Wind-down Plan, the Corporation shall, in such manner as may be
provided by the Rules and Procedures of the Corporation and subject to any required
regulatory or judicial approval or consent:

(a) provide Members, Limited Members and Settling Banks with a notice (a
“Transfer Notice”) setting forth:

(1) the decision taken by the Board of Directors to Transfer the

Business from the Corporation to the Transferee and a brief
statement of the reasons therefor;

165
 (RULE 42)

(2) the name of the Transferee and basic information about the
Transferee;

(3) a description of the material financial and operational terms of the

Transfer;

(4) the (i) Transfer Time, (ii) Last Transaction Acceptance Date and (iii)
Last Settlement Date;

(5) a summary of the matters described in Sections 4 through 8 of this

Rule 42;

(6) a list setting forth (i) which Members and Limited Members of the
Corporation are Eligible Members and Limited Members and (ii)
which Members and Limited Members of the Corporation are Non-
Eligible Members and Limited Members; and

(7) a list setting forth (i) the Critical Services and any Non-Critical
Services that will be transferred from the Corporation to the
Transferee at the Transfer Time and (ii) any Non-Critical Services
that will not be transferred from the Corporation to the Transferee;
and

(b) make available to Members, Limited Members and Settling Banks a copy
of the Transferee Documents.

No delay or failure on the part of the Corporation to provide a Transfer Notice or

make available a copy of the Transferee Documents to any Member, Limited Member or
Settling Bank shall alter the timing or effectiveness of the Transfer. The Corporation
shall also furnish the Transfer Notice and a copy of the Transferee Documents to its
regulators.

SEC. 4. Transfer of Members, Limited Members and Settling Banks

Prior to the Transfer Time, the Corporation shall enter into arrangements with a
Transferee that is a Failover Entity, or shall use commercially reasonable efforts to enter
into arrangements with a Transferee that is a Third Party Entity or Bridge Entity,
providing in either case that, at the Transfer Time, by operation of this Rule 42 and with
no further action required by any party:

(a) each Eligible Member of the Corporation shall become (i) a Member of the
Transferee and (ii) a party to a Member Agreement with the Transferee;

(b) each Eligible Limited Member of the Corporation shall become (i) a
Limited Member of the Transferee and (ii) a party to a Limited Member Agreement with
the Transferee; and

166
 (RULE 42)

(c) each Settling Bank for Members and Limited Members of the Corporation
shall become (i) a Settling Bank for Members and Limited Members of the Transferee
and (ii) a party to a Settling Bank Agreement with the Transferee.

SEC. 5. Status of Members, Limited Members and Settling Banks

Prior to the Transfer Time, the Corporation shall enter into arrangements with a
Transferee that is a Failover Entity, or shall use commercially reasonable efforts to enter
into arrangements with a Transferee that is a Third Party Entity or Bridge Entity,
providing in either case that, from and after the Transfer Time:

(a) An Eligible Member of the Corporation that has become a Member of the
Transferee shall have all of the rights and be subject to all of the obligations of a
Member set forth in the Rules and Procedures of the Transferee, including the legal,
financial, operational and collateral requirements of the Transferee applicable to such
Member.

(b) An Eligible Limited Member of the Corporation that has become a Limited
Member of the Transferee shall have all of the rights and be subject to all of the
obligations of a Limited Member set forth in the Rules and Procedures of the
Transferee, including the legal, financial and operational requirements of the Transferee
applicable to such Limited Member.

(c) A Settling Bank for Members and Limited Members of the Corporation that
has become a Settling Bank for Members and Limited Members of the Transferee shall
have all of the rights and be subject to all of the obligations of a Settling Bank set forth
in the Rules and Procedures of the Transferee, including the operational requirements
of the Transferee applicable to such Settling Bank.

SEC. 6. Right of Non-Eligible Members and Limited Members to Apply to

the Transferee

Nothing contained in this Rule 42 shall:

(a) preclude a Non-Eligible Member of the Corporation from applying after the
Transfer Time to become a Member of the Transferee in accordance with such eligibility
requirements and procedures as may be prescribed by the Transferee, but such Non-
Eligible Member shall not have the benefit of the automatic admission arrangements
provided in Section 4(a) of this Rule 42; or

(b) preclude a Non-Eligible Limited Member of the Corporation from applying

after the Transfer Time to become a Limited Member of the Transferee in accordance
with such eligibility requirements and procedures as may be prescribed by the
Transferee, but such Non-Eligible Limited Member shall not have the benefit of the
automatic admission arrangements set forth in Section 4(b) of this Rule 42.

167
 (RULE 42)

SEC. 7. Right to Withdraw from the Transferee

Nothing contained in this Rule 42 shall:

(a) preclude an Eligible Member of the Corporation that has become a

Member of the Transferee pursuant to Section 4(a) of this Rule 42 from electing to
withdraw as a Member from the Transferee at any time after the Transfer Time, subject
to the Rules and Procedures of the Transferee;

(b) preclude an Eligible Limited Member of the Corporation that has become a
Limited Member of the Transferee pursuant to Section 4(b) of this Rule 42 from electing
to withdraw as a Limited Member from the Transferee at any time after the Transfer
Time, subject to the Rules and Procedures of the Transferee; or

(c) preclude a Settling Bank for Members and Limited Members of the
Corporation that has become a Settling Bank for Members and Limited Members of the
Transferee pursuant to Section 4(c) of this Rule 42 from electing to withdraw as a
Settling Bank from the Transferee at any time after the Transfer Time, subject to the
Rules and Procedures of the Transferee.

SEC. 8. Disposition of Pending Transactions

At the Transfer Time:

(a) any pending transactions that are Guaranteed Transactions shall be

treated as provided in the Corporation Default Rule; and

(b) any pending transactions that are Non-Guaranteed Transactions shall be

settled by the parties outside the facilities of the Corporation, including, if agreed by the
Transferee, through the facilities of the Transferee.

SEC. 9. Certain Ex Ante Matters

Prior to the Transfer Time, the Corporation shall enter into arrangements with a
Transferee that is a Failover Entity, or shall use commercially reasonable efforts to enter
into arrangements with a Transferee that is a Third Party Entity or Bridge Entity,
providing in either case that, with respect to the Critical Services and any Non-Critical
Services that are transferred from the Corporation to the Transferee, for at least the
duration of the Comparability Period, in order to facilitate a smooth Transfer of the
Business from the Corporation to the Transferee:

(a) the Rules and Procedures, Member Agreement, Limited Member

Agreement and Settling Bank Agreement of the Transferee shall be comparable in
substance and effect to the Rules and Procedures, Member Agreement, Limited
Member Agreement and Settling Bank Agreement of the Corporation;

(b) the rights and obligations of Members, Limited Members and Settling
Banks of the Transferee under the Rules and Procedures of the Transferee shall be

168
 (RULE 42)

comparable in substance and effect to the rights and obligations of Members, Limited
Members and Settling Banks of the Corporation under the Rules and Procedures of the
Corporation; and

(c) the Critical Services and any Non-Critical Services provided by the
Transferee shall be provided in a manner that is comparable in substance and effect to
the manner in which such Critical Services and Non-Critical Services were provided by
the Corporation.

SEC. 10. Subordination of Claims

In the event of any insolvency of the Corporation following the commencement of

any Event Period (as defined in Rule 4), the unsecured claims (if any) of Members and
Limited Members of the Corporation that failed to pay or perform any obligation to the
Corporation or elected to withdraw as Members or Limited Members from and after
such time shall (i) rank pari passu with each other and (ii) be subordinate to the claims
of other unsecured creditors of the Corporation.

SEC. 11. Further Assurances; Additional Powers; Miscellaneous Matters

(a) Members, Limited Members and Settling Banks of the Corporation shall
assist and cooperate with the Corporation to effectuate any Transfer of the Business
from the Corporation to a Transferee, including without limitation (i) by complying with
the terms and conditions of this Rule 42 and their obligations hereunder and (ii) by
providing the Corporation and the Transferee with such financial and operational
information as they may request. The Corporation may provide to a Transferee any
financial and operational information it has with respect to Members, Limited Members
and Settling Banks of the Corporation as may be necessary and appropriate to
effectuate an orderly Transfer of the Business from the Corporation to the Transferee.

(b) The Corporation may take such other actions and enter into such other
arrangements (on behalf of itself and its Members, Limited Members and Settling
Banks) as may be necessary and appropriate to effectuate an orderly Transfer of the
Business from the Corporation to a Transferee, and otherwise accomplish the purposes
of the Wind-down Plan.

(c) As a condition to receiving, and by virtue of accepting, the continuing

benefits of being Members, Limited Members and Settling Banks of the Corporation,
such Members, Limited Members and Settling Banks (i) hereby expressly agree to the
arrangements set forth in this Rule 42 relating to their becoming Members, Limited
Members and Settling Banks, as the case may be, of the Transferee in the
circumstances described herein and (ii) hereby expressly grant to the Corporation an
irrevocable power of attorney to execute and deliver on their behalf such documents
and instruments as the Transferee may request for this purpose. As Members, Limited
Members and Settling Banks of the Corporation, such Members, Limited Members and
Settling Banks are subject to the Rules and Procedures of the Corporation.

169
 (RULE 42)

(d) No actions taken or omitted to be taken by the Corporation pursuant to

this Rule 42 shall be deemed to constitute a default by the Corporation in the
performance of any of its other obligations to Members, Limited Members and Settling
Banks of the Corporation pursuant to any other Rules and Procedures of the
Corporation.

(e) The Corporation shall have no liability to any Members, Limited Members,
or Settling Banks of the Corporation for any actions taken or omitted to be taken by the
Corporation pursuant to this Rule 42.

(f) The Corporation shall have no liability to any third parties, including any
customers or clients of any Members, Limited Members or Settling Banks of the
Corporation, for any actions taken or omitted to be taken by the Corporation pursuant to
this Rule 42.

(g) In connection with the Transfer of the Business from the Corporation to
the Transferee, (i) the Corporation shall assign all of its Member Agreements, Limited
Member Agreements and Settling Bank Agreements to the Transferee and (ii) the
Transferee shall assume such Member Agreements, Limited Member Agreements and
Settling Bank Agreements.

(h) All rights of the Corporation that are not assigned to the Transferee in
connection with the Transfer of the Business from the Corporation to the Transferee,
including any claims of the Corporation against Members, Limited Members and Settling
Banks arising at any time prior to the Transfer Time, shall remain rights of the
Corporation, enforceable by the Corporation in accordance with their terms and subject
to applicable law (including insolvency law).

(i) All obligations and liabilities of the Corporation that are not assigned to
and assumed by the Transferee in connection with the Transfer of the Business from
the Corporation to the Transferee shall remain obligations and liabilities of the
Corporation, enforceable against the Corporation in accordance with their terms and
subject to applicable law (including insolvency law).

(j) In the event of any conflict between the provisions of this Rule 42 and any
other Rules and Procedures of the Corporation, the provisions of this Rule 42 shall
prevail.

170
 (RULE 43)

RULE 43. (RULE NUMBER RESERVED FOR FUTURE USE)

171
 (RULE 44)

RULE 44. DELIVERIES PURSUANT TO BALANCE ORDERS

SEC. 1. All deliveries of securities pursuant to a deliver balance order produced

in the Balance Order System or as the consequence of the pairing of Long and Short
Positions in the CNS System (Order), other than security orders relating to Special
Trades, shall be subject to the provisions of this Rule.

SEC. 2. Deliveries must be made at the receiver’s Specified Location.

SEC. 3. The receiver shall accept a partial delivery on any Order provided the
portion remaining undelivered is not an amount which includes an odd-lot.

SEC. 4. Without limiting the rights of any receiver that has designated a
Specified Location other than New York City, to the extent a deliver balance order is for
a security that is eligible for book-entry transfer on the books of DTC, and the deliverer
has filed with the Corporation a standing instruction, the Corporation will issue an
instruction on file to DTC specifying the quantity of each security to be delivered from
the deliverer to the receiver and the money settlement related thereto.

SEC. 5. Each delivery of certificates evidencing equity securities:

(l) in which the Order is for l00 shares may be in one certificate for the exact
number of shares or certificates totaling l00 shares,

(2) in which the Order is greater than l00 shares and a multiple of l00 shall be
in the exact amount of the contract, or in multiples of l00 shares, or in amounts
from which units of l00 shares can be made, or a combination thereof equaling
the amount of the contract,

(3) in which the Order is for more than l00 shares but not in a multiple of l00
shall be in multiples of l00 shares, or in amounts from which units of l00 shares
can be made, or a combination thereof, plus either the exact amount for the odd
lot or smaller amounts equaling the odd lot, or

(4) in which the Order is for less than l00 shares shall be in the exact amount
of the contract or for smaller units aggregating the amount of the contract.

SEC. 6. (a) Each delivery of bonds or similar evidences of indebtedness in

coupon bearer form shall be made in denominations of $l,000 or in denominations of
$l00 or multiples thereof aggregating $l,000.

(b) Each delivery of bonds or similar evidences of indebtedness in fully

registered bond issues shall be made in denominations of $l,000 or multiples thereof or
in amount of $l00 or multiples aggregating $l,000, but in no event in denominations
larger than $l00,000.

SEC. 7. The units of delivery for certificates of deposit for bonds shall be the
same as prescribed for bonds in Section 6 of this Rule.

172
 (RULE 44)

SEC. 8. Each delivery must also meet the good delivery requirements set forth
in the rules of the primary market place where the securities are traded notwithstanding
that such requirements would not otherwise apply to a transaction compared, cleared or
settled through the Corporation.

173
 (RULE 45)

RULE 45. NOTICES

SEC. 1. Any notice pursuant to these Rules from the Corporation to an

Interested Person as defined in Rule 37 shall be sufficiently served on such Interested
Person if the notice is in writing, and is mailed to the Interested Person’s office address
or e-mailed to the Interested Person’s e-mail address. Any notice to an Interested
Person, if mailed, shall be deemed to have been given when deposited in the United
States Postal Service, with postage thereon prepaid, directed to the Interested Person
at its office address, and if e-mailed, shall be deemed to have been given when routed
to the e-mail address of the Interested Person.

SEC. 2. Any notice from an Interested Person to the Corporation shall be

sufficiently served on the Corporation if the notice is in writing and is delivered or mailed
to the Corporation at its principal place of business, Attention: Secretary, or such other
place as it designates. Any such notice to the Corporation shall be deemed to have
been given when received.

SEC. 3. Any notice required to be given to participants by the Corporation

pursuant to Rule 18 shall state the Corporation’s decision to cease to act for a
participant. The Corporation may provide in such notice or a subsequent notice the
steps to be taken in the Comparison Operation, Accounting Operation, Settlement or
other activities as well as how pending transactions shall be affected.

SEC. 4. Any notice required to be given to the Corporation by a participant

pursuant to Rule 20 shall be given both orally and in writing as soon as possible after
the time of insolvency. Notice by the Corporation pursuant to Rule 20 to all participants
shall be given as soon as possible after the time of insolvency and shall state whether
the Corporation has ceased to act for the insolvent participant as well as how pending
matters will be affected and what steps will be taken in connection therewith.

SEC. 5. Any notice required to be given by the Corporation pursuant to Section

2 of Rule 46 shall set forth the specific grounds under consideration upon which any
suspension, prohibition or limitation of access may be based and shall contain notice to
the participant of its right to request a hearing, such request to be filed by such
participant with the Corporation pursuant to Rule 37.

SEC. 6. Any notice required to be given by the Corporation to a participant

pursuant to Section 2 of Rule 48 shall set forth the charges against the participant and
shall contain notice to such participant of its right to request a hearing, such request to
be filed by it with the Corporation pursuant to Rule 37.

SEC. 7. Notwithstanding anything in these Rules to the contrary, and other than
with respect to notices covered by Sec. 5 or 6 of this Rule, the Corporation may
distribute notices to participants by posting such notices on the NSCC Website. The
Corporation shall deem a notice sufficiently served once the notice is posted on the
NSCC Website, and it is the responsibility of the participants to retrieve notices daily
from the NSCC Website.

174
 (RULE 46)

RULE 46. RESTRICTIONS ON ACCESS TO SERVICES

SEC. 1. The Board of Directors may suspend a Member, Mutual Fund/Insurance

Services Member, Municipal Comparison Only Member, Insurance Carrier/Retirement
Services Member, TPA Member, TPP Member, Investment Manager/Agent Member,
Fund Member, Data Services Only Member or AIP Member (each hereinafter referred
to as a “participant” for purposes of this Rule 46) or prohibit or limit such participant’s
access to services offered by the Corporation in the event that (a) the participant has
been and is expelled or suspended from any regulatory or self-regulatory organization,
or (b) the participant is in default of any delivery of funds or securities to the
Corporation, (c) the participant is in such financial or operating difficulty, that the
Corporation determined, in its discretion, that such action is necessary for the protection
of the Corporation, the participants, creditors, or investors; with respect to a bank or
trust company Member or Mutual Fund/Insurance Services Member (and a parent bank
holding company of a Member that has guaranteed the obligations of the Member in
accordance with Addendum B) such difficulty shall include but not be limited to impaired
capital or the appointment by the primary Federal or State bank supervisor of a receiver
to take control of the bank, (d) the Corporation has reasonable grounds to believe that
such participant is subject to a Statutory Disqualification, (e) the Corporation determines
that such participant does not meet the applicable qualifications for membership or
limited access set forth in Rule 2A, Rule 2B and Addendum B, (f) such participant has
failed to comply with any financial or operational requirement of the Corporation, or (g)
in any circumstances in which, in the discretion of the Corporation, adequate cause
exists to do so.

SEC. 2. Before suspending a participant or prohibiting or limiting such

participant’s access to services offered by the Corporation pursuant to this Rule, the
Corporation shall notify such participant pursuant to Section 5 of Rule 45.

SEC. 3. Notwithstanding Section 2 of this Rule, the Board of Directors may

summarily suspend a participant’s access to services offered by the Corporation in the
event that either one or more of conditions (a), (b) or (c) of Section 1 of this Rule apply
to such participant. In the event that any such participant has been summarily
suspended, the Corporation shall cease to act for such participant in accordance with
Rule 18, except as otherwise provided in the Rules. Any summary action which may be
taken by the Board of Directors pursuant to this Section of Rule 46 may instead be
taken by one or more designees of the Board of Directors in the event that a quorum of
the Board of Directors is unable to meet, provided that any summary action taken by
one or more designees must be confirmed by the Board of Directors within 3 Business
Days. Any participant that has been summarily suspended or whose access has been
summarily prohibited or limited pursuant to this Section of Rule 46 shall be promptly
furnished a written statement of the grounds for the decision and shall be notified of its
right to request a hearing, pursuant to Rule 37. A request for a hearing must be in
writing and filed within 2 Business Days of receipt from the Corporation of such
statement. Any such hearing requested pursuant to Rule 37 shall be held as promptly
as possible after the Corporation has taken summary action against the participant
pursuant to this Rule.

175
 (RULE 46)

SEC. 4. Any action taken by the Corporation pursuant to this Rule may include,
but shall not be limited to, any one or more of the following actions:

(a) ceasing to act for the participant pursuant to Rule 18; and

(b) limiting or excluding the participant’s participation in one or more classes

of transactions or services which are, depending on membership type, available to the
participant, including but not limited to (i) envelope “receive” transactions, (ii) CNS
positions or Balance Order obligations of the Member, or (iii) transactions involving
ancillary services of the Corporation

176
 (RULE 47)

RULE 47. INTERPRETATION OF RULES

The Board of Directors of the Corporation or their designee(s) shall have the
authority to interpret the Rules of the Corporation. Interpretations of the Board of
Directors or their designee(s) shall be final and conclusive.

177
 (RULE 48)

RULE 48. DISCIPLINARY PROCEEDINGS

SEC. 1. The Corporation may discipline any Member or Limited Member (each
hereinafter referred to as a “participant” for purposes of this Rule 48) for a violation of
any provision of the Rules or the Procedures of the Corporation, such participant’s
agreements with the Corporation, or for any error, delay or other conduct detrimental to
the operations of the Corporation, or for not providing adequate facilities for such
participant’s business with the Corporation, by expulsion, suspension, limitation of or
restriction on activities, functions and operations, fine or censure or any other fitting
sanction; provided, however, that the fine for any single offense shall not exceed the
sum of $20,000. Fines shall be payable in the manner and at such time as determined
by the Corporation from time to time.

SEC. 2. Before imposing any disciplinary sanction on a participant pursuant to

this Rule, the Corporation shall notify such participant pursuant to Section 6 of Rule 45
of the charges against such participant and its right to a hearing.

178
 (RULE 49)

RULE 49. RELEASE OF CLEARING DATA AND CLEARING FUND DATA

(a) Absent valid legal process or as provided in paragraph (b) hereof, the
Corporation will only release Clearing Data relating to transactions of a particular
participant and Clearing Fund Data to such participant upon his written request;
however, if the participant is a Sponsored Member, the Corporation will also release
Clearing Data relating to transactions of such participant to such participant’s
Sponsoring Member upon the Sponsoring Member’s written request.

(b) The Corporation, in its sole discretion, may release Clearing Data relating
to transactions of participants and/or the Clearing Fund Data of participants to
(i) regulatory organizations and self-regulatory organizations, as defined in the
Exchange Act, or other comparable Federal or State statutes, (ii) clearing agencies
registered with the SEC of which the participant is a member, and (iii) to any clearing
organization that is affiliated with or has been designated by a futures contract market
under the oversight of the CFTC, of which the participant is a member. Provided,
however, that nothing in this Rule shall prevent the Corporation from releasing Clearing
Data to others, provided that such data shall be in a form as to prevent the disclosure,
whether patently or in easily discernible format, of proprietary and/or confidential
financial, operational or trading data of a particular participant or inappropriately
arranged groups of participants.

(c) With respect to the foregoing, the release of any Clearing Data and/or
Clearing Fund Data shall be conditioned upon either (i) a written request, or (ii) the
execution of a written agreement with the Corporation, whichever appropriate in the
Corporation’s discretion and the Corporation, in its discretion, shall establish the
conditions under which such data shall be released and the fees, if any, to be paid for
such data.

(d) The term “Clearing Data” shall mean, for the purposes of this Rule,
transaction data which is received by the Corporation for inclusion in the clearance
and/or settlement process of the Corporation, or such data, reports or summaries
thereof, which may be produced as a result of processing such transaction data. The
term “Clearing Fund Data” shall mean, for the purposes of this Rule, information
regarding a participant’s clearing fund, margin and other similar requirements and
deposits at the Corporation, or such data, reports or summaries thereof, which may be
produced by the Corporation from time to time.

(e) The foregoing notwithstanding, this Rule is not intended to, nor shall it be
deemed to be in contravention, or a limitation, of the Corporation’s obligations, as a self-
regulatory organization, to cooperate and share data with other regulatory and self-
regulatory organizations for regulatory purposes.

179
 (RULE 50)

RULE 50. AUTOMATED CUSTOMER ACCOUNT TRANSFER SERVICE

SEC. 1. The Corporation may provide a service to enable Members and

Qualified Securities Depositories, on behalf of their participants (hereinafter referred to
as the “QSD”), to transfer accounts of their customers between themselves on an
automated basis. Such automated transfer of customer accounts will be known as the
Automated Customer Account Transfer Service (hereinafter referred to as “ACATS”)
and will be processed in accordance with the provisions of this Rule.

SEC. 2. A Member or QSD to whom a customer’s full account is to be

transferred (hereinafter referred to as the “Receiving Member”) may initiate the
procedure by submitting to the Corporation, within such time frame as established by
the Corporation from time to time, a transfer initiation request in such automated format
as the Corporation may establish from time to time.

SEC. 3. The Corporation will review the transfer initiation request received for
such data which the Corporation determines from time to time to be necessary.
Notwithstanding the foregoing, the Corporation will not be responsible for the
completeness or accuracy of any information contained in the transfer initiation request.
If the request does not contain the required data, the Corporation will reject the request.
If the Corporation rejects the request, the Receiving Member must reinitiate the request
as if it had never been previously submitted. The Receiving Member may submit,
through the facilities of the Corporation, such documentation as the Member or QSD
who currently has the account (hereinafter referred to as the “Delivering Member”)
requires to transfer the account, and any such delivery shall be made pursuant to the
procedures of the Corporation as the Corporation may provide from time to time. The
Corporation assumes no responsibility for the completeness or accuracy of any such
form or documentation submitted through the facilities of the Corporation or otherwise.

SEC. 4. Each day the Corporation will produce a report, in such form as
determined by the Corporation from time to time, indicating all customer account
transfer requests received by the Corporation that day. On a daily basis, Members and
QSDs must compare the list of customer account transfer requests as reported by the
Corporation that were initiated throughout that day with any transfer initiation requests
delivered to or received from the Corporation or from another Member or QSD. Any
discrepancies between the report and the transfer initiation requests received or
delivered must be immediately reported to the Corporation. To the extent necessary or
appropriate, the Corporation will cause an adjustment to be made to such report within
such time as the Corporation determines to be necessary.

SEC. 5. Within the time frame established by the Corporation or, to the extent
applicable, the Delivering Member’s Designated Examining Authority (“DEA”), and, to
the extent applicable, pursuant to reasons permitted by the Delivering Member’s DEA,
the Delivering Member must either reject a customer account transfer request by
submitting a rejection to the Corporation in such form as determined by the Corporation
from time to time, or submit to the Corporation detailed customer account asset data in
such format as established by the Corporation from time to time; provided, however,

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that if Fund/SERV Eligible Fund assets are to be transferred through Mutual Fund
Services, the Delivering Member must specify the quantity of each Fund/SERV Eligible
Fund asset to be processed and indicate whether each such transfer shall be a full or a
partial transfer1. A Delivering Member who rejects a transfer request must indicate the
reason for the rejection. Any transfer request that is not responded to by a Delivering
Member within such time frame as established by the Corporation from time to time will
be deleted from ACATS by the Corporation and the Receiving and Delivering Member’s
will be notified accordingly. A Receiving Member who desires to resubmit a transfer
request that is deleted will be required to reinitiate the request as if one had never been
previously submitted.

SEC. 6. The Corporation will notify a Receiving Member, in such manner as

determined by the Corporation from time to time, of customer account transfer requests
that have been rejected by the Delivering Member and the Corporation will cause such
requests to be deleted from ACATS unless a correction is submitted by the Receiving
Member as set forth below. To the extent the rejection is for enumerated categories, as
specified by the Corporation from time to time, within one (1) Business Day after
notification of a Delivering Member’s rejection, a Receiving Member may adjust a
customer account transfer request by submitting corrections to the Corporation in such
manner as determined by the Corporation from time to time. A Delivering Member must
either reject the adjusted transfer request by submitting a rejection to the Corporation or
submit to the Corporation detailed customer account asset data, in such manner and by
such time as determined by the Corporation from time to time. If the Delivering Member
fails to respond to the adjusted transfer request within such time frame as established
by the Corporation from time to time, the Corporation will delete such request from
ACATS and the Receiving and Delivering Members will be notified accordingly. A
Receiving Member who desires to resubmit a transfer request that is deleted will be
required to reinitiate the request as if one had never been previously submitted.

SEC. 7. Upon receipt by the Corporation from the Delivering Member of

customer account asset data, the Corporation will use its best efforts to validate the
data for edit errors. However, the Corporation will not assume the responsibility for
such validation process. If no edit errors or format errors are discovered by the
Corporation in the asset data, details of the account will be reported to both the
Delivering Member and the Receiving Member in such manner and by such time as
established by the Corporation from time to time. If the Corporation discovers that
customer account asset data contains one or more edit errors or, format errors, the
Corporation will notify the Receiving Member in such manner and by such time as
determined by the Corporation from time to time that customer account asset data has
been received from the Delivering Member but that it contains edit errors or format
errors. The Corporation will notify the Delivering Member in such manner and by such
time as determined by the Corporation from time to time of all customer account asset

1 A full transfer will cause all Fund/SERV Eligible Fund account assets, whether greater or lesser than
the quantity specified, to be transferred. A partial transfer will cause only the Fund/SERV Eligible
Fund account asset quantity specified or such lesser amount to be transferred.

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data reported, indicating that which contains errors. The Delivering Member will be
required to correct those items that contain edit errors or format errors in order to permit
delivery of the customer’s account to occur within the time frame as established by the
Delivering Member’s DEA. If the Delivering Member fails to correct edit errors or format
errors within such time frame established by the Corporation, the Corporation will delete
the transfer request from ACATS. A Receiving Member who desires to resubmit a
transfer request that is deleted will be required to reinitiate the request as if one had
never been previously submitted.

SEC. 8. A Receiving Member will have one (1) Business Day after receipt from
the Corporation of the report detailing the customer account asset data to review the
account and accept all assets, or, to the extent permitted by the Receiving Member’s
DEA, if applicable, reject one or more assets within a DEA determined asset category,
request the Delivering Member to make adjustments to it or, as permitted by the
Corporation or, to the extent applicable, the Receiving Member's DEA, reject the
account. No action is required by the Receiving Member if it determines to accept all
assets in an account. A Receiving Member may accelerate the transfer of the customer
account by either (i) providing an acceleration instruction to the Corporation upon
receipt of the customer account asset data list from the Corporation and accepting all
assets or (ii) deleting nontransferable assets as defined by the Receiving Member’s
DEA and as permitted by the Corporation and accepting the remaining assets. Once a
Receiving Member has accelerated the transfer, the transfer will be in accelerated
status. During the one (1) Business Day time period, the Delivering Member will be
able to add, delete or change an item, provided that the Receiving Member did not
accelerate the transfer, by delivering to the Corporation such information in such form
and by such time as established by the Corporation from time to time; however, the
Receiving Member may delete nontransferable assets as defined by the Receiving
Member’s DEA and as permitted by the Corporation during the one (1) Business Day
time period. Once the Receiving Member accelerates the transfer, the Delivering
Member will be prohibited from making any adjustments to the account. If the transfer
is not in an accelerated status, each Business Day that a Delivering Member causes an
adjustment to be made to an account will give the Receiving Member an additional one
(1) Business Day to review the account. If Fund/SERV Eligible Fund assets and/or
I&RS Eligible Products (“MF/I&RS Products”) are to be transferred the Receiving
Member shall also, within one (1) Business Day after receipt from the Corporation of the
report detailing the MF/I&RS Products data or simultaneous with the submission of an
acceleration instruction, submit to the Corporation detailed transfer instructions in such
format as established by the Corporation from time to time, which instructions shall be
processed through Mutual Fund Services in accordance with Section 16 of Subsection
A of Rule 52 or through I&RS in accordance with Section 6 of Rule 57, as applicable. If
a Receiving Member submits instructions and determines that a modification must be
made to such instruction, such modifications must be submitted within the same
deadline. Modifications to an already submitted instruction will not be permitted if the
transfer is in accelerated status. Each Business Day that the Delivering Member
causes an adjustment to be made to an account will give the Receiving Member an
additional one (1) Business Day to submit such transfer information. With respect to
Fund/SERV Eligible Fund assets, if the Receiving Member fails to properly submit such

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transfer information within the required time period, the Corporation shall transmit
through Mutual Fund Services such standing transfer information as the Corporation
shall determine. Each day the Corporation will produce a report indicating the transfer
instructions that have been received by the Corporation, if any, and, with respect to
Fund/SERV Eligible Fund assets, if no instructions have been received, the standing
instructions which will be submitted to the Mutual Fund Processor or Fund Member.
Each day the Corporation will produce a report to the Receiving and Delivering Member,
indicating the Fund/SERV Eligible Fund customer account asset transfers which have
been confirmed or rejected by the Mutual Fund Processor or Fund Member in
accordance with Section 16 of Subsection A of Rule 52. Such report will also indicate
those transfers which the Mutual Fund Processor or Fund Member has not confirmed or
rejected or which have been deleted. Each day the Corporation will produce a report to
the Receiving and Delivering Member, indicating the I&RS Eligible Products transfers
which have been confirmed or rejected by the Insurance Carrier/Retirement Services
Member in accordance with Section 6 of Rule 57, or which have been deleted.

SEC. 9. Once a customer account has been accepted by the Receiving

Member:

(i) To the extent a transfer is between a Member and another Member:

(1) The Corporation will cause relevant items deemed by it to be

eligible pursuant to Procedure XVIII to be entered into the ACATS
Settlement Accounting Operation.

(2) The Corporation will issue an instruction file to DTC specifying the
assets to be delivered/received for all items that are not eligible for the
ACATS Settlement Accounting Operation that are otherwise eligible at
DTC, in each case pursuant to the standing instructions filed with the
Corporation by the Delivering Member.

(3) The Corporation will produce ACATS Receive and Deliver

Instructions for items that are not eligible for the ACATS Settlement
Accounting Operation or for inclusion in the file sent to DTC per (2) above.

To the extent that a value is specified on an ACATS Receive and Deliver

Instruction, other than for those asset types or asset settling locations designated by the
Corporation from time to time, the value for settlement purposes pursuant to Section 10
will be in U.S. dollars and, in the case of items not eligible for the ACATS Settlement
Accounting Operation, will be based upon (i) the price obtained from a pricing source, if
available or, if not available, (ii) the value of that asset provided to the Corporation by
the Delivering Member2, and will also specify such other information as the Corporation
may determine from time to time and shall otherwise, to the extent applicable, be

2 Members who are also members of FINRA are expected to adhere to FINRA rules regarding
valuation of assets in connection with transfer instructions.

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subject to the rules of the Members’ DEAs, including, but not limited to, their close-out
provisions and shall not be subject to the Rules of the Corporation.

(ii) To the extent a transfer is between QSD participants or between a QSD

participant and a Member:

(1) For all DTC eligible assets, other than (a) U.S. dollar cash balances
(“Cash”), (b) assets covered by a standing instruction filed by the
Delivering Member with the Corporation, and (c) assets for which a special
receive/deliver instruction request was received from the Delivering
Member at the time asset details were submitted, the Corporation will
issue an instruction file to DTC specifying the quantity of each asset to be
delivered with a deliver value of zero. 3

(2) The Corporation will produce ACAT Receive and Deliver

Instructions for all assets to be transferred and, upon request, will also
produce special receive/deliver instructions naming the Receiving Member
and Delivering Member. All such special receive/deliver instructions will
specify no value.

(3) For all Cash assets, the Corporation will issue payment instructions
to DTC naming the paying/receiving entity.

All assets to be transferred through DTC shall be subject to the rules and
procedures of DTC.

SEC. 10. To the extent a transfer is between a Member and another Member:

(i) On Settlement Date as indicated on the ACATS Receive and Deliver

Instructions, the Corporation will debit and credit the appropriate Member’s settlement
account for the value of the applicable items (excluding items included within the
ACATS Settlement Accounting Operation). The actual delivery and corresponding
money settlement of the underlying assets, regardless of whether a Member’s account
has been debited pursuant to this subsection, shall be the responsibility of the
appropriate Member and, to the extent applicable, shall be pursuant to the rules of the
Member’s DEA. If a Member fails to make a delivery, such failure, to the extent
applicable, shall be subject to the rules of the Member’s DEA and not the Rules of the
Corporation.

(ii) The actual delivery and corresponding money settlement, if any, of

Fund/SERV Eligible Fund assets which have been rejected or deleted in accordance
with Section 16 of Subsection A of Rule 52 for which ACAT Receive and Deliver
Instructions have been issued shall be the responsibility of the appropriate Member and,
to the extent applicable, shall be pursuant to the rules of the Member’s DEA. If a

3 The special receive/deliver instruction referenced in this Section has the same legal effect as an
ACAT Receive and Deliver instruction.

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Member fails to make a delivery, such failure shall be, to the extent applicable, subject
to the rules of the Member’s DEA and not the Rules of the Corporation.

(iii) On Settlement Date, as indicated on the ACAT Settlement Report, the

Corporation will debit and credit the Member’s settlement account for the value of the
Fund/SERV Eligible Fund assets which were specified by the Delivering Member to be
processed through Mutual Fund Services in accordance with Section 16 of Subsection
A of Rule 52. The Corporation will credit the settlement account of the Member whose
settlement account was debited and debit the settlement account of the Member whose
settlement account was credited, for the value of the Fund/SERV Eligible Fund assets
within such time frame as specified by the Corporation from time to time following
receipt from the Mutual Fund Processor or Fund Member of the transfer data
confirmation.

SEC. 11. On each Business Day, the Corporation will issue to each Member and
QSD such reports, in such forms and containing such information as established by the
Corporation from time to time, indicating the status and details of requested customer
account transfers. On each Business Day, Members and QSDs must compare the
reports received against their records and any discrepancies between the two must be
immediately reported to the Corporation. To the extent necessary or appropriate, the
Corporation will cause an adjustment to be made to the report.

In addition to the foregoing, to the extent that a Receiving Member determines

that information as reported on the transfer initiation request is inaccurate, he may
cause an adjustment to be made by submitting corrected data to the Corporation. If a
Delivering Member determines that the account number of his customer as reported on
the transfer initiation request is inaccurate, he may cause an adjustment to be made by
submitting corrected data to the Corporation. In both such cases, corrected data must
be submitted to the Corporation within such time as established by the Corporation from
time to time.

SEC. 12. The Corporation may also provide services to enable Delivering
Members to initiate the transfer of:

(i) residual credit positions, which are received for the benefit of a customer’s
account by the Delivering Member after the ACAT process is completed or which, due
to a restriction, were not included in the original asset transfer (hereinafter collectively
referred to as “Residual Credits”);

(ii) a partial account held by a Delivering Member (in the form of cash or
securities), (hereinafter collectively referred to as “Partial Accounts”);

(iii) cash in respect of fail positions for which delivery is unable to be

completed, provided, however, that this transfer may only be initiated to the extent that
the fail is between a Member and another Member (hereinafter collectively referred to
as “Fail Reversals”); and

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(iv) cash or securities mistakenly delivered as part of ACATS (hereinafter

collectively referred to as “Reclaims”), other than Fund/SERV Eligible Fund assets and
positions eligible for processing at a Registered Clearing Agency with whom the
Corporation has entered into an agreement relating to ACATS (hereinafter referred to
as an “ACAT RCA”).

Such transfers shall be processed as follows:

1. Transfers may be initiated by a Delivering Member by submitting to the

Corporation such details as required by the Corporation from time to time within such
time frame as established by the Corporation from time to time. The Corporation will
reject a transfer if the details contain an edit or format error. The Corporation will notify
the Delivering Member if a transfer is rejected and the Delivering Member must reinitiate
the transfer as if it had never been previously submitted. If no edit errors or format
errors are discovered by the Corporation in the asset data, details of the account will be
reported to both the Delivering Member and the Receiving Member in such manner and
by such time as established by the Corporation from time to time.

2. A Receiving Member may reject the transfer by submitting such

information as determined by the Corporation by the time and in the manner specified
by the Corporation on the same day as the transfer request is received or, in respect of
Reclaim transfers, no later than two Business Days following the day the Reclaim
transfer request is received. No action is required by the Receiving Member if it
determines to accept the transfer. A Receiving Member may not submit corrections and
a Delivering Member may not make adjustments to such transfer request, except a
Receiving Member may delete Fund/SERV Eligible Fund assets for Partial Accounts
and Residual Credits.

3. Settlement Date for all transfers covered by this section shall be one
Business Day following the day the Corporation receives the transfer request unless:

(i) the request is Reclaim transfer, in which case Settlement Date shall
be one Business Day following the day the Receiving Member accepts the
request or the Corporation deems the request accepted, or

(ii) the request includes either options assets which are eligible for
processing an ACAT RCA, or Fund/SERV Eligible Fund assets, whereby
the settlement date for all assets included in the transfer shall be two
Business Days following the day the Corporation receives the transfer
request.

SEC. 13. A Receiving Member may submit a request to a Delivering Member to

initiate the transfer of a partial customer account, in such form as determined by the
Corporation from time to time. Such request shall be delivered by the Corporation to the
Delivering Member on the same day as received by the Corporation. Each day for a
period not to exceed two days, the Corporation will produce a report, in such form as
determined by the Corporation from time to time, indicating all such requests received

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by the Corporation. A Delivering Member must either reject a customer account

transfer request by submitting a rejection to the Corporation in such form as determined
by the Corporation from time to time, or submit to the Corporation detailed customer
account asset data in such format as established by the Corporation from time to time.
If a request is rejected, the Delivering Member must indicate the reason for the
rejection. If the Delivering Member submits detailed account asset data, and the
transfer is not rejected by the Receiving Member, Settlement Date for this transfer
request will be one Business Day after the Delivering Member has submitted the asset
account data unless the transfer contains options assets or Fund/SERV Eligible Fund
assets, in which case the settlement date for all assets will be two Business Days.

SEC. 14. Notwithstanding the forgoing, to the extent a transfer involves an asset
position eligible for delivery at an ACAT RCA (other than the DTC), and both the
Receiving Member and the Delivering Member have an account at the ACAT RCA, the
Corporation will either: issue an instruction file to the applicable ACAT RCA indicating
the quantity of assets to be delivered and received and the delivering/receiving
participant, or produce ACAT Receive and Deliver Instructions if requested by the
Delivering Member at the time the asset details are submitted or pursuant to a standing
instruction filed by the Delivering Member with the Corporation. Such ACAT Receive
and Deliver Instructions and instruction files shall not specify a value, unless the transfer
is between two Members and the assets to be transferred are government securities
(where a nominal value shall be specified) and mortgage-backed securities. In the case
of mortgage-backed securities, the ACAT Receive and Deliver Instructions and
instruction files shall specify a value for each item (in accordance with the pricing
provisions of Section 9 of this Rule for non-CNS eligible items) and, on Settlement Date
as indicated on the ACAT Receive and Deliver Instructions and instruction files, the
Corporation will debit and credit the appropriate Members’ settlement accounts for the
specified value of such items.

SEC. 15. The Corporation may report to the Delivering and Receiving Members’
DEA, to the extent applicable, such information regarding customer account transfers as
may be requested of the Corporation from time to time by the DEA.

SEC. 16. Settlement of money payments between Members arising out of

account transfers covered by this Rule shall be made in accordance with Rule 12 and
other provisions of these Rules.

SEC. 17. Each Member or participant of a QSD that requests a transfer through
ACATS (the “Requesting Firm”) agrees to (i) indemnify and hold harmless the Member
or participant of a QSD that accepts such transfer request (the “Accepting Firm”) from
and against any and all losses, claims, damages or liabilities (or actions in respect
thereof) to which the Accepting Firm may become subject, under any provision of law,
to the Accepting Firm’s customer or to any other person, insofar as such losses, claims,
damages or liabilities arise out of or are based upon an unauthorized or allegedly
unauthorized transfer request or any inaccurate or allegedly inaccurate documentation
or information, in any format, transmitted by the Requesting Firm through NSCC or
ACATS and (ii) reimburse the Accepting Firm for any legal or other expenses

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reasonably incurred by the Accepting Firm in connection with defending any such action
or claim as such expenses are incurred. Each Requesting Firm agrees that an
Accepting Firm accepting its transfer request through ACATS shall be a third-party
beneficiary of the above indemnification and reimbursement obligations in respect of
such request, and that such an Accepting Firm may assert any claim under these
indemnification and reimbursement obligations as a third-party beneficiary directly
against such Requesting Firm.

Each Accepting Firm agrees, promptly after receipt of written notice from any
customer of the Accepting Firm or any other person, or after any action is brought
against the Accepting Firm by such a customer or other person in respect of a loss,
claim, damage or liability that may give rise to the indemnification obligations under the
preceding paragraph, to notify the Requesting Firm in writing of the receipt of such
notice or action. The Requesting Firm agrees that any failure by the Accepting Firm to
give such notice does not relieve the Requesting Firm of any liability to the Accepting
Firm under the preceding paragraph. If any action shall be brought against the
Accepting Firm that may give rise to the indemnification provisions of the preceding
paragraph, the Accepting Firm further agrees that the Requesting Firm shall be entitled
to participate therein and/or assume the defense thereof (with counsel satisfactory to
the Accepting Firm), without the prejudice to the continuing rights of the Accepting Firm.
Each Requesting Firm and Accepting Firm agrees that any Requesting Firm or
Accepting Firm benefiting from the notification and participation obligations in this
paragraph is intended to be a third-party beneficiary of such obligations and may
enforce such obligations as a third-party beneficiary against the promisor thereof.

Each Requesting Firm and Accepting Firm agrees that any dispute between
them arising under this section shall be resolved directly between them, and that the
Corporation shall not be made a party to any such dispute and shall have no
responsibility with respect to the enforcement or satisfaction of any indemnification,
reimbursement, notification and participation obligations contained in this section.

SEC. 18. The Corporation does not guaranty completion of ACATS transactions.
In the event a Member fails to meet its settlement obligation to the Corporation:

(1) For any transaction that entered the ACATS Settlement Accounting
Operation but was subsequently exited from the ACATS Settlement
Accounting Operation on ACATS settlement date, the transaction will be
considered uncompleted and will be reversed against the original debit or
credit value applied to their settlement account upon exit. 4

4 The ACATS reversal for this transaction would be processed in the same way as a transaction that
did not enter the ACATS Settlement Accounting Operation. The exception would be for a
Fund/SERV Eligible Fund asset, as NSCC tracks the completion of this asset on settlement date and
would only reverse an uncompleted transaction.

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(2) Any transaction or, if partially completed, the uncompleted portion of a

transaction of the Member in the ACATS Settlement Accounting
Operation, will be reversed if it remains outstanding (or uncompleted)
upon the Member’s failure to settle, and:

a. If the timing of that reversal on settlement date is before such

transaction would have either entered the CNS General Accounting
System or issued as a Member to Member instruction for a DTC-
eligible transaction, the transaction will be reversed without a
settlement debit or credit (as there was no debit or credit value
originally applied to the Member’s settlement account), or

b. If the reversal occurred on settlement date after such transaction

either entered the CNS General Accounting System or was issued
as a Member to Member instruction for a DTC-eligible transaction,
the transaction will be reversed against the debit or credit value that
was originally applied to the Member’s settlement account.

(3) For all other uncompleted ACATS transactions not applicable to (1) and
(2) of this Section, such transactions and any related debits or credits will
be reversed.

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RULE 51. OBLIGATION WAREHOUSE

SEC. 1. General

The Corporation may offer a service to Members for: (i) the comparison of
securities transactions that are not otherwise submitted by or on behalf of Members for
trade comparison or recording through other NSCC systems or services, (ii) tracking,
storage and maintenance of obligations either compared through the service, or
forwarded to it from other NSCC accounting operations or services in accordance with
the Rules and Procedures through the time of settlement of such obligations (such
obligations shall collectively be referred to as “OW Obligations”), (iii) the repricing and
updating of fail obligations, (iv) the pair off of certain eligible open obligations. As
regards to tracking and maintenance, the Corporation will cause CNS-eligible OW
Obligations to be entered into the CNS Accounting Operation on a regular basis. 1 This
service shall be known as the “Obligation Warehouse” service. In addition, in
accordance with this Rule and the Obligation Warehouse Procedure, a Member shall
submit to the Obligation Warehouse for repricing, netting and allotting, fail data with
respect to transactions already compared through the facilities of the Corporation or
other facilities.

SEC. 2. Eligible Obligations

The Obligation Warehouse shall be available for use by Members for the
tracking, records storage and maintenance of transactions in such securities or classes
of securities as the Corporation shall determine from time to time.

SEC. 3. Non-Guaranteed Service and Settlement

The Obligation Warehouse shall not be a guaranteed service of the Corporation.

Except with respect to: (i) OW Obligations that have been forwarded to the CNS
Accounting Operation in accordance with Procedure II A. and Procedure VII, and (ii) any
cash adjustment forwarded to the settlement system of the Corporation in accordance
with the Obligation Warehouse Procedure, the settlement of OW Obligations shall occur
between the parties themselves. Any obligations (settlement or otherwise) arising from
OW Obligations shall be the sole responsibility of the Members that are parties to the
obligation. In the event of the default of a Member, the Corporation within such time
frames as determined from time to time and whether before or after settlement on any
Business Day, may: (i) exit all OW Obligations of such Member, (ii) reverse all credits
and debits for the Member relating to OW Obligations that have entered the CNS
Accounting Operation, and (iii) reverse any cash adjustment of the Member forwarded
to settlement pursuant to the Obligation Warehouse Procedures.

1 This functionality will be made available to Members at a date no less than 10 Business Days
following announcement of its implementation by Important Notice.

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SEC. 4. Limitations on Liability

(a) Notwithstanding any other provision in the Rules of the Corporation;

the Corporation will not be liable for any action taken, or any delay or failure to
take any action, hereunder or otherwise to fulfill the Corporation’s obligations to
users of the Obligation Warehouse service, other than for losses caused directly
by the Corporation’s gross negligence, willful misconduct, or violation of federal
securities laws for which there is a private right of action.

(b) Under no circumstances will the Corporation be liable for any

indirect, consequential, incidental, special, punitive or exemplary loss or damage
(including, but not limited to, loss of business, loss of profits, trading losses, loss
of opportunity and loss of use) howsoever suffered or incurred, regardless of
whether the Corporation has been advised of the possibility of such damages or
whether such damages otherwise could have been foreseen or prevented.

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RULE 52. MUTUAL FUND SERVICES

A. Fund/SERV®

SEC. 1. The Corporation may provide a service to enable Members, Mutual

Fund/Insurance Services Members, TPA Members, TPP Members, Investment
Manager/Agent Members, and Fund Members to process and/or settle, as the case
may be, on an automated basis purchase and redemption orders and transactions in
interests in Fund/SERV Eligible Funds (such interests, whether structured as shares,
units, or other denominations shall be referred to as “shares” for purposes of these
Rules), transmit registration instructions and/or to enable, as the case may be, the
transfer on an automated basis of the value of Fund/SERV Eligible Fund shares. Such
automated processing of Fund/SERV Eligible Fund shares shall be known as
Fund/SERV and will be accomplished in accordance with the provisions of this Rule.

SEC. 2. A Member, Mutual Fund/Insurance Services Member, TPA Member,

TPP Member or Investment Manager/Agent Member who desires to submit a
Fund/SERV Eligible Fund order (e.g. purchase, redemption, exchange) or transaction to
another Member (referred to as a Mutual Fund Processor) or Fund Member may do so
by submitting order data to the Corporation on the day the order is intended to take
place (“Trade Date”) or, to the extent established by each Fund Member, any day
thereafter (hereinafter referred to as “As-Of” orders) or any day prior to the Trade Date,
in such form and by such times as established by the Corporation from time to time. 1
An order submitted by a Member, Mutual Fund/Insurance Services Member, Investment
Manager/Agent Member, TPP Member or TPA Member that does not indicate otherwise
shall be settled through the facilities of the Corporation. An order processed through
Fund/SERV but not settled through the Corporation’s facilities is referred to hereinafter
as a “Fund/SERV Processing Only Transaction,” and the settlement of such
transactions is the responsibility of the parties thereto.

SEC. 3. Upon receipt of the order data, the Corporation will review the order
data for such information which the Corporation determines from time to time to be
necessary (including applicable Fund Member or Mutual Fund Processor parameters).
If such order data does not contain the information required by the Corporation, the
Corporation will reject the order data and will advise the Member, Mutual
Fund/Insurance Services Member, Investment Manager/Agent Member, TPP Member
or the TPA Member, as the case may be, of such rejection in such form and by such
times as established by the Corporation from time to time. If the order data appears to
contain the information required by the Corporation, subject to any rights the
Corporation may have as provided in the Rules generally, the Corporation will transmit
the order data to the Mutual Fund Processor or Fund Member and, if submitted by a
TPP Member, TPA Member or Investment Manager/Agent Member, to the
corresponding Member or Mutual Fund/Insurance Services Member with the obligation

1 A Fund Member or Mutual Fund Processor may indicate to the Corporation the parameters and types
of orders it is willing to process through Fund/SERV.

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to settle the order (hereinafter referred to as the TTP/TPA/IMA Settling Entity), in such
form and by such times as established by the Corporation from time to time. To the
extent the Corporation has knowledge that it is unable to transmit the order data to the
Mutual Fund Processor or Fund Member, the Corporation will use its best efforts to
contact the Mutual Fund Processor or Fund Member and so advise. Notwithstanding
the foregoing, to the extent a Mutual Fund Processor or Fund Member fails to receive
the order data, the Mutual Fund Processor or Fund Member, as soon as practicable,
must contact the Corporation. Upon request by the Mutual Fund Processor or Fund
Member, the Corporation may make summary order data available to the Mutual Fund
Processor or Fund Member to the extent the Corporation has such data available. A
Member, Mutual Fund/Insurance Services Member, Investment Manager/Agent
Member, TPP Member or a TPA Member who desires to resubmit an order that has
been rejected must resubmit the order as if it had never been submitted and such order
shall be submitted within the time frames established by the Corporation from time to
time.

SEC. 4. A Mutual Fund Processor or Fund Member may acknowledge (in the
case of an interval fund repurchase order), confirm or reject an order received from a
Member, Mutual Fund/Insurance Services Member, Investment Manager/Agent
Member, TPP Member or a TPA Member by transmitting such acknowledgement,
confirmation or rejection to the Corporation in such form and by such time as
established by the Corporation from time to time. If the order was submitted by a TPP
Member, TPA Member or Investment Manager/Agent Member, the corresponding
TPP/TPA/IMA Settlement Entity will be notified of the action taken by the Mutual Fund
Processor or Fund Member. All orders (except money market purchase orders) not
acknowledged, confirmed or rejected within such time will be deleted from the
Fund/SERV system. Upon receipt of a rejection from a Mutual Fund Processor or Fund
Member, the Corporation will delete the unsettled order from Fund/SERV.
Responsibility for adjusting any orders which are deleted from Fund/SERV is between
the Member, Mutual Fund/Insurance Services Member, Investment Manager/Agent
Member, TPP Member or the TPA Member, as the case may be, and the Mutual Fund
Processor or Fund Member. In addition to the foregoing, if a Mutual Fund Processor or
Fund Member recognizes that he has incorrectly priced orders, other than exchange
orders, that were confirmed through Fund/SERV, in order to adjust the price for all such
orders (other than money market orders) he may, until the day prior to settlement day,
submit a reconfirmation in such form and by such time as established by the
Corporation from time to time and with respect to money market orders settling on a
same day basis he may on settlement day submit a reconfirmation in such form and by
such time as established by the Corporation from time to time; provided, however, that
no reconfirmation may be submitted if a Member, Mutual Fund/Insurance Services
Member, Investment Manager/Agent Member, TPP Member or a TPA Member has
submitted a correction, as provided for in Section 7 of this Rule; instead, the procedures
set forth in Section 7 of this Rule shall apply.

SEC. 5. A Mutual Fund Processor or Fund Member who desires to originate a

confirmed order (including an As-Of order) to a Member, Mutual Fund/Insurance
Services Member, Investment Manager/Agent Member, TPP Member or a TPA Member

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(other than for money market and exchange orders) may do so by submitting such
confirmed order data to the Corporation in such form and by such time as established
by the Corporation from time to time (any such confirmed order originated by a Mutual
Fund Processor or Fund Member will hereinafter be referred to as a “Fund Originated
Order”).

SEC. 6. Upon receipt of a Fund Originated Order, the Corporation will review the
order data for such information as the Corporation determines from time to time to be
necessary. If the order data does not contain the information required by the
Corporation, the Corporation will reject the order data and will advise the Mutual Fund
Processor or Fund Member of such rejection in such form and by such time as
established by the Corporation from time to time. A Fund Member or Mutual Fund
Processor who desires to resubmit a Fund Originated Order that has been rejected
must resubmit the order as if it never had been submitted and such order must be
submitted within the time frames established by the Corporation from time to time. If the
order data appears to contain the information required by the Corporation, subject to
any rights which the Corporation may have as provided in the Rules generally, the
Corporation will report such confirmed Fund Originated Order to the Member, Mutual
Fund/Insurance Services Member, Investment Manager/Agent Member, TPP Member
or the TPA Member and the corresponding TPP/TPA/IMA Settling Entity, as the case
may be, in such form and by such time as established by the Corporation from time to
time.

SEC. 7. A Member, Mutual Fund/Insurance Services Member, Investment

Manager/Agent Member, TPP Member or a TPA Member who does not agree with the
terms of an order (including confirmed, reconfirmed and As-Of orders), other than an
exchange order or a money market order, may submit a correction. A Member, Mutual
Fund/Insurance Services Member, Investment Manager/Agent Member, TPP Member,
TPA Member or TPP/TPA/IMA Settling Entity who does not agree with the terms of a
Fund Originated Order (including As-Of Fund Originated Orders) may submit a deletion.
Corrections and deletions must be submitted in such form and by such time as
established by the Corporation from time to time. In the case of exchanges and money
market orders, corrections and deletions are not accepted. Exchange and money
market orders will settle as confirmed by the Mutual Fund Processor or Fund Member.
Money Market purchase orders will settle as submitted by the Member, Mutual
Fund/Insurance Services Member, Investment Manager/Agent Member, TPP Member
or the TPA Member if not rejected by the Fund Member or Mutual Fund Processor. A
deletion of a Fund Originated Order pursuant to this subsection will cause the Fund
Originated Order to be deleted from Fund/SERV, and such order must be adjusted
directly between the Member, Mutual Fund/Insurance Services Member, TPP Member,
TPA Member or Investment Manager/Agent Member, as the case may be, and the
Mutual Fund Processor or Fund Member.

SEC. 8. A Mutual Fund Processor or Fund Member may either acknowledge (in
the case of an interval fund repurchase order), accept or reject a correction in such form
and by such time as established by the Corporation from time to time. A Mutual Fund
Processor or Fund Member must submit a correction confirmation in order to accept a

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correction. Corrections which are not confirmed or rejected within such time will be
deleted from the Fund/SERV system. Upon receipt of a rejection, the Corporation will
delete the order from Fund/SERV. Any orders which are deleted from Fund/SERV must
be adjusted directly between the Member, Mutual Fund/Insurance Services Member,
Investment Manager/Agent Member, TPP Member or the TPA Member, as the case
may be, and the Mutual Fund Processor or Fund Member.

SEC. 9. A Member, Mutual Fund/Insurance Services Member, Investment

Manager/Agent Member, TPP Member or a TPA Member may submit a money only
related charge against a Mutual Fund Processor or Fund Member, and a Mutual Fund
Processor or Fund Member may submit a money only related charge against a
Member, Mutual Fund/Insurance Services Member or another Mutual Fund Processor
or Fund Member in such form and by such time as established by the Corporation from
time to time. Upon receipt of a money only related charge, the Corporation will review
the data for such information as the Corporation determines from time to time to be
necessary (including applicable Fund Member or Mutual Fund Processor parameters).
If the data does not contain the information required by the Corporation, the Corporation
will reject the money only related charge and will advise the Member, Mutual
Fund/Insurance Services Member, Investment Manager/Agent Member, TPP Member,
TPA Member, Mutual Fund Processor or Fund Member as the case may be in such
form and by such time, as established by the Corporation from time to time. If the
money only related charge appears to contain the information required by the
Corporation, subject to any rights which the Corporation may have as provided in the
Rules generally, the Corporation will report such money only related charge to the
appropriate contra party in such form and by such time, as established by the
Corporation from time to time. A Member, Mutual Fund/Insurance Services Member,
Investment Manager/Agent Member, TPP Member, TPA Member or TPP/TPA/IMA
Settling Entity, Mutual Fund Processor or Fund Member who does not agree with the
terms of a money only related charge may submit a deletion in such form and by such
time, as established by the Corporation from time to time.

SEC. 10. A Member, Mutual Fund/Insurance Services Member, Investment

Manager/Agent Member, TPP Member, TPA Member or TPP/TPA/IMA Settling Entity
who does not want an order (including an exchange order) to settle within Fund/SERV,
may submit an exit instruction in such form and by such time as established by the
Corporation from time to time. Upon receipt of an exit instruction the Corporation will
review the data for such information as the Corporation determines from time to time to
be necessary. If the data does not contain the information required by the Corporation,
the Corporation will reject the exit and advise the Member, Mutual Fund/Insurance
Services Member, Investment Manager/Agent Member, TPP Member, TPA Member or
TPP/TPA/IMA Settling Entity, as the case may be, in such form and by such time as
established by the Corporation from time to time. If the exit instruction appears to
contain the information required by the Corporation, the Corporation will report such exit
to a Fund Member, Mutual Fund Processor, Investment Manager/Agent Member, TPP
Member or TPA Member and corresponding TPP/TPA/IMA Settling Entity, as the case
may be, within such time as established by the Corporation from time to time. A
properly submitted exit instruction will cause such order to be deleted from Fund/SERV

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and such order must be adjusted directly between the Member, Mutual Fund/Insurance
Services Member and Fund Member or Mutual Fund Processor. If a TPP/TPA/IMA
Settling Entity does not submit an exit instruction in such form and by such time as
established by the Corporation from time to time, the TPP/TPA/IMA Settling Entity shall
be responsible for the settlement of such order in accordance with the provisions of
these Rules.

SEC. 11. (a) All money market purchase orders and all other confirmed or
reconfirmed orders and money only related charges for which settlement is to take
place through the facilities of the Corporation, except for orders that have been deleted,
rejected or exited, or for which releases to settlement have not been submitted by the
Fund Member or Mutual Fund Processor, will settle in accordance with the time frames
as established by the Corporation from time to time, or in such extended or shortened
time frame as established by agreement of the submitting parties; provided however,
that such modified time frame shall be no shorter than T. On settlement date, the
Corporation will debit and credit the appropriate Members’, Mutual Fund/Insurance
Services Members’, Mutual Fund Processors’ or Fund Members’ account for the value
of such orders and money only related charges.

(b) Settlement of money payments between Fund Members, Mutual Fund

Processors and Members and Mutual Fund/Insurance Services Members arising out of
orders and money only related charges for Mutual Fund Services transactions
submitted through Fund/SERV for which settlement is to take place through the facilities
of the Corporation, shall be made in accordance with Rule 12 and other provisions of
these Rules. Settlement of all other transactions and charges shall be made directly
between, and are the responsibility of, the parties thereto.

SEC. 12. If a Member, Mutual Fund/Insurance Services Member, Investment

Manager/Agent Member, TPP Member or a TPA Member (hereinafter referred to as the
“Firm Initiating Party”) determines that data transmitted to a Fund Member or Mutual
Fund Processor (hereinafter referred to as the “Fund Responding Party”) in respect of a
settled order is incorrect or if a Fund Member or Mutual Fund Processor (hereinafter
referred to as the “Fund Initiating Party”) determines that data transmitted to a Member,
Mutual Fund/Insurance Services Member, Investment Manager/Agent Member, TPP
Member or a TPA Member (hereinafter referred to as the “Firm Responding Party”) in
respect of a settled order is incorrect, the respective Firm or Fund Initiating Party may
submit an extended correction instruction to the Corporation within such time as
established by the Corporation from time to time. Upon receipt of the extended
correction instruction, the Corporation will review the data for such information as the
Corporation determines from time to time to be necessary. If the data does not contain
the information required by the Corporation, the Corporation will reject the extended
correction instruction and advise the respective Firm or Fund Initiating Party in such
form and by such time as established by the Corporation from time to time. If the
extended correction instruction appears to contain the information required by the
Corporation, the Corporation will report the extended correction instruction to the
respective Firm or Fund Responding Party and, if submitted by a Firm Initiating Party
that is a TPP Member, TPA Member or Investment Manager/Agent Member, to the

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corresponding TPP/TPA/IMA Settling Entity within such time as established by the

Corporation from time to time. A Fund Responding Party must reject or confirm the
extended correction instruction in such form and within such time as established by the
Corporation from time to time. Extended correction instructions not confirmed or
rejected by a Fund Responding Party within such time as established by the
Corporation from time to time will be deleted from the Fund/SERV system by the
Corporation. Extended correction instructions will settle as submitted by the Fund
Responding Party if not rejected by a Firm Responding Party or a TPP/TPA/IMA
Settling Entity.

SEC. 13. A Member, Mutual Fund/Insurance Services Member, Investment

Manager/Agent Member, TPP Member or a TPA Member may submit registration data
for orders and transactions processed and/or settled through Fund/SERV by
transmitting such data to the Corporation in such form and by such time as established
by the Corporation from time to time. Upon receipt of the registration data, the
Corporation will review the data for such information which the Corporation determines
from time to time to be necessary (including applicable Fund Member or Mutual Fund
Processor parameters). If such data does not contain the information required by the
Corporation, the Corporation will reject the data and report such rejection to the
Member, Mutual Fund/Insurance Services Member, Investment Manager/Agent
Member, TPP Member and the TPA Member, as the case may be, in such form and by
such time as established by the Corporation from time to time. A Member, Mutual
Fund/Insurance Services Member, Investment Manager/Agent Member, TPP Member
or a TPA Member who desires to resubmit registration data that has been rejected must
resubmit the registration data as if it had never been submitted. If the registration data
appears to contain the information required by the Corporation, the Corporation will
transmit the data to the Mutual Fund Processor or Fund Member in such form and by
such time as established by the Corporation from time to time. The Mutual Fund
Processor or Fund Member must accept or reject the registration data in such form and
by such time as established by the Corporation.

SEC. 14. ACAT/TRANSFERS

(a) Within the time frame established by the Corporation, the Corporation may
transmit, to a Mutual Fund Processor or Fund Member, Fund/SERV Eligible Fund
customer account transfer data in such form and by such time as established by the
Corporation from time to time. The Mutual Fund Processor or Fund Member must reject
or confirm the transfer in such format and by such time as established by the
Corporation. Transfers not confirmed or rejected within such time frame will be deleted
from the Fund/SERV system by the Corporation.

(b) The Corporation may permit a Member to designate another Member or

Mutual Fund/Insurance Services Member as its ACATS-Fund/SERV Agent with regard
to the re-registration of eligible book share mutual fund assets. Members and ACATS-
Fund/SERV Agents must notify the Corporation of such designation in such form and
within such timeframe as determined by the Corporation from time to time.

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If such designation is made, the ACATS-Fund/SERV Agent (and not the ACAT
Receiving or Delivering Member, as the case may be) will be identified on reports and
output transmitted to a Mutual Fund Processor or Fund Member. Notwithstanding such
designation, the Member shall at all times be responsible for all provisions of these
Rules.

SEC. 15. Transfer of Registration

(a) The Corporation may provide a service to enable the transfer of

instructions relating to the registration of Fund/SERV Eligible Fund Shares between a
Member and a Fund Member or Mutual Fund Processor (each, a “participant”). For
purposes of this Section 15, the participant to which the registration is to be transferred
is referred to as the “Receiving Participant” and the participant that initially holds the
registration that is subject to transfer is referred to as the “Delivering Participant”.

(b) In accordance with procedures established by the Corporation, a request

for a registration transfer may be initiated by a Member in its capacity as a Delivering
Participant or Receiving Participant, by submission of an instruction in such form and
within such time frames as established by the Corporation from time to time. The
Corporation will reject an instruction that does not conform to the requirements set forth
in the Corporation’s procedures and will notify the Member of such rejection. Details of
all requests for a transfer of registration made in accordance with the procedures of the
Corporation shall be reported to the Delivering and Receiving Participants.

(c) The Fund Member or Mutual Fund Processor to which the transfer request
is directed must reject or confirm the request in such form and within the time period
established by the Corporation. A request that is not responded to in a timely manner,
or one that is rejected by the Fund Member or Mutual Fund Processor, will be deleted
within the time periods established by the Corporation. Details of rejections or
confirmations of all requests made in accordance with the procedures of the
Corporation, and all requests which have been deleted in accordance with such
procedures, shall be reported to the Member that initiated the request.

(d) The Corporation will not be responsible for the completeness or accuracy
of any information contained in a transfer request or any other instruction transmitted by
a participant relating to the transaction. The submission of a transaction or instruction
through the Corporation shall not otherwise relinquish, extinguish or affect any legal
rights, remedies or obligations of the participant arising out of such transaction or
instruction.

(e) Unless otherwise agreed between the participants that are a party to a
transfer request transaction subject to this Section 15, each participant that submits a
transfer request through the Corporation (the “Requesting Participant”) agrees as
follows:

(i) to indemnify and hold harmless the participant that accepts such
request, the affiliated companies of such participant and the respective directors,

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officers, employees and agents of each of such (collectively, the “Accepting

Participant”) from and against any and all demands, damages, liabilities, and
losses, or any pending or completed actions, proceedings or investigations
(including reasonable attorney fees and other costs, including all expenses of
litigation or arbitration, judgments, fines or amounts paid in settlement consented
to by the Requesting Participant, whose consent shall not be unreasonably
withheld) (collectively, “Losses”) to which any of them may be or become subject
as a result of or arising out of (A) the Accepting Participant receiving and acting
upon such request, or (B) any negligent act, omission, or willful misconduct by
the Requesting Participant or its agents relating to such request; provided,
however, that the Requesting Participant shall not be liable for any Losses to the
extent that they arise from the negligence or misconduct of the Accepting
Participant. Each Requesting Participant agrees that an Accepting Participant
shall be a third-party beneficiary of the above indemnification and reimbursement
obligations in respect of such request, and that the Accepting Participant may
assert any claim under these indemnification and reimbursement obligations as a
third-party beneficiary directly against such Requesting Participant: and

(ii) That it will have obtained from the holder(s) of the account(s) to
which the request relates (the “Accountholder(s)”), written authorization, signed
by the Accountholder(s), for the request in compliance with applicable law, and to
furnish a copy of such authorization to the Accepting Participant upon request;
and

(iii) With respect to a transfer request relating to an Individual

Retirement Account (“IRA”), Roth IRA, SIMPLE IRA, Profit Sharing and Money
Purchase Plan Account and other types of tax-deferred or tax-advantaged
accounts (“Accounts”) for which the Accepting Participant acted as trustee or
custodian (or an agent or affiliate thereof) and with respect to which the
Requesting Participant makes the Fund Transfer Request in the capacity as a
successor trustee or custodian (or an agent or affiliate thereof), that (A) the
Requesting Participant (or, if the Requesting Participant is acting in the capacity
as an agent or affiliate, the entity on whose behalf it acts) is qualified to act as
successor trustee or custodian pursuant to applicable provisions of the Internal
Revenue Code; (B) in all cases, the transfer is a trustee-to-trustee transfer and
as such is a non-taxable and non-reportable transaction for federal income tax
withholding and reporting purposes, (C) that for purposes of effecting the transfer
of such Accounts, the Accepting Participant appoints the Requesting Participant
as the Accepting Participant’s agent to act on its behalf solely to receive and
accept the instructions from an accountholder with respect to the Account
transfer, and the Requesting Participant hereby accepts such appointment.

(f) Each Requesting Participant and Accepting Participant agrees that any
dispute between them arising under this section shall be resolved directly between
them, and that the Corporation shall not be made a party to any such dispute and shall
have no responsibility with respect to the enforcement or satisfaction of any
indemnification, reimbursement, notification or other obligation contained in this section.

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SEC. 16. Transfers of Fund/SERV Eligible Fund Shares.

(a) A Fund Member or Mutual Fund Processor to whom the value of

Fund/SERV Eligible Fund shares is to be transferred (hereinafter referred to as the
“Receiving Fund Member”) may initiate the process by submitting a transfer request to
the Corporation in such form and by such time on the submission date as established
by the Corporation from time to time.

(b) The Fund Member or Mutual Fund Processor indicated by the Receiving
Fund Member (hereinafter referred to as the “Delivering Fund Member”) must
acknowledge or reject a transfer request by submitting either an acknowledgment
containing such information and in such form as established by the Corporation from
time to time or a rejection instruction containing such information and in such form as
established by the Corporation from time to time. The Delivering Fund Member will have
up to two (2) Business Days after the submission of a transfer request to acknowledge
or reject the transfer request. A transfer request that is not responded to timely by a
Delivering Fund Member, and a transfer request that is rejected by a Delivering Fund
Member, will be deleted from Fund/SERV.

(c) A Delivering Fund Member that has acknowledged a transfer request must
confirm the value of the Fund/SERV Eligible Fund shares to be transferred by
submitting a confirmation to the Corporation in such form as established by the
Corporation from time to time. The Delivering Fund Member must submit the
confirmation no earlier than one (1) Business Day and no later than ten (10) Business
Days after the submission of an acknowledgment. Failure to timely submit a
confirmation will cause the transfer request to be deleted from Fund/SERV.

(d) A Delivering Fund Member that has confirmed a transfer request may
submit a reconfirmation to change any information submitted in the confirmation by
transmitting such reconfirmation to the Corporation in such form as established by the
Corporation from time to time prior to the inclusion of the value of the transfer in the
settlement cycle of the Corporation as provided in paragraph (h) below.

(e) A Receiving Fund Member may cancel a transfer request by submitting an

exit instruction in such form as established by the Corporation from time to time prior to
the inclusion of the value of the transfer in the settlement cycle of the Corporation as
provided in paragraph (h) below. A properly submitted exit instruction will cause such
transfer to be deleted from Fund/SERV.

(f) The Corporation will review transmissions received from Receiving Fund
Members and Delivering Fund Members for such information as the Corporation
determines from time to time to be necessary. If the transmission does not contain the
information required by the Corporation, the Corporation will reject the transmission and
will advise the appropriate Receiving Fund Member or Delivering Fund Member. If the
transmission appears to contain the information required by the Corporation, subject to
any rights the Corporation may have as provided in the Rules generally, the Corporation

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will send the transmission to the appropriate Receiving Fund Member or Delivering
Fund Member.

(g) A Receiving Fund Member who desires to resubmit a transfer request that
has been rejected, deleted or exited, or an exit instruction that has been rejected by the
Corporation, must resubmit such transfer request or exit instruction as if it had never
been submitted. A Delivering Fund Member who has an acknowledgment, rejection,
confirmation or reconfirmation rejected by the Corporation must resubmit such
acknowledgment, rejection, confirmation or reconfirmation.

(h) All confirmed and reconfirmed transfer requests, except for transfer
requests that have been rejected, deleted or exited, will settle in the next settlement
cycle of the Corporation after such confirmation or reconfirmation. On settlement date,
the Corporation will debit the Delivering Fund Member’s account and credit the
Receiving Fund Member’s account for the value of the Fund/SERV Eligible Fund shares
transferred. Settlement of money payments between Receiving Fund Members and
Delivering Fund Members arising out of transfer requests submitted through
Fund/SERV shall be made in accordance with Rule 12 and other provisions of these
Rules.

(i) Credits and debits arising after the settlement of a transfer of the value of
Fund/SERV Eligible Fund shares will be processed in accordance with Section 9 of this
Rule.

SEC. 17. Notwithstanding the foregoing, the submission of a transaction or

instruction through Fund/SERV and settlement, deletion, rejection and exit of such
transaction or instruction from or through Fund/SERV shall not otherwise relinquish,
extinguish or affect any legal rights, remedies or obligations of the Member, Mutual
Fund/Insurance Services Member, Investment Manager/Agent Member, TPP Member,
TPA Member, Mutual Fund Processor or Fund Member arising out of such transaction
or instruction.

SEC. 18. Each Business Day, the Corporation will make data available to
Members, Mutual Fund/Insurance Services Member, Investment Manager/Agent
Members, TPP Members, TPA Members, TPP/TPA/IMA Settling Entities, Mutual Fund
Processors and Fund Members, indicating the status of all Fund/SERV transactions and
instructions submitted to the Corporation. On a daily basis, Members, Mutual
Fund/Insurance Services Members, Investment Manager/Agent Members, TPP
Members, TPA Members, TPP/TPA/IMA Settling Entities, Mutual Fund Processors and
Fund Members must compare the data against their records and any discrepancies
must be immediately reported to the Corporation. To the extent necessary or
appropriate, the Corporation may cause an adjustment to be made to the data within
such time as the Corporation determines to be necessary.

SEC. 19. At any time, the Corporation may prohibit one or more orders, money
only related charges or transfer requests from settling through Fund/SERV if the
Corporation, in its discretion, determines that such action is necessary for the protection

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of the Corporation, Members, Mutual Fund/Insurance Services Members, Fund

Members, creditors or investors.

SEC. 20. (a) The Corporation may delete from Fund/SERV any
incompleted Fund/SERV items, with the exception of incompleted ACAT-Fund/SERV
items, upon the withdrawal of a Member or Mutual Fund/Insurance Services Member
from participation in Fund/SERV, but not earlier than five Business Days following
notification to Members and Mutual Fund/Insurance Services Members of such
Member’s or Mutual Fund/Insurance Services Member’s intention to withdraw from
Fund/SERV, where such Member or Mutual Fund/Insurance Services Member
continues as such or is merged into or acquired by another Member or Mutual
Fund/Insurance Services Member which is not a participant in Fund/SERV.

(b) The Corporation may delete from Fund/SERV any incompleted

Fund/SERV items upon the withdrawal of a TPP Member, TPA Member or Investment
Manager/Agent Member from participation in Fund/SERV, but not earlier than five
Business Days following notification to the TPP/TPA/IMA Settling Entity of such TPP
Member’s, TPA Member’s or Investment Manager/Agent Member’s intention to
withdraw from Fund/SERV.

B. Networking

SEC. 1. The Corporation may provide a service to enable Members, Mutual

Fund/Insurance Services Members, Investment Manager/Agent Members, TPA
Members, TPP Members, Mutual Fund Processors and Fund Members to transmit
Fund/SERV Eligible Fund customer account data and/or settle Fund/SERV Eligible
Fund payments, as the case may be, (hereinafter referred to as “Networking
Payments”) between themselves, which service shall be known as NETWORKING.
Networking Payments shall consist of payments other than payments processed thru
Fund/SERV and DTCC Payment aXis. The Corporation may also permit Data Services
Only Members to utilize the Networking service only to request and transmit
Fund/SERV Eligible Fund customer account data.

SEC. 2. Such customer account data if submitted must be transmitted in such

formats and by such times as established by the Corporation from time to time.
Submission of such customer account data to the Corporation, or provided to a Data
Services Only Member shall not relinquish, extinguish or affect any legal or regulatory
rights or obligations of the Member, Mutual Fund/Insurance Services Member, Mutual
Fund Processor, Fund Member, Data Services Only Member, Investment
Manager/Agent Member, TPP Member or TPA Member pertaining to the customer
accounts.

SEC. 3. Settlement of Networking Payments shall occur as follows:

(a) Dividend Payments. Each Fund Member and Mutual Fund Processor
must submit to the Corporation by the time specified by the Corporation, the payable
date in respect of dividend data submitted to the Corporation. If the payable date is a

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Business Day on which banks in New York are open for business (hereinafter referred
to as a “Dividend Payable Date”) settlement will occur on the payable date. If the
payable date is not a Dividend Payable Date, settlement will occur on the next Dividend
Payable Date after the payable date. Each day the Corporation will produce a report
indicating the dividend amounts which will be required to be paid that day and the
following day (hereinafter referred to as the “Dividend Payable Amount”). On a daily
basis, the Fund Members and Mutual Fund Processors must compare the Dividend
Payable Amount against their records and any errors must be reported to the
Corporation in such form and by such time as established by the Corporation from time
to time. The Corporation will report any corrections submitted by the Fund Member and
Mutual Fund Processor to the Member, Mutual Fund/Insurance Services Member,
Investment Manager/Agent Member, TPP Member, TPA Member and corresponding
TPP/TPA/IMA Settling Entity, Fund Member and Mutual Fund Processor, as the case
may be, on the next issued report after receipt by the Corporation of the correction.

(b) Other Networking Payments. On the Business Day prior to the day the
Fund Member and Mutual Fund Processor intends to be debited (hereinafter referred to
as “Debit Day”) the Fund Member and Mutual Fund Processor must submit to the
Corporation, within the time specified by the Corporation, the dollar value of amounts to
be debited against the Fund Member and Mutual Fund Processor (hereinafter referred
to as “Other Payable Amounts”). If the Debit Day is not a Business Day on which banks
in New York are open for business the Debit Day will be the next Business Day the
banks in New York are open for business. Each day the Corporation will produce a
report or reports indicating the Other Payable Amounts which will be required to be paid
that day and the following day.

SEC. 4. On Dividend Payable Date or Debit Day, the Fund Member or Mutual
Fund Processor must pay to the Corporation the Dividend Payable Amount or Other
Payable Amounts as indicated on the applicable report in accordance with Rule 12 and
other provisions of these rules.

On Dividend Payable Date or Debit Day, the Corporation shall credit the
appropriate Member’s, Mutual Fund/Insurance Services Member’s or TPP/TPA/IMA
Settling Entity’s account with the Dividend Payable Amount or Other Payable Amounts
indicated on the applicable report.

SEC. 5. Each Business Day a Fund Member and Mutual Fund Processor may
submit correction data to the Corporation in order to correct a previously submitted
incorrect payment. A Member, Mutual Fund/Insurance Services Member, Investment
Manager/Agent Member, TPP Member, TPA Member or TPP/TPA/IMA Settling Entity
who disagrees with a correction which results in a debit to the Member, Mutual
Fund/Insurance Services Member, Investment Manager/Agent Member or
TPP/TPA/IMA Settling Entity must notify the Corporation within such time as specified
by the Corporation. Upon timely receipt of such notice the Corporation will delete the
correction and such amount must be settled directly between the Member or Mutual
Fund/Insurance Services Member and the Fund Member or Mutual Fund Processor. If
the correction results in a credit to a Fund Member or Mutual Fund Processor, payment

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of such amount shall be made in accordance with Rule 12 and other provisions of these
rules.

SEC. 6. The Corporation will not be responsible for the completeness or

accuracy of any customer account or payment data received from or transmitted to a
Member, Mutual Fund/Insurance Services Member, Fund Member, Data Services Only
Member, Investment Manager/Agent Member, TPP Member or a TPA Member nor for
any errors, omissions or delays which may occur in the absence of gross negligence on
the Corporation’s part, in the transmission of such customer account or payment data to
or from a Member, Mutual Fund/Insurance Services Member, Fund Member, Data
Services Only Member, Investment Manager/Agent Member, TPP Member or a TPA
Member.

C. DTCC Payment aXis

SEC. 1. The Corporation may provide a service to enable Members, Mutual

Fund/Insurance Services Members, Fund Members and Mutual Fund Processors to
transmit commission and fee related data (herein collectively referred to as “Payment
aXis Fee Data”), including with regard to investor accounts held at the Fund Member or
Mutual Fund Processor on an omnibus account basis (“Omnibus”), and to settle such
payments between themselves, which service shall be known as the DTCC Payment
aXis service.

SEC. 2. (a) Payment aXis Fee Data, if submitted, must be transmitted in such
formats and by such times as established by the Corporation from time to time.
Submission of Payment aXis Fee Data to the Corporation shall not relinquish,
extinguish or affect any legal or regulatory rights or obligations of the Member, Mutual
Fund/Insurance Services Member, Fund Members or Mutual Fund Processors
pertaining to the commissions or fee payments.

(b) Payment aXis Fee Data instructing for the settlement of certain
commission and other fee type payments must be initiated and submitted to the
Corporation by the Member, Mutual Fund/Insurance Services Member, Fund Member or
Mutual Fund Processor seeking payment thereof (such commission and other fee types
are collectively referred to as “Payee Initiated Fee Types”). Payee Initiated Fee Types
may include commissions and fees with regard to investor accounts held in Omnibus.
The Corporation will transmit such Payee Initiated Fee Type settlement instructions to
the applicable Member, Mutual Fund/Insurance Services Member, Fund Member or
Mutual Fund Processor from whom payment is being sought (the “Paying Participant”)
in such form and by such times as established by the Corporation from time to time.
The Paying Participant may (i) confirm or reject such Payee Initiated Fee Type
settlement instruction by transmitting a confirmation or rejection to the Corporation in
such form and by such time as established by the Corporation from time to time or (ii)
release settlement as set forth in Section 3 below (either with or without a confirmation).
If the Paying Participant confirms or rejects such Payee Initiated Fee Type settlement
instruction, the Corporation will transmit such confirmation or rejection to the Member,
Mutual Fund/Insurance Services Member, Fund Member or Mutual Fund Processor that

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initiated the Payee Initiated Fee Type settlement instruction. Designation of Payee
Initiated Fee Types shall be made by the Corporation from time to time, and the
Corporation shall provide notice to Members, Mutual Fund/Insurance Services
Members, Fund Members and Mutual Fund Processors from time to time of such
designation.

SEC. 3. Except as otherwise described with regard to Payee Initiated Fee

Types, settlement of commission and fee payments, including settlement of commission
and fee payments with regard to investor accounts held in Omnibus, shall occur as
follows: On the Business Day prior to the day the amount is intended to be debited
(hereinafter referred to as “Debit Day”) the entity submitting the amount must submit to
the Corporation, within the time specified by the Corporation, the dollar value and the
appropriate accounts to which such amount is to be credited and debited. If the Debit
Day is not a Business Day on which banks in New York are open for business the Debit
Day will be the next Business Day the banks in New York are open for business. On
Debit Day, the Corporation will credit and debit the appropriate accounts in accordance
with the instructions of the Member, Mutual Fund/Insurance Services Member, Fund
Member or Mutual Fund Processor. Settlement of payments arising out of such
instructions shall be made in accordance with Rule 12 and other provisions of these
Rules.

SEC. 4. The Corporation will not be responsible for the completeness or

accuracy of any Payment aXis Fee Data, including Payment aXis Fee Data with regard
to investor accounts held in Omnibus, received from or transmitted to a Member, Mutual
Fund/Insurance Services Member, Fund Member or Mutual Fund Processor nor for any
errors, omissions or delays which may occur in the absence of gross negligence on the
Corporation’s part, in the transmission of such Payment aXis Fee Data to or from a
Member, Mutual Fund/Insurance Services Member, Fund Member or Mutual Fund
Processor.

D. Mutual Fund Profile Service

SEC. 1. The Corporation may offer a service to provide Members, Mutual

Fund/Insurance Services Members, Investment Manager/Agent Member, TPP
Members, TPA Members, Data Services Only Members and Fund Members with
Fund/SERV Eligible Fund information (the “MFPS Data”) as the Corporation may
determine from time to time. Such service shall be known as the Mutual Fund Profile
Service (“MFPS”) and will be accomplished in accordance with the provisions of this
Rule.

SEC. 2. Each Member, Mutual Fund/Insurance Services Member, Investment

Manager/Agent Member, TPP Member, TPA Member, Data Services Only Member or
Fund Member that desires access to MFPS must complete and deliver to the
Corporation such agreements as the Corporation may from time to time require.

SEC. 3. The MFPS Data must be submitted to the Corporation in such formats
and by such times as established by the Corporation from time to time. The submission

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of such information to the Corporation shall not relinquish, extinguish or affect any
regulatory or legal rights, remedies or obligations, if any, of Members, Mutual
Fund/Insurance Services Members, Investment Manager/Agent Member, TPP
Members, TPA Members, Data Services Only Members or Fund Members participating
in the MFPS.

SEC. 4. Each Fund member agrees with the Corporation that the Fund Member
will take reasonable steps to validate the accuracy of the MFPS data that it submits to
the Corporation. The Corporation shall not be responsible for the completeness or
accuracy of any MFPS Data nor for any errors, omissions or delays which may occur
relating to the MFPS Data.

SEC. 5. On a regularly scheduled basis, as the Corporation may determine from

time to time, the Corporation may produce scorecards as part of MFPS. Scorecards will
set forth the individual, numerical score issued to each MFPS Data provider and the
combined average numerical score of all MFPS Data providers. The number of
identified Discrepancies (as defined below) within each Discrepancy category, and each
applicable MFPS Data provider’s action or in action with respect to each such
Discrepancy, shall form the basis for the calculation of each score.

As used in this Section, “Discrepancy” means an identified variance between

MFPS Data and the applicable MFPS Data provider’s public filings and/or other
potential MFPS Data discrepancies identified by the Corporation from time to time.

Each MFPS Data provider’s scorecard will contain (i) the individual, numerical
score issued to it, (ii) the number of identified Discrepancies within each Discrepancy
category attributable to such MFPS Data provider and (iii) the combined average
numerical score of all MFPS Data providers. MFPS Data providers will not see the
individual, numerical scores issued to other MFPS Data providers nor the identified
Discrepancies of other MFPS Data providers.

Scorecards distributed to MFPS Data receivers will contain (i) the individual,
numerical score issued to each MFPS Data provider, (ii) the number of identified
Discrepancies within each Discrepancy category attributable to each MFPS Data
provider and (iii) the combined average numerical score of all MFPS Data providers.

The Corporation makes no representation or warranty with respect to the value

or usefulness of any score or scorecard, nor will the Corporation be subject to any
damages or liabilities whatsoever with respect to any Person’s use of or reliance upon
any score or scorecard. In addition, all information contained in the scorecards is
copyrighted and any form of copying, other than for each Member’s, Mutual
Fund/Insurance Services Member’s, Investment Manager/Agent Member’s, TPP
Member’s, TPA Member’s, Data Services Only Member’s or Fund Member’s personal
reference, without the express written permission of the Corporation, is prohibited, and
further distribution or redistribution of the scorecard or any information contained therein
by any means or in any manner is strictly prohibited.

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E. MF Info Xchange

The Corporation shall provide a service (“MF Info Xchange”) to enable Members,
Mutual Fund/Insurance Services Members, Investment Manager/Agent Members, TPP
Members, TPA Members, Data Services Only Members and Fund Members (“data
providers”) to transmit event notifications relating to mutual funds or other pooled
investment entities to other Members or Limited Members and to other third parties
identified by the data providers to receive the event notifications, or to otherwise supply
and provide access to event notification data directly to or from the Corporation through
a data repository. The Corporation may determine from time to time, and shall
announce by Important Notice, which types of event notifications may be transmitted
using MF Info Xchange. The Corporation shall not be responsible for the completeness
or accuracy of any event notifications transmitted using MF Info Xchange nor for any
errors, omissions or delays that may occur relating to the event notifications.

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RULE 53. ALTERNATIVE INVESTMENT PRODUCT SERVICES AND MEMBERS

SEC. 1. General

(a) The Corporation may provide a service to enable entities meeting the
relevant qualifications of Rule 2A (“AIP Members”) to transmit such data and information
related to alternative investment products (“AIP Data”) between themselves and to settle
payments relating to such products (“AIP Payments”) between themselves or as
otherwise provided in this Rule. Such service shall be known as the “AIP Service,” or
“AIP,” and shall be accomplished in accordance with this Rule.

The rights, liabilities and obligations of AIP Members (including AIP Fund
Administrators, defined below) in their capacity as such and in the capacity as a Limited
Member shall be governed by this Rule 53 and relevant provisions of such other Rules
as expressly reference AIP Members or Limited Members. References to a Member,
Mutual Fund/Insurance Services Member, Non-Clearing Member, Municipal
Comparison Only Member, Fund Member, Insurance Carrier/Retirement Services
Member, Investment Manager/Agent Member, TPP Member, TPA Member or Data
Services Only Member shall not apply to an AIP Member in its capacity as such unless
specifically noted in this Rule or in such other Rule as applicable to an AIP Member or
Limited Member.

An AIP Member that participates in the Corporation in another capacity pursuant

to another Rule of this Corporation, or which has entered into an agreement with the
Corporation independent from this Rule, shall continue to have all the rights, liabilities
and obligations set forth in such other Rule or pursuant to such agreement, and such
rights, liabilities and obligations shall be separate from its rights, liabilities and
obligations as an AIP Member. As such, with respect to Members, Mutual
Fund/Insurance Services Members, Non-Clearing Members, Municipal Comparison
Only Members, Fund Members, Insurance Carrier/Retirement Services Members,
Investment Manager/Agent Members, TPP Members, TPA Members or Data Services
Only Members who qualify as AIP Members, this Rule only applies to their activities in
connection with transactions in Eligible AIP Products (as defined in Section 4 of this
Rule).

(b) The only service offered by the Corporation that is available to an AIP
Member in its capacity as such shall be the AIP Service, and such other services or
features thereof that the Corporation may from time to time designate as eligible for
access by an AIP Member.

(c) An AIP Member acting on behalf of, or under authority of, the sponsor,
general partner or any other party responsible for the creation or manufacturing of an
Eligible AIP Product (as defined in Section 4 of this Rule) shall be known as an “AIP
Manufacturer”. An AIP Manufacturer that specifically (i) identifies itself to the Corporation
as an entity engaged under contract to provide administrative services with respect to
one or more Eligible AIP Products and (ii) wishes to be so recognized by the

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Corporation, shall be known as an “AIP Fund Administrator”. In all events, AIP Fund
Administrators are AIP Manufacturers with respect to the AIP Service.

An AIP Member acting on behalf of, or under authority of, a customer or other
investor in an Eligible AIP Product, or otherwise as the contra-side to an AIP
Manufacturer in a transaction (including information processing) with an AIP
Manufacturer, shall be known as an “AIP Distributor”.

(d) In the Corporation’s sole and absolute discretion, and in accordance with
such procedures as the Corporation may establish as it deems necessary or
appropriate from time to time, the Corporation may permit AIP Fund Administrators to
create one or more sub-accounts approved by the Corporation to settle AIP
Payments at the sub-account level (“AIP Settling Sub-Accounts”). All matters,
activities, liabilities and obligations under these Rules with respect to any AIP Settling
Sub-Account, except for settlement of AIP Payments, shall be the responsibility of the
respective AIP Fund Administrator.

Prior to approval of any such AIP Settling Sub-Account, the applicable AIP
Fund Administrator shall provide the Corporation:

(i) Documentation and/or agreements in such form as required by the

Corporation from time to time for the creation of each such AIP Settling
Sub-Account, which shall include (A) the AIP Fund Administrator’s
acknowledgement and agreement that it shall be responsible for all
matters, activities, liabilities and obligations applicable to AIP Members
under these Rules with respect to each such AIP Settling Sub-Account,
except for settlement of AIP Payments, and (B) the AIP Fund
Administrator’s agreement to indemnify the Corporation for any loss,
liability or expense sustained by the Corporation in connection with,
arising from or related to each such AIP Settling Sub-Account, including
with respect to FATCA.

(ii) An agreement, in such form as required by the Corporation from time to

time, stating that the AIP Fund Administrator shall be responsible for (A)
all charges incurred and payments due under Rule 26 for the processing
of AIP Settling Sub-Account transactions through AIP and (B) any other
charges that may be incurred with respect to each such AIP Settling
Sub-Account under Rule 24.

(iii) Documentation and/or agreements in such form as required by the

Corporation from time to time (A) designating the AIP Non-Member Fund
with responsibility for making AIP Payments with respect to each such
AIP Settling Sub-Account, (B) reflecting such AIP Non-Member Fund’s
consent and approval thereof, (C) agreeing that it is the AIP Fund
Administrator’s obligation to notify the AIP Non-Member Fund of such
AIP Non-Member Fund’s daily AIP Payment balance and (D) identifying
that it is the AIP Fund Administrator’s obligation to notify the Corporation

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of any changes in condition to the AIP Non-Member Fund that would

otherwise require notice to the Corporation under Rule 2B (Ongoing
Membership Requirements and Monitoring) or Rule 20 (Insolvency).

(iv) Tax documentation from the applicable AIP Non-Member Fund in such
form as required by the Corporation from time to time. With respect to
any AIP Non-Member Fund that is treated as a non-U.S. entity for U.S.
federal income tax purposes, the AIP Fund Administrator shall provide
the Corporation with an executed Tax Certification from such AIP Non-
Member Fund.

(v) An effective Settling Bank Agreement for such AIP Non-Member Fund.

SEC. 2. Qualifications of AIP Members

(a) An AIP Member or applicant to become such must meet the qualifications
set for in Rule 2A and Addendum B of these Rules.

SEC. 3. Application and Admission

(a) Each applicant to become an AIP Member shall complete and deliver to
the Corporation such documents and information as set forth in Rule 2A of these Rules.

The Corporation shall approve an application to become an AIP Member as set

forth in Rule 2A of these Rules.

SEC. 4. Eligible Alternative Investment Products

(a) Upon application by one or more AIP Members, the Corporation may
designate an alternative investment product as eligible for processing through the AIP
Service (an “Eligible AIP Product”). The Corporation shall maintain a list of all Eligible
AIP Products processed through the Corporation. Alternative investment products that
may be designated as Eligible AIP Products include the following: securities issued by
private pooled investment vehicles (including hedge funds and private equity funds,
among others), interests in commodity pools, securities issued by funds of funds, real
estate investment trust securities, managed futures, managed currency products and
such other alternative investment products as shall be approved by the Corporation
from time to time. An Eligible AIP Product may be a security registered under the
Securities Act of 1933, as amended, or a security exempt from registration thereunder

(b) The Corporation may elect to decline to designate an alternative

investment product as an Eligible AIP Product, or may withdraw an alternative
investment product’s designation as an Eligible AIP Product, at any time it deems it to
be in the interests of the Corporation and its participants.

(c) By submitting an Eligible AIP Product for processing through the

Corporation, an AIP Manufacturer is representing to the Corporation that the offer and
sale of such Eligible AIP Product complies with all applicable requirements under

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federal securities law and such other laws as may apply, whether state, federal or those
of a jurisdiction outside the United States, for so long as such Eligible AIP Product is
processed through the Corporation.

SEC. 5. Obligations and Rights applicable to AIP Member

(a) The rights and obligations applicable to an AIP Member shall be as set
forth in these Rules as applicable to an AIP Member or Limited Member.

(b) An AIP Member shall not be required to pay a Clearing Fund contribution
to the Corporation in respect of its use of AIP Services.

(c) An AIP Member shall not be responsible for loss allocations or other loss
or liability to the Corporation pursuant to the Rules or Procedure of the Corporation,
except for such losses or liabilities as are set forth expressly in this Rule.

(d) The Corporation shall not be a party to a transaction (whether the

communication of data or payments of money) processed through the AIP Service and
shall not assume any obligations or liability in connection therewith, other than the
obligation to pay AIP Credit Balances and AIP Adjusted Credit Balances in accordance
with this Rule.

(e) Tax Considerations – AIP Settling Sub-Accounts

(i) AIP Fund Administrators with AIP Settling Sub-Accounts shall be

responsible for obtaining such tax documentation from their
applicable AIP Non-Member Funds as requested by the
Corporation from time to time. With respect to AIP Non-Member
Funds that are treated as non-U.S. entities for U.S. federal income
tax purposes, the applicable AIP Fund Administrator shall be
responsible for obtaining the necessary Tax Certifications as
requested by the Corporation from time to time. Notwithstanding
any other provision of these Rules, failure to provide such tax
documentation, including Tax Certifications to the extent
applicable, in the manner and timeframes set forth by the
Corporation from time to time will result in revocation of the
Corporation’s approval, in the Corporation’s sole and absolute
discretion, for such AIP Non-Member Fund to settle AIP
Payments through AIP.

(ii) AIP Fund Administrators with AIP Settling Sub-Accounts shall

indemnify the Corporation for any loss, liability or expense
sustained by the Corporation in connection with, arising from or
related to FATCA in respect of such AIP Settling Sub-Accounts.

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SEC. 6. Transmission of AIP Data

(a) AIP Data transmitted through the AIP Service may include data relating to
subscriptions and purchases; redemptions, withdrawals and tender offers; commissions
and other fees; distributions; exchange transactions; transfers; position reporting;
product information; account maintenance, valuation, and activity and such other data
as may be established by the Corporation from time to time.

(b) AIP Data must be submitted to the Corporation in such formats and by
such times as established by the Corporation from time to time, and, depending upon
the type of AIP Data submitted, may require a response from the receiver of AIP Data.

The Corporation will review AIP Data received from AIP Members for such
information as the Corporation determines from time to time to be necessary. If the
AIP Data does not contain the information required by the Corporation, the
Corporation will reject the AIP Data and will advise the appropriate AIP Member in
such form and by such time as established by the Corporation from time to time.

If the AIP Data appears to contain the information required by the Corporation,
the Corporation will transmit the AIP Data to the appropriate AIP Member in such form
and by such time as established by the Corporation from time to time, subject to any
rights the Corporation may have under any applicable Rules and Procedures of the
Corporation.

Pursuant to the procedures established by the Corporation from time to time,

the Corporation will notify, in such form and at such times as established by the
Corporation from time to time, the AIP Member in respect of certain AIP Data which
requires a response, if no such response has been received by the Corporation.

Submission of certain AIP Data may require a confirming instruction from the
contra side AIP Member.

(c) Pursuant to the procedures established by the Corporation from time to

time, an AIP Member submitting AIP Data can withdraw certain submitted AIP Data by
submitting a withdrawal instruction to the Corporation, in such form and by such time as
established by the Corporation from time to time. Withdrawal of certain AIP Data may
require a confirming instruction from the contra side AIP Member. Upon receipt of a
properly submitted withdrawal instruction, the Corporation will (i) delete the withdrawn
AIP Data and (ii) notify the appropriate party of the withdrawn AIP Data in such form
and by such time as established by the Corporation from time to time.

(d) Notwithstanding the foregoing, nothing prohibits an AIP Member from

requiring data or information in connection with transactions in Eligible AIP Products in
addition to AIP Data that has been transmitted through the Corporation.

(e) Submission of AIP Data to, or alteration or withdrawal of AIP Data from,
the Corporation shall not relinquish, extinguish or affect any legal or regulatory right or
obligation of the AIP Member existing outside of this Rule.

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(f) The Corporation will not be responsible for the completeness or accuracy
of the AIP Data received from or transmitted to any AIP Member through the AIP
Service, nor shall the Corporation, absent gross negligence on the Corporation’s part,
be responsible for any errors, omissions or delays that may occur in the transmission of
AIP Data to or from any AIP Member.

SEC. 7. Settlement of AIP Payments

(a) The Corporation may provide a facility for the settlement of AIP Payments
pursuant to such settlement procedures as the Corporation shall adopt. AIP Payments
may include amounts to be transmitted in respect of subscriptions and purchases;
redemptions, withdrawals and tender offers; commissions and other transaction fees;
distributions; exchange transactions; transfers; and such other transactions in
connection with the processing and settlement of transactions in Eligible AIP Products
as the Corporation may determine from time to time. Settlement of AIP Payments
through the Corporation shall be in same day funds, effected in accordance with the
provisions of this Rule, Rule 55 and such procedures as the Corporation may establish
from time to time. The Corporation shall not guarantee the payment of AIP Payments to
any AIP Member (including to any AIP Fund Administrator’s AIP Settling Sub-Account).
For the avoidance of doubt, the Corporation shall not guarantee the payment of AIP
Payments to any AIP Non-Member Fund. Settlement of all payments and transactions
in respect of Eligible AIP Products which do not settle through the facilities of the
Corporation are the responsibility of the parties thereto and are not subject to the
provisions of this Rule.

(b) An AIP Member (including an AIP Fund Administrator with respect to any
AIP Settling Sub-Account thereof) may initiate an instruction for the settlement of AIP
Payments on a certain date by submitting AIP Data that indicates settlement of AIP
Payments is to take place through the Corporation pursuant to the AIP Service, in
accordance with procedures established by the Corporation from time to time. Unless
otherwise stated in such procedures, settlement of AIP Payments shall require a
concurring instruction from the contra side AIP Member (including the AIP Fund
Administrator with respect to any contra side AIP Settling Sub-Account thereof).

Unless otherwise stated in procedures established by the Corporation, AIP

Payments submitted for settlement through the Corporation on a Business Day
designated by the AIP Member (including the AIP Fund Administrator with respect to
any AIP Settling Sub-Account thereof) (the “Settlement Date”) shall be submitted
(and, if applicable, agreed by the contra side AIP Member (including the AIP Fund
Administrator with respect to any contra side AIP Settling Sub-Account thereof)), no
later than the times established by the Corporation for this purpose on the Business
Day prior to Settlement Date (“Settlement Date minus 1”). The references to
Settlement Date in this Rule refer to settlement of AIP Payments through the
settlement facilities of the Corporation and do not define the settlement date of
payment or delivery obligations between the parties for purposes outside of the AIP
Service.

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(c) The Corporation shall maintain both a credit balance and a debit balance
for each AIP Member’s AIP account (including each AIP Settling Sub-Account). All AIP
Payment amounts made through the AIP Service shall be credited and debited, as
applicable, to the respective credit and debit balances of the AIP Member’s AIP account
involved in the AIP transaction (including AIP Settling Sub-Accounts), for settlement on
Settlement Date. Posting of a credit to an AIP Member’s account’s (or AIP Settling Sub-
Account’s) credit balance shall always be accompanied by a corresponding debit posted
to the debit balance of the contra side AIP Member’s AIP account (or AIP Settling Sub-
Account). Credit balances and debit balances posted to any AIP Member’s respective
account (or AIP Settling Sub-Account) will not be netted or offset against one another,
but will be maintained on a gross credit and gross debit basis. AIP Payments will not be
netted or offset against any other type of transaction settled through the facilities of the
Corporation.

(d) An AIP Member submitting or receiving instructions for an AIP Payment

(including an AIP Fund Administrator with respect to any AIP Settling Sub-Account
thereof) may delete such instruction for AIP Payment from settling through the
Corporation by submitting a deletion instruction to the Corporation in accordance with
such procedures as are established by the Corporation from time to time. Unless
otherwise stated in the procedures established by the Corporation, a deletion instruction
will require a concurring instruction from the contra side AIP Member. To be effective,
such deletion instruction must be submitted (and, if applicable, agreed by the contra
side AIP Member) no later than Settlement Date minus 1. Upon receipt of a properly
submitted deletion instruction, the Corporation will delete the appropriate credit and
debit amounts from the respective balances of the AIP Members’ accounts and AIP
Settling Sub-Accounts involved in the transaction.

(e) (i) In general, on Settlement Date minus 1, at the time established by

the Corporation for this purpose, the Corporation shall notify each AIP Member and its
AIP Settling Bank of such respective aggregate gross credit balance and aggregate
gross debit balance amounts that are anticipated for settlement of its AIP Payment
amounts on Settlement Date, together with details on the credits and debits comprising
such aggregate balances (the “Preliminary Settlement Report”).

(ii) With respect to AIP Settling Sub-Accounts, on Settlement Date

minus 1, at the time established by the Corporation for this purpose, the Corporation
shall notify (A) each applicable AIP Fund Administrator and (B) each applicable AIP
Settling Bank, in each case, of the respective aggregate gross credit balance and
aggregate gross debit balance amounts that are anticipated for settlement on
Settlement Date, together with a Preliminary Settlement Report. The Corporation shall
not notify, and shall not be responsible for notifying, any AIP Non-Member Fund of any
aggregate gross credit balance or aggregate gross debit balance amounts with respect
to any AIP Settling Sub-Account. It is the AIP Fund Administrator’s obligation to notify
each applicable AIP Non-Member Fund of its respective aggregate gross credit
balance and aggregate gross debit balance amounts that are anticipated for settlement
on Settlement Date.

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(f) The Corporation shall establish a modification period after the Preliminary
Settlement Report is issued, during which an AIP Member (including an AIP Fund
Administrator with respect to any AIP Settling Sub-Account thereof) may send
instructions to delete any particular AIP Payment in accordance with procedures
established by the Corporation. Certain deletion instructions may require submission of
an agreement instruction by the contra side AIP Member (including the AIP Fund
Administrator with respect to any contra side AIP Settling Sub-Account thereof). At the
conclusion of the modification period, at the time established by the Corporation for this
purpose, the Corporation shall notify each AIP Member, including each AIP Fund
Administrator with respect to any AIP Settling Sub-Account, of its respective aggregate
gross debit and aggregate gross credit balances for settlement (“AIP Debit Balance”
and “AIP Credit Balance”, respectively), together with details on the credits and debits
comprising such aggregate balances (“Final Settlement Reports”). The Corporation
shall not notify, and shall not be responsible for notifying, any AIP Non-Member Fund of
any AIP Debit Balance or any AIP Credit Balance with respect to any AIP Settling Sub-
Account. It is the AIP Fund Administrator’s obligation to notify each applicable AIP Non-
Member Fund of its respective AIP Debit Balance and AIP Credit Balance.

(g) Settlement shall take place in same day funds in accordance with the
Corporation’s procedures applicable to AIP settlement. Unless otherwise approved by
the Corporation, settlement payments shall be transmitted through AIP Settling Banks.

AIP Debit Balances shall be payable on Settlement Date, at the time

established by the Corporation for this purpose. On Settlement Date, subsequent to
the time at which AIP Debit Balances are payable, the Corporation shall pay AIP
Credit Balances to the applicable contra side AIP Members’ accounts and contra side
AIP Settling Sub-Accounts for which AIP Debit Balances were received by the
Corporation, and shall pay AIP Adjusted Credit Balances if and to the extent
applicable under the following paragraph.

At any time that the Corporation fails to receive payment in the amount of an
AIP Member’s or AIP Settling Sub-Account’s AIP Debit Balance, the Corporation will
reverse the corresponding amounts previously credited to the AIP Credit Balances of
the contra side AIP Members and contra side AIP Settling Sub-Accounts. The
Corporation shall notify the contra side AIP Members (including AIP Fund
Administrators with respect to contra side AIP Settling Sub Accounts) of the amounts
and details of such credit reversals and shall issue a revised settlement report in
respect of the AIP Credit Balances as so reduced (“AIP Adjusted Credit Balances”).

A failure in payment of an AIP Settlement Debit Balance shall not be deemed a

default in payment to the Corporation under the Rules of the Corporation or otherwise.
The Corporation may establish fees for such late payment or nonpayment and may
establish procedures for limiting or excluding an AIP Member, including an AIP Fund
Administrator with respect to any AIP Settling Sub-Account thereof, from using the
Corporation’s AIP Services in the event of a pre-established number of instances of
late payment or nonpayment, pursuant to procedures established by the Corporation

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on a nondiscriminatory basis and communicated to AIP Members in advance of

effectiveness.

(h) Unless otherwise permitted by the Corporation, each AIP Member (and
each AIP Non-Member Fund with respect to AIP Settling Sub-Accounts) shall appoint
an AIP Settling Bank for the purpose of settling with the Corporation on behalf of the
AIP Member or the AIP Settling Sub-Account pursuant to a Settling Bank Agreement.
Settlement shall occur in same-day funds, in accordance with the procedures
established by the Corporation. An AIP Settling Bank may settle for one or more AIP
Members, and for one or more AIP Non-Member Funds, and may settle for itself. An
AIP Settling Bank may refuse to settle for an AIP Member or an AIP Non-Member Fund
by notifying the Corporation in the manner and prior to the time on Settlement Date set
forth in the AIP settlement procedures.

(i) At any time, the Corporation may prohibit any payment from settling
through the Corporation if the Corporation, in its discretion, determines that such action
is necessary for the protection of the Corporation and its Members. The
Corporation shall not be liable for delays in settlement due to operational factors or
otherwise.

SEC. 8. Document Transmission

(a) The Corporation may provide a service to enable AIP Members to

electronically transmit imaged documents, signatures and forms relating to alternative
investment products, including without limitation documents relating to customers of an
AIP Member (“AIP Attachments”). AIP Members may, by agreements among
themselves, establish parameters regarding AIP Attachments such as requirements,
obligations and the legal effect of the transmission of AIP Attachments as between
themselves. The Corporation shall not review AIP Attachments, shall not be a party to
any applicable agreements between AIP Members relating to AIP Attachments, and
shall not provide repository services for AIP Attachments.

SEC. 9. Designation of “Broker-Controlled” and “Customer-Controlled” Accounts

(a) AIP Data includes the designation of a specified AIP Distributor’s

customer account as “broker-controlled” or “customer-controlled” in respect of an AIP
Manufacturer’s Eligible AIP Product.

(b) For so long as any specified customer account is designated as “broker-

controlled” by the applicable AIP Manufacturer, such AIP Manufacturer shall be making
continual and ongoing representations and assurances to the controlling AIP Distributor
with respect to such customer account that:

(i) the Eligible AIP Product securities held (or to be held) in such
customer account are not subject to any right, charge, security
interest, lien or claim of any kind in favor of such AIP Manufacturer
or any person claiming through such AIP Manufacturer;

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(ii) to the knowledge of such AIP Manufacturer, there are no

substantial problems of an operational nature which such AIP
Manufacturer is experiencing or which may endanger the interest of
investors in the Eligible AIP Product;

(iii) the Eligible AIP Product securities held (or to be held) in such
customer account are registered with the SEC pursuant to the
Securities Act of 1933, as amended, are exempt from such
registration, or are not required to be registered;

(iv) the Eligible AIP Product securities held in such customer account
(or to be held in such account) are registered on the books and
records of such AIP Manufacturer, or its designee, in the name of
the controlling AIP Distributor, on behalf of its customer;

(v) in the case of Eligible AIP Product securities issued outside of the
United States, such AIP Manufacturer does not require the
controlling AIP Distributor, or any of its customers, to pay any fees
other than for safe custody or administration as a condition for the
transfer of the Eligible AIP Product securities; and

(vi) such AIP Manufacturer understands and acknowledges that the

controlling AIP Distributor may be relying on the above
representations in order to establish custody in accordance with
Rule 15c3-3 of the Exchange Act, and that failure to comply with
the above representations may require that the controlling AIP
Distributor remove the Eligible AIP Product securities from the
applicable customer’s brokerage account.

The above AIP Manufacturer representations and assurances are collectively

referred to in this Rule as the “AIP Manufacturer Representations and Assurances”.

(c) Each AIP Distributor that is a Registered-Broker Dealer and that is relying
on a specified AIP Manufacturer’s Representations and Assurances with respect to a
customer’s account, shall, for so long as the applicable “broker-controlled” designation
remains in place, be continually stating that:

(i) such AIP Distributor carries those Eligible AIP Product securities
“long” in such customer’s account;

(ii) such AIP Distributor reflects all share positions of the applicable
Eligible AIP Product separately in such AIP Distributor’s securities
records or ledgers maintained pursuant to Rule 17a-3 of the
Exchange Act;

(iii) such AIP Distributor maintains in a separate file a current list of all
AIP Manufacturers of which Eligible AIP Product securities are
carried on such AIP Distributor’s books and records, including the

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name, telephone number and address of a contact person at each

AIP Manufacturer; and

(iv) such AIP Distributor is not aware of any substantial problems of an

operational nature which the AIP Service or the applicable AIP
Manufacturer or issuer (if different) may be experiencing and which
may endanger the interests of the customer.

The above AIP Distributor statements are collectively referred to in this Rule as
the “AIP Distributor Statements”.

(d) If an account designation within the AIP Service is changed from “broker-
controlled” to “customer-controlled,” the above AIP Manufacturer Representations and
Assurances and AIP Distributor Statements shall no longer apply to the relevant AIP
Members.

(e) Each AIP Distributor and each AIP Manufacturer agrees that any dispute
arising between them under this Section shall be resolved directly between them, and
that the Corporation shall not be made a party to any such dispute and shall have no
responsibility with respect to the resolution thereof.

SEC. 10. Limitations on Liability

(a) Notwithstanding any other provision in the Rules of the Corporation: The
Corporation will not be liable for any action taken, or any delay or failure to take any
action, hereunder or otherwise to fulfill the Corporation’s obligations to its AIP Members,
other than for losses caused directly by the Corporation’s gross negligence, willful
misconduct, or violation of federal securities laws for which there is a private right of
action. Under no circumstances will the Corporation be liable for the acts, delays,
omissions, bankruptcy, or insolvency, of any third party, including, without limitation, any
depository, custodian, sub-custodian, AIP Settling Bank, data communication service,
AIP Non-Member Fund or delivery service (“Third Party”), unless the Corporation was
grossly negligent, engaged in willful misconduct, or in violation of federal securities laws
for which there is a private right of action in selecting such Third Party.

(b) Under no circumstances will the Corporation be liable for any indirect,
consequential, incidental, special, punitive or exemplary loss or damage (including, but
not limited to, loss of business, loss of profits, trading losses, loss of opportunity and loss
of use) howsoever suffered or incurred, regardless of whether the Corporation has been
advised of the possibility of such damages or whether such damages otherwise could
have been foreseen or prevented.

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RULE 54. DTCC LIMIT MONITORING RISK MANAGEMENT TOOL

SEC. 1. General

NSCC may provide its Members with a risk management tool called DTCC Limit
Monitoring that will enable Members to monitor trading activity on an intraday basis of
their organizations and/or their correspondent firms through review of post-trade data.
DTCC Limit Monitoring will be available to all Members.

DTCC Limit Monitoring will provide Members with: (i) post-trade data relating to
unsettled equity and debt securities trades for a given day that have been compared or
recorded through the Corporation’s trade capture mechanisms on that day (“LM Trade
Date Data”), and (ii) other information as provided in this Rule and the DTCC Limit
Monitoring Procedure. The trade capture mechanisms utilized in the production of LM
Trade Date Data shall be as determined by the Corporation from time to time.

A Member is able to access LM Trade Date Data and other information through
DTCC Limit Monitoring only with respect to its own account(s) at the Corporation.
Through the utilization of filtering criteria known as “Risk Entities”, a Member can define
activity it seeks to monitor through the risk management tool, including that of its
correspondents, or other entities or groups for which LM Trade Date Data is processed
through the Members’ account, including relating to subgroups within its own business. 1

Members using the tool will have the ability to input or load start of day and/or
intra-day position data representing open activity from prior days into DTCC Limit
Monitoring on their own (“LM Member-provided Data”) (LM Trade Date Data and LM
Member-provided Data shall collectively be referred to as “LM Transaction Data”).
Through its definition of Risk Entities, and as otherwise provided in the Procedures, a
Member may create rules for the aggregation of LM Transaction Data, set parameters
for the monitoring of each Risk Entities’ activity in relation to LM Transaction Data, and
receive alerts for the display of parameter brakes relating to the LM Transaction Data.
These functions, and the responsibilities of the Corporation and Members with respect
to DTCC Limit Monitoring are further described in the DTCC Limit Monitoring Procedure
(Procedure XVII).

1 The Corporation does not distinguish a Member’s overall activity from that of the Member’s customers
or other groups. Therefore, a Member’s ability to receive LM Trade Date Data organized by Risk
Entity is entirely dependent upon the Member’s provision of defining criteria in accordance with this
Rule and the DTCC Limit Monitoring Procedure.

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SEC. 2. No Impact on Trade Guaranty and Other Provisions

Neither reports nor data supplied to Members through DTCC Limit Monitoring,
nor the timing of their distribution, will impact the timing, status, or effectiveness of a
trade guaranty, or lack thereof, of any transaction in CNS Securities or Balance Order
Securities. Furthermore, the provision of information or data to Members, or lack
thereof, through DTCC Limit Monitoring will not be deemed to indicate or have any
bearing on the status of any transaction, including, but not limited to, as compared,
locked-in, validated, guaranteed, or not guaranteed. Any Member that registers for
DTCC Limit Monitoring shall indemnify the Corporation, and any of its employees,
officers, directors, shareholders, agents, and participants who may sustain any loss,
liability, or expense as a result of any act or omission by the Member made in reliance
upon data or information furnished through DTCC Limit Monitoring to the Member
(whether derived from LM Trade Date Data, LM Member-provided Data, or LM
Transaction Data).

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RULE 55. SETTLING BANKS AND AIP SETTLING BANKS

SEC. 1. A Settling Bank shall be a Member or a Settling Bank Only Member. An

AIP Settling Bank shall be a Member or a Settling Bank Only Member. Each Settling
Bank agrees to abide by these Rules and Procedures and shall enter into a Settling
Bank Agreement with the Corporation and each Member, Mutual Fund/Insurance
Services Member, Insurance Carrier/Retirement Services Member and Fund Member
which the Settling Bank represents. Each AIP Settling Bank agrees to abide by these
Rules and Procedures and shall enter into a Settling Bank Agreement with the
Corporation and each AIP Member and AIP Non-Member Fund (with respect to AIP
Settling Sub-Accounts) which the AIP Settling Bank represents.

SEC. 2. Each Settling Bank shall settle with the Corporation on a net-net basis
on each Business Day: the Net Credit Balance of each participant that settles through
such Settling Bank and has a Net Credit Balance on that Business Day and the Net
Debit Balance of each participant that settles through the same Settling Bank and has a
Net Debit Balance on that Business Day will be aggregated with the Net Debit Balance
or Net Credit Balance on that Business Day of the Settling Bank itself, if any, and all
such balances will be netted to a single net-net debit balance or net-net credit balance
for the Settling Bank for that business day. Throughout each Business Day the
Corporation will provide each Settling Bank with reports of the Net Debit Balance or Net
Credit Balance in the Settlement account of each participant which the Settling Bank
represents and the arithmetic sum of these amounts. The Settling Bank will be
responsible for collecting the Net Debit Balances from, and paying the Net Credit
Balances to, participants represented by the Settling Bank.

SEC. 3. A Settling Bank may refuse to settle for one or more of its participants
(but not for less than all of a given participant’s accounts) in the manner and at the time
specified in the Procedures (a “Refusal”). The Settling Bank shall, if it has a net-net
debit after any Refusal, pay the amount thereof to the Corporation’s account at the bank
specified by the Corporation and in the manner provided in the Procedures, by the time
specified in the Procedures and the participant for whom the Settling Bank has refused
to settle shall pay the Corporation, by Fedwire, the amount of its Net Debit Balance.

SEC. 4. A Member, Mutual Fund/Insurance Services Member, Insurance

Carrier/Retirement Services Member or Fund Member will be deemed to have failed to
settle when the Corporation receives a Refusal from such participant’s Settling Bank
and the participant has failed to pay its Net Debit Balance (or has so failed to pay its Net
Debit Balance if permitted by the Corporation to settle otherwise than through a Settling
Bank), or when its Settling Bank has failed to pay its net-net debit balance by the time
specified in the Procedures.

SEC. 5. If a Settling Bank or, the participant in the case of a Refusal, fails to
settle in the manner and at the time prescribed in the Procedures, the Settling Bank or,
the participant in the case of a Refusal, will be charged interest on the amount of the
required payment calculated in the manner specified in the Procedures and the charge
shall be made to the Settling Bank’s, or in the case of a Refusal the participant’s,

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account with the Corporation. In the event of the insolvency of a Settling Bank the
charge shall be made against the Settling Bank’s member account to the extent
sufficient collateral exits in the account; any remaining charge will be made pro rata
against the other Members, Mutual Fund/Insurance Services Members, Insurance
Carrier/Retirement Services Members or Fund Members represented by that Settling
Bank. The Corporation may also assess penalties against a Settling Bank or, in the
case of a Refusal, the participant as specified in the Procedures, in the event the
Settling Bank or, in the case of a Refusal, the participant, fails to settle.

SEC. 6. A Settling Bank shall not terminate its status as a Settling Bank and
shall not terminate its representation of a Member, Mutual Fund/Insurance Services
Member, Insurance Carrier/Retirement Services Member or Fund Member without
having given 10 Business Days advance written notice thereof to the Corporation. No
Settling Bank shall commence representation of any such participant without having
given 5 Business Days advance written notice thereof to the Corporation.

SEC. 7. In the event the Settling Bank fails to settle in the manner and at the
time prescribed in the Procedures, due to the insolvency or other cause, each Member,
Mutual Fund/Insurance Services Member, Insurance Carrier/Retirement Services
Member and Fund Member represented by that Settling Bank shall be obligated to the
Corporation for its Net Debit Balance, and the Corporation shall pay to such participant
the amount of its Net Credit Balance; provided, however, if the Corporation has made
payment to the failed Settling Bank the Corporation shall have no obligation to any such
participant for a Net Credit Balance.

SEC. 8. Based on its judgment that adequate cause exits to do so, the
Corporation may at any time terminate a Member’s right to act as a Settling Bank.

SEC. 9. (a) Each AIP Settling Bank shall settle with the Corporation on a gross
basis on each Business Day: the AIP Debit Balance and AIP Credit Balance (or, if
applicable, the AIP Adjusted Credit Balance) of each AIP Member and AIP Non-
Member Fund which settles through such AIP Settling Bank. Each AIP Debit Balance of
each AIP Member and each AIP Non-Member Fund which settles through the same AIP
Settling Bank and has a AIP Debit Balance on that Business Day will be aggregated
with the AIP Debit Balance on that Business Day of the AIP Settling Bank itself, if any,
and all such balances will be aggregated to a single gross debit balance for the AIP
Settling Bank for that Business Day. Each AIP Credit Balance (or if applicable, AIP
Adjusted Credit Balance) of each AIP Member and each AIP Non-Member Fund which
settles through the same AIP Settling Bank and has an AIP Credit Balance (or, if
applicable AIP Adjusted Credit Balance) on that Business Day will be aggregated with
the AIP Credit Balance (or AIP Adjusted Credit Balance, as applicable) on that Business
Day of the AIP Settling Bank itself, if any, and all such balances shall be aggregated to
a single gross credit balance for the AIP Settling Bank for that Business Day.
Throughout each Business Day the Corporation will provide each AIP Settling Bank with
reports of the debit balance or credit balance in the AIP settlement account of each AIP
Member (including AIP Settling Sub-Account) which the AIP Settling Bank represents
and the arithmetic sum of these amounts. The AIP Settling Bank will be responsible for

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collecting the AIP Debit Balances from, and paying the AIP Credit Balances (or, if
applicable, the AIP Adjusted Credit Balances) to AIP Members and AIP Non-Member
Funds represented by the AIP Settling Bank.

(b) DTC will act as “Settlement Agent” (as that term is used in the Federal
Reserve Board’s Operating Circular 12 and in the Corporation’s Rules & Procedures)
for the Corporation and the AIP Settling Banks. By the AIP Acknowledgment Cutoff
Time, AIP Settling Banks, without exception, must acknowledge to the Settlement Agent
via the terminal system their AIP Debit Balance and their AIP Credit Balance and (1)
their intention to settle with the Corporation their AIP Debit Balance and their AIP Credit
Balance by the settlement deadlines, or (2) their refusal to settle for particular AIP
Members or AIP Non-Member Funds.

(c) If an AIP Settling Bank does not, by the AIP Acknowledgement Cutoff
Time, either: (i) affirmatively acknowledge its AIP Debit Balance and AIP Credit
Balance or (ii) notify the Settlement Agent that it refuses to settle for one or more AIP
Members or AIP Non-Member Funds for which it is the designated AIP Settling Bank,
then, at the AIP Acknowledgement Cutoff Time, the AIP Settling Bank is deemed to
have acknowledged its AIP Debit Balance and AIP Credit Balance. If the AIP Settling
Bank has an AIP Debit Balance, then the AIP Settling Bank’s account at the FRB will be
debited; if the AIP Settling Bank has an AIP Credit Balance, then the AIP Settling
Bank’s FRB account will be credited.

(d) If the AIP Settling Bank sends refusal messages for one or more AIP
Members or AIP Non-Member Funds for which it is the designated AIP Settling Bank,
the Settlement Agent shall remove from the AIP Debit Balance and AIP Credit Balance
the settlement balance(s) of the AIP Member(s) or AIP Non-Member Fund(s) for which
the Settling Bank has refused to settle, and will provide the AIP Settling Bank with a
new AIP Credit Balance and AIP Debit Balance. The AIP Settling Bank must
acknowledge to the Settlement Agent by the AIP Acknowledgement Cutoff Time via the
terminal system its new AIP Debit Balance and AIP Credit Balance and its intention to
settle such amounts with the Corporation by the settlement deadlines. This new AIP
Debit Balance and AIP Credit Balance shall be subject to subsection (c) above.

(e) The Settlement Agent will attempt to contact the AIP Settling Bank if no
acknowledgment or notice of a refusal to settle is received by the AIP
Acknowledgement Cutoff Time. If (x) the Settlement Agent is able to contact the AIP
Settling Bank, and (y) the AIP Settling Bank notifies the Settlement Agent that it cannot,
at that time, acknowledge or refuse its AIP Debit Balance and AIP Credit Balance, then
the Settling Bank will not be deemed to have acknowledged its AIP Debit Balance and
AIP Credit Balance. If the AIP Settling Bank cannot be reached, the AIP Settling Bank
will be deemed to have acknowledged its AIP Debit Balance and AIP Credit Balance.

The Corporation may exclude an AIP Settling Bank’s AIP Debit Balance and AIP
Credit Balance from the FRB’s National Settlement Service (“NSS”) file if the AIP
Settling Bank (A) does not acknowledge its AIP Debit Balance and AIP Credit Balance
by the AIP Acknowledgement Cutoff Time or does not acknowledge its new AIP Debit

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Balance and AIP Credit Balance pursuant to subsection (d) above by the AIP
Acknowledgement Cutoff Time and (B) is not deemed to have acknowledged its AIP
Debit Balance and AIP Credit Balance or its new AIP Debit Balance and AIP Credit
Balance pursuant to subsection (d) above because the AIP Settling Bank has notified
the Settlement Agent that it is unable to affirmatively acknowledge its AIP Debit Balance
and AIP Credit Balance or that it refuses to settle on behalf of an AIP Members or AIP
Non-Member Funds.

(f) An AIP Settling Bank that cannot send an acknowledgment or refusal

message to the Settlement Agent may contact the Settlement Agent and instruct the
Settlement Agent to act on its behalf.

(g) The Settlement Agent uses the most recent contact information provided
by the AIP Settling Bank to the Settlement Agent. Each AIP Settling Bank must ensure
that it maintains up-to-date and accurate contact details with the Settlement Agent on
an ongoing basis when previously provided contact details are no longer accurate, to
facilitate the Settlement Agent’s ability to contact an AIP Settling Bank regarding this
settlement process and any settlement issues.

SEC. 10. An AIP Settling Bank may refuse to settle for one or more of its AIP
Members and/or AIP Non-Member Funds (but not for less than all of a given AIP
Member’s or AIP Non-Member Fund’s accounts) in the manner and at the time specified
in Section 9 above (an “AIP Refusal”). The AIP Settling Bank shall, if it has an AIP Debit
Balance remaining after any AIP Refusal, pay the amount thereof to the Corporation’s
account at the bank specified by the Corporation or the Settlement Agent and in the
manner and by the time specified in accordance with settlement procedures adopted by
the Corporation or the Settlement Agent and the AIP Member or AIP Non-Member Fund
for whom the AIP Settling Bank has refused to settle may pay the Corporation, by
Fedwire, the amount of its remaining AIP Debit Balance in accordance with settlement
procedures adopted by the Corporation or the Settlement Agent.

SEC. 11. An AIP Member (including an AIP Fund Administrator with respect to
its AIP Settling Sub-Accounts) will be deemed to have failed to settle an AIP Debit
Balance when the Corporation receives an AIP Refusal from the applicable AIP Settling
Bank and the AIP Member (including the applicable AIP Fund Administrator with respect
to its AIP Settling Sub-Accounts or the AIP Non-Member Fund in respect thereof) has
failed to pay the AIP Debit Balance (or has so failed to pay its AIP Debit Balance if
permitted by the Corporation to settle otherwise than through an AIP Settling Bank) or
when its AIP Settling Bank has failed to pay its debit balance by the time specified in the
Procedures.

SEC. 12. If an AIP Settling Bank or the AIP Member (including the AIP Fund
Administrator with respect to its AIP Settling Sub-Accounts) in the case of an AIP
Refusal, fails to settle in the manner and at the time prescribed in the Procedures, the
Corporation shall reduce the AIP Credit Balances of all contra side AIP Members’
accounts (including contra side AIP Settling Sub-Accounts) having an AIP Credit
Balance on that Business Day as a result of transactions with the AIP Member(s) and/or

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AIP Settling Sub-Account(s) which AIP Debit Balance failed to settle, in accordance with
Rule 53 and the Procedures of the Corporation. The AIP Settling Bank or AIP Member
(including an AIP Fund Administrator with respect to its AIP Settling Sub-Accounts) will
not be deemed to have defaulted in a payment obligation to the Corporation. The
Corporation may assess penalties against an AIP Settling Bank or, the AIP Member
(including the AIP Fund Administrator with respect to its AIP Settling Sub-Accounts) as
specified in the Procedures, in the event the AIP Settling Bank or, in the case of an AIP
Refusal, the AIP Member (including AIP Fund Administrators with respect to AIP
Settling Sub-Accounts) fails to settle.

SEC. 13. An AIP Settling Bank shall not terminate its status as an AIP Settling
Bank and shall not terminate its representation of a AIP Member or AIP Non-Member
Fund without having given 10 Business Days advance written notice thereof to the
Corporation. No AIP Settling Bank shall commence representation of a AIP Member or
AIP Non-Member Fund without having given 5 Business Days advance written notice
thereof to the Corporation.

SEC. 14. In the event the AIP Settling Bank fails to settle in the manner and at
the time prescribed in the Procedures, due to the insolvency or other cause, the
Corporation in its discretion may permit an AIP Member or an AIP Non-Member Fund
represented by that AIP Settling Bank to pay the Corporation for its AIP Debit Balance,
and the Corporation shall pay the contra side AIP Member’s account (including any
contra side AIP Settling Sub-Account) the amount of its AIP Credit Balance (or AIP
Adjusted Credit Balances, if applicable) to the extent such funds have been received by
such AIP Member or AIP Non-Member Fund; provided, however, if the Corporation has
made payment to the failed AIP Settling Bank the Corporation shall have no obligation
to any AIP Member (including any AIP Fund Administrator with respect to any AIP
Settling Sub-Account) or to any AIP Non-Member Fund for an AIP Credit Balance or
AIP Adjusted Credit Balance, as applicable.

SEC. 15. Based on its judgment that adequate cause exists to do so, the
Corporation may at any time terminate an AIP Member’s right to act as a AIP Settling
Bank.

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RULE 56. SECURITIES FINANCING TRANSACTION CLEARING SERVICE

SEC. 1. General.

(a) The Corporation may accept for novation Securities Financing

Transactions (SFTs) entered into between (i) a Member and another Member, (ii) a
Sponsoring Member and its Sponsored Member, or (iii) an Agent Clearing Member
acting on behalf of a Customer and either (x) a Member or (y) the same or another
Agent Clearing Member acting on behalf of a Customer.

(b) Any SFT that is submitted to the Corporation for novation, and any
Member and Sponsored Member that enters into an SFT (and any Customer on behalf
of whom an Agent Clearing Member enters into an SFT) shall be subject to the
provisions of this Rule 56; provided that Sections 15 and 16 of this Rule shall only apply
to Sponsoring Members, Agent Clearing Members, Sponsored Members and
Customers, as applicable.

(c) Any amount of cash described in this Rule 56 may be rounded up to the
nearest one cent, five cents, 10 cents, 25 cents or dollar according to the rounding
convention requested by the SFT Member parties to the relevant SFT as conveyed to
the Corporation in accordance with the communication links, formats, timeframes and
deadlines established by the Corporation for such purpose.

SEC. 2. Eligibility for SFT Clearing Service: SFT Member.

The Corporation may permit any Member acting in its principal capacity,
Sponsored Member acting in its principal capacity or Agent Clearing Member acting on
behalf of a Customer to be an SFT Member and participate in the SFT Clearing Service.

The rights, liabilities and obligations of SFT Members in their capacity as such
shall be governed by this Rule 56. References to a Member in other Rules and
Procedures shall not apply to an SFT Member in its capacity as such, unless specifically
noted in this Rule or in such other Rules and Procedures as applicable to an SFT
Member.

An SFT Member that participates in the Corporation in another capacity pursuant

to another Rule or Procedure of this Corporation, or which has entered into an
agreement with the Corporation independent from this Rule, shall continue to have all
the rights, liabilities and obligations set forth in such other Rule or Procedure or
pursuant to such agreement, and such rights, liabilities and obligations shall be
separate from its rights, liabilities and obligations as an SFT Member, except as
contemplated under Sections 15 and 16 of this Rule.

SEC. 3. Membership Documents.

To become an SFT Member, each applicant shall complete and deliver to the
Corporation documents in such forms as may be prescribed by the Corporation from
time to time and any other information requested by the Corporation.

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SEC. 4. Securities Financing Transaction Data Submission.

(a) In order for an SFT to be submitted to the Corporation, the transaction

data for the SFT must be submitted to the Corporation by an Approved SFT Submitter
in accordance with the communication links, formats, timeframes and deadlines
established by the Corporation for such purpose. Any such transaction data shall be
submitted to the Corporation on a locked-in basis. In determining whether to accept
transaction data from an Approved SFT Submitter, the Corporation may require the
Approved SFT Submitter to provide a Cybersecurity Confirmation, as described in Rule
2B, Section 2.A.

(b) The Corporation will not act upon any instruction received from an
Approved SFT Submitter in respect of an SFT unless each SFT Member (other than an
SFT Member that is a Sponsored Member) designated by the Approved SFT Submitter
as a party to such SFT has consented, in a writing delivered to the Corporation, to the
Approved SFT Submitter acting on behalf of the SFT Member in respect of SFTs.

(c) The obligations reflected in the transaction data on an SFT shall be

deemed to have been confirmed and acknowledged by each SFT Member designated
by the Approved SFT Submitter as a party thereto and to have been adopted by such
SFT Member and, for the purposes of determining the rights and obligations between
the Corporation and such SFT Member under this Rule and such other Rules or
Procedures applicable to SFTs, shall be valid and binding upon such SFT Member. An
SFT Member which has been so designated by an Approved SFT Submitter shall
resolve any differences or claims regarding the rights and obligations reflected in the
transaction data submitted by the Approved SFT Submitter with the Approved SFT
Submitter, and the Corporation shall have no responsibility in respect thereof or to
adjust its records or the accounts of the SFT Member in any way, other than pursuant to
the instructions of the Approved SFT Submitter. Any such adjustment shall be in the
sole discretion of the Corporation.

(d) The Corporation makes no representation, whether expressed or implied,

as to the complete and timely performance of an Approved SFT Submitter’s duties and
obligations. The Corporation assumes no liability to any SFT Member for any act or
failure to act by an Approved SFT Submitter in connection with any information received
by the Corporation or given to the SFT Member by the Corporation via the Approved
SFT Submitter, as the case may be.

(e) The submission of each SFT to the Corporation and the performance of
any obligation under such SFT shall constitute a representation to the Corporation and
covenant by the Transferor and the Transferee, any Sponsoring Member that is acting
on behalf of the Transferor or Transferee and any Agent Clearing Member that is acting
on behalf of a Customer in connection with such SFT that its participation in such SFT is
in compliance, and will continue to comply, with all applicable laws and regulations,
including without limitation Rule 15c3-3 and all other applicable rules and regulations of
the SEC, any applicable provisions of Regulation T, Regulation U and Regulation X of
the Board of Governors of the Federal Reserve System, and the rules of FINRA and

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any other regulatory or self-regulatory organization to which the Transferor, the

Transferee, any Sponsoring Member that is acting on behalf of the Transferor or
Transferee or any Agent Clearing Member that is acting on behalf of a Customer is
subject.

(f) The submission of each SFT to the Corporation shall constitute an

authorization to the Corporation by the Transferor, the Transferee and any Agent
Clearing Member that is acting on behalf of a Customer for the Corporation to give
instructions regarding the SFT to DTC in respect of the relevant accounts of the
Transferor, Transferee and Agent Clearing Member at DTC.

SEC. 5. Novation of Securities Financing Transactions.

(a) The Corporation will only novate an SFT if, at the time of novation, the
Final Settlement of such transaction is scheduled to occur one Business Day following
the Initial Settlement and the SFT Cash is no less than 100% of the Contract Price of
the SFT.

(b) Each SFT that is a Bilaterally Initiated SFT, including any Sponsored
Member Transaction, and validated pursuant to these Rules and Procedures shall be
novated to the Corporation as of the time the Corporation provides the Approved SFT
Submitter for such SFT a report confirming such novation in accordance with the
communication links, formats, timeframes and deadlines established by the Corporation
for such purpose. Each SFT that is neither a Bilaterally Initiated SFT nor a Sponsored
Member Transaction and that is validated pursuant to these Rules and Procedures shall
be novated to the Corporation as of the time (x) the Initial Settlement of such SFT has
completed by (i) the Transferor instructing DTC to deliver from the relevant DTC
account of the Transferor to the Corporation’s account at DTC the subject SFT
Securities versus payment of the amount of the SFT Cash, (ii) the Corporation
instructing DTC to deliver from the Corporation’s account at DTC to the relevant DTC
account of the Transferee the subject SFT Securities versus payment of the amount of
SFT Cash and (iii) DTC processes the deliveries in accordance with the rules and
procedures of DTC, or (y) the Initial Settlement obligations of such SFT have been
discharged in accordance with Section 8 of this Rule. If the Initial Settlement obligations
of an SFT that is neither a Bilaterally Initiated SFT nor a Sponsored Member
Transaction are not discharged in accordance with clause (x) or (y), then such SFT shall
be deemed void ab initio.

(c) Subject to subsections (d) and (e) below of this Section 5, the novation of
SFTs shall consist of the termination of the Final Settlement, Rate Payment and
Distribution Payment obligations and entitlements between the parties to the SFT with
respect to such SFT and their replacement with obligations and entitlements to and from
the Corporation to perform, in accordance with these Rules and Procedures, the Final
Settlement, Rate Payment, and Distribution Payment obligations and entitlements under
the SFT.

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(d) Novation in Respect of SFTs Having Incremental Additional Independent

Amount SFT Cash

(i) If an SFT has Incremental Additional Independent Amount SFT

Cash, then, unless the SFT is a Sponsored Member Transaction and the
Sponsoring Member is the Transferee, the obligation of the Transferor to return
the Incremental Additional Independent Amount SFT Cash to the Transferee
shall not be terminated and novated to the Corporation (nor shall the Corporation
otherwise be required to return such Incremental Additional Independent Amount
SFT Cash), except to the extent that the Transferor, Sponsoring Member or
Agent Clearing Member, as applicable, has satisfied the associated Independent
Amount SFT Cash Deposit Requirement.

(ii) To the extent the Transferor, Sponsoring Member or Agent

Clearing Member has not satisfied the associated Independent Amount SFT
Cash Deposit Requirement, the Transferor’s (or in the case of a Non-Returned
SFT, the Corporation’s) obligation to return the Incremental Additional
Independent Amount SFT Cash shall:

1. If the SFT is an Agent Clearing Member Transaction for

which the Agent Clearing Member, acting on behalf of the Customer, is
the Transferor, be terminated and replaced with an obligation of the Agent
Clearing Member, in its capacity as principal, to return the Incremental
Additional Independent Amount SFT Cash to the Transferee; or

2. Otherwise, remain (or in the context of a Non-Returned SFT,

be terminated and replaced with) a bilateral obligation of the Transferor to
the Transferee.

(iii) Each SFT Member agrees that any obligation to return Incremental
Additional Independent Amount SFT Cash that is novated to an Agent Clearing
Member or that remains (or becomes) a bilateral obligation of the Transferor to
the Transferee in accordance with (ii) above is a binding and enforceable
obligation of the Agent Clearing Member or Transferor, as applicable, regardless
of whether the Transferee has entered into an Existing Master Agreement with
the Agent Clearing Member or Transferor. Each SFT Member further agrees that
any such obligation shall only be due and payable to the Transferee upon the
final discharge of the Corporation’s Final Settlement obligations to the Transferor
under the portion of the SFT that has been novated to the Corporation in
accordance with Section 5(b) of this Rule.

(iv) Until the Transferor, Sponsoring Member or Agent Clearing

Member has satisfied in full its Independent Amount SFT Cash Deposit
Requirement, the SFT Cash of the SFT shall, for purposes of determining the
obligations owing to and from the Corporation under such SFT, equal the SFT
Cash of the SFT less the Incremental Additional Independent Amount SFT Cash.

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(v) Once the Transferor, Sponsoring Member or Agent Clearing

Member, as applicable, has satisfied in full its Independent Amount SFT Cash
Deposit Requirement, the obligation of the Transferor to return the Incremental
Additional Independent Amount SFT Cash to the Transferee (or, in the case of
an SFT that is an Agent Clearing Member Transaction, any obligation of the
Agent Clearing Member to return the Incremental Additional Independent Amount
SFT Cash to the Transferee) shall be novated to the Corporation, and the SFT
Cash of the SFT shall, for purposes of determining the obligations owing to and
from the Corporation under the SFT, include the full amount of the SFT Cash of
such SFT.

(e) Novation in Respect of Certain Corporate Actions

(i) Regardless of anything to the contrary in any Existing Master

Agreement (including a provision addressing when an issuer pays different
amounts to different security holders due to withholding tax or other reasons), the
Distribution Payment obligations and entitlements between the Corporation and
each party to an SFT that has been novated to the Corporation shall be the
obligation of the Corporation to pay to the Transferor and the obligation of the
Transferee to pay to the Corporation the Distribution Amount in respect of each
Distribution and the corresponding entitlements of the Transferor and the
Corporation, in each case, in accordance with these Rules and Procedures.

(ii) The Corporation shall maintain a list of corporate actions and

distributions that the Corporation does not support with respect to SFTs. No
Final Settlement, Rate Payment, Distribution Payment or other obligation
resulting from a corporate action or distribution that is not supported by the
Corporation shall be novated to the Corporation. Nor shall any such corporate
action modify the Final Settlement, Rate Payment, Distribution Payment or other
obligations of the Corporation, Transferor and Transferee under an SFT that has
been novated to the Corporation. Each SFT Member agrees that any obligation
under an SFT resulting from a corporate action or distribution not supported by
the Corporation shall remain a binding and enforceable bilateral obligation
between the Transferor and the Transferee, regardless of whether the Transferor
and Transferee have entered into an Existing Master Agreement.

(f) The novation of SFTs shall not affect the fundamental substance of the
SFT as a transfer of securities by one party in exchange for a transfer of cash by the
other party and an agreement by each party to return the property it received and shall
not affect the economic obligations or entitlements of the parties under the SFT except
that following novation, the Final Settlement, Rate Payment and Distribution Payment
obligations and entitlements shall be owed to and by the Corporation rather than the
original counterparty under the SFT.

(g) The representations and warranties made by each of the parties to an

SFT that has been novated to the Corporation under the parties’ Existing Master
Agreement, if any, shall (x) to the extent that they are inconsistent with the Rules and

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Procedures of the Corporation, be eliminated and replaced with the Rules and
Procedures of the Corporation and (y) to the extent that they are not inconsistent with
the Rules and Procedures of the Corporation, remain in effect as between the parties to
the original SFT, but shall not impose any additional obligations on the Corporation.

SEC. 6. Rate and Distributions.

(a) The Corporation shall debit and credit the Rate Payment from and to the
SFT Accounts of the SFT Member parties to an SFT that has been novated to the
Corporation as part of its end of day final money settlement process in accordance with
Rule 12 and Procedure VIII on the scheduled Final Settlement Date for the SFT,
irrespective of whether Final Settlement of such SFT occurs on such date.

(b) If (x) a cash dividend is made on or in respect of an SFT Security that is

the subject of an SFT that has been novated to the Corporation or (y) cash is
exchanged, in whole or in part, for such an SFT Security in a merger, consolidation or
similar transaction, and the Transferor under the SFT would have been entitled to a
cash payment related to the event described in clause (x) or (y) had it not transferred
the SFT Securities that are the subject of the SFT to the Transferee in the Initial
Settlement, then the Corporation shall, within the time period determined by the
Corporation from time to time, credit the Distribution Amount to the Transferor’s SFT
Account and debit the Distribution Amount from the Transferee’s SFT Account as part of
its end of day final money settlement process in accordance with Rule 12 and
Procedure VIII. If cash is exchanged in whole for such an SFT Security, then the
completion of the actions described in the preceding sentence shall discharge the
Corporation’s Final Settlement obligations to the relevant Transferor and the
Transferee’s Final Settlement obligations to the Corporation.

SEC. 7. Final Settlement of Securities Financing Transactions.

Subject to the provisions of Section 11 of this Rule, the Final Settlement of an

SFT that has been novated to the Corporation shall be scheduled to occur on the
Business Day immediately following the date the SFT was novated to the Corporation.
Unless the Final Settlement obligations under such an SFT are discharged in
accordance with Section 8 of this Rule, Final Settlement of the SFT shall occur by (x)
the Corporation instructing DTC to (i) deliver from the relevant DTC account of the
Transferee to the Corporation’s account at DTC the subject SFT Securities versus
payment of the amount of SFT Cash and (ii) deliver from the Corporation’s account at
DTC to the relevant DTC account of the Transferor the subject SFT Securities versus
payment of the amount of SFT Cash, and (y) the processing of such deliveries by DTC
in accordance to the rules and procedures of DTC; provided that if such transfers do not
occur and a Buy-In does not occur in respect of the SFT, then the Final Settlement Date
shall be rescheduled for the following Business Day as described in Section 9 of this
Rule. The obligation of a Transferor (or a Sponsoring Member that guarantees to the
Corporation the obligation of a Transferor or an Agent Clearing Member that is
responsible for the performance of the obligation under an SFT that is an Agent
Clearing Member Transaction to return SFT Cash to the Corporation) in respect of the

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Final Settlement of an SFT that has been novated to the Corporation shall be to pay the
SFT Cash and, if applicable, the Rate Payment to the Corporation against the transfer
of the relevant SFT Securities by the Corporation. The obligation of a Transferee (or a
Sponsoring Member that guarantees to the Corporation the obligation of a Transferee or
an Agent Clearing Member that is responsible for the performance of the obligation
under an SFT that is an Agent Clearing Member Transaction to return SFT Securities to
the Corporation) in respect of the Final Settlement of an SFT that has been novated to
the Corporation shall be to transfer the SFT Securities and, if applicable, the Rate
Payment to the Corporation against the transfer of SFT Cash by the Corporation.

An SFT, or a portion thereof, shall be deemed complete and final upon Final
Settlement of the SFT, or such portion, whether pursuant to this Section 7, Section 8,
Section 9(d) or Section 13(c). From and after the Final Settlement of an SFT, or a
portion thereof, pursuant to any such section, the Corporation shall be discharged from
its obligations to the Transferor and the Transferee, and the Corporation shall have no
further obligation in respect of the SFT, or such portion.

SEC. 8. Discharge of Offsetting Final Settlement and Initial Settlement

Obligations.

(a) Subject to the provisions of Section 13(c) of this Rule, if, on any Business
Day, the pre-novation SFT Member parties to a Settling SFT enter into a Linked SFT
and the Approved SFT Submitter provides an appropriate instruction to the Corporation
in accordance with the communication links, formats, timeframes and deadlines
established by the Corporation for such purpose, the Final Settlement obligations of the
parties to the Settling SFT and the Initial Settlement obligations of the parties to the
Linked SFT shall be discharged once the Corporation has instructed DTC to debit and
credit the relevant DTC accounts, of the SFT Member parties, as described in
subsection (b) of this Section 8 and DTC processes such debits and credits in
accordance with the rules and procedures of DTC. To the extent the Price Differential is
not processed by DTC in accordance with the rules and procedures of DTC, the
Corporation shall debit and credit the Price Differential from and to the SFT Accounts of
the SFT Member parties as part of its end of day final money settlement process in
accordance with Rule 12 and Procedure VIII. If the Price Differential is positive, the
Corporation shall (x) credit an amount equal to the Price Differential to the Transferee’s
SFT Account and (y) debit an amount equal to the Price Differential from the
Transferor’s SFT Account. If the Price Differential is negative, the Corporation shall (x)
credit an amount equal to the absolute value of the Price Differential to the Transferor’s
SFT Account and (y) debit an amount equal to the absolute value of the Price
Differential from the Transferee’s SFT Account. However, if the Linked SFT has as its
subject fewer SFT Securities than the Settling SFT, then only the following Final
Settlement obligations under the Settling SFT shall be discharged in accordance with
this Section 8: (i) the Transferee’s and Corporation’s Final Settlement obligations in
respect of a quantity of SFT Securities equal to the quantity of SFT Securities that are
the subject of the Linked SFT and (ii) the Transferor’s and Corporation’s Final
Settlement obligations in respect of the Corresponding SFT Cash.

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(b) If the Price Differential is positive, the Corporation shall (x) instruct DTC to
debit an amount equal to the Price Differential from the Corporation’s account at DTC
and credit such amount to the relevant DTC account of the Transferee and (y) instruct
DTC to debit an amount equal to the Price Differential from the relevant DTC account of
the Transferor and credit such amount to the Corporation’s account at DTC. If the Price
Differential is negative, the Corporation shall (x) instruct DTC to debit an amount equal
to the absolute value of the Price Differential from the Corporation’s account at DTC and
credit such amount to the relevant DTC account of the Transferor and (y) instruct DTC
to debit an amount equal to the absolute value of the Price Differential from the relevant
DTC account of the Transferee and credit such amount to the Corporation’s account at
DTC.

SEC. 9. Non-Returned Securities Financing Transactions and Recalls.

(a) If (x) the Transferee does not satisfy its Final Settlement obligations in
respect of an SFT that has been novated to the Corporation on the Final Settlement
Date, (y) such Final Settlement obligations have not been discharged in accordance
with the provisions of Section 8 of this Rule, and (z) a Buy-In has not occurred in
respect of such SFT or a portion thereof (such SFT, a “Non-Returned SFT”), the Final
Settlement Date of the Non-Returned SFT shall be rescheduled for the following
Business Day, and the Corporation shall instruct DTC to debit and credit the relevant
DTC accounts of the SFT Member parties, as described in subsection (b) of Section 8.
To the extent the Price Differential is not processed by DTC in accordance with the
rules and procedures of DTC, the Corporation shall debit and credit the Price
Differential from and to the SFT Accounts of the SFT Member parties to the Non-
Returned SFT as part of its end of day final money settlement process in accordance
with Rule 12 and Procedure VIII. If the Price Differential is positive, the Corporation
shall (x) credit an amount equal to the Price Differential to the Transferee’s SFT
Account and (y) debit an amount equal to the Price Differential from the Transferor’s
SFT Account. If the Price Differential is negative, the Corporation shall (x) credit an
amount equal to the absolute value of the Price Differential to the Transferor’s SFT
Account and (y) debit an amount equal to the absolute value of the Price Differential
from the Transferee’s SFT Account.

(b) If the Corporation receives a Recall Notice in respect of an SFT that has
been novated to the Corporation and the Transferee does not satisfy its Final
Settlement obligations by the Recall Date for the Recall Notice, the Transferor may, in a
commercially reasonable manner, purchase some or all of the SFT Securities that are
the subject of the SFT or elect to be deemed to have purchased the SFT Securities, in
each case in accordance with such timeframes and deadlines as established by the
Corporation for such purpose (a “Buy-In”); provided that in the case of a Default-Related
SFT, the commercial reasonableness of a Buy-In shall be determined by the
Corporation based on whether, in the opinion of the Corporation, such Buy-In would
create a disorderly market in the relevant SFT Security. Following such purchase or
deemed purchase, the Transferor shall (x) give written notice to the Corporation of the
Transferor’s costs to purchase the relevant SFT Securities (including the price paid by
the Transferor and any broker’s fees and commissions and reasonable out-of-pocket

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transaction costs, fees or interest expenses incurred in connection with such purchase)
(such costs, the “Buy-In Costs”) or, if the Transferor elects to be deemed to have
purchased the SFT Securities, the Deemed Buy-In Costs, and (y) indemnify the
Corporation, and its employees, officers, directors, shareholders, agents and Members
(collectively the “Buy-In Indemnified Parties”), for any and all losses, liability or
expenses of a Buy-In Indemnified Party arising from any claim disputing the calculation
of the Buy-In Costs, the Deemed Buy-In Costs or the method or manner of effecting the
Buy-In. Each SFT Member acknowledges and agrees that each SFT Security is of a
type traded in a recognized market and that, in the absence of a generally recognized
source for prices or bid or offer quotations for any SFT Security, the Transferor may, for
purposes of a Buy-In, establish the source therefor in its commercially reasonable
discretion. Each SFT Member further acknowledges and agrees that the Corporation
will not calculate any Buy-In Costs or Deemed Buy-In Costs and shall have no liability
for any such calculation. The Corporation hereby assigns to any Transferee whose SFT
is subject to a Buy-In any rights it may have against the Transferor to dispute the
Transferor’s calculation of the Buy-In Costs or Deemed Buy-In Costs.

(c) On the Business Day following the Corporation’s receipt of written notice
of the Transferor’s Buy-In Costs, the Corporation shall debit and credit the Buy-In
Amount from and to the SFT Accounts of the SFT Member parties to the SFT as part of
its end of day final money settlement process in accordance with Rule 12 and
Procedure VIII. If the Buy-In Amount is positive, the Corporation will (x) credit the value
of the Buy-In Amount to the Transferor’s SFT Account and (y) debit the value of the
Buy-In Amount from the Transferee’s SFT Account. If the Buy-In Amount is negative,
the Corporation will (x) credit the value of the Buy-In Amount to the Transferee’s SFT
Account and (y) debit the value of the Buy-In Amount from the Transferor’s SFT
Account.

(d) Following the application of such Buy-In Amount, the Final Settlement
obligations under the SFT shall be discharged; provided that if the Transferor effected a
Buy-In in respect of some but not all of the SFT Securities that are the subject of an
SFT, then only the following obligations shall be discharged: (i) the Transferee’s and
Corporation’s Final Settlement obligations in respect of the SFT Securities for which the
Transferor effected the Buy-In and (ii) the Transferor’s and Corporation’s Final
Settlement obligations in respect of the Corresponding SFT Cash.

(e) A Recalled SFT shall be treated as a Non-Returned SFT by the

Corporation until the earlier of the time that the SFT settles or a Buy-In is processed by
the Corporation in accordance with this Section 9, except that the additional SFT
Deposit required for Non-Returned SFTs under Section 12(c) of this Rule shall not
apply. If the Transferor effects the Buy-In in respect of some, but not all, of the SFT
Securities that are the subject of a Recalled SFT, the Final Settlement obligations of the
Recalled SFT that are not discharged in accordance with subsection (d) of this Section
9 shall be treated as a Non-Returned SFT until the SFT settles or a Buy-In is processed
by the Corporation in accordance with this Section 9, and the additional SFT Deposit
required under Section 12(c) of this Rule for Non-Returned SFTs shall apply.

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SEC. 10. Cancellation, Modification and Termination of Securities Financing

Transactions.

(a) Transaction data on an SFT that has not been novated to the Corporation
may be cancelled upon receipt by the Corporation of appropriate instructions from the
Approved SFT Submitter with respect to such SFT on behalf of both SFT Member
parties thereto, submitted in accordance with the communication links, formats,
timeframes and deadlines established by the Corporation for such purpose. An SFT
that is so cancelled by the Corporation will be deemed to be void ab initio.

(b) The Rate Payment on an SFT that has been novated to the Corporation
may be modified upon receipt by the Corporation of appropriate instructions from the
Approved SFT Submitter with respect to such SFT, submitted in accordance with the
communication links, formats, timeframes and deadlines established by the Corporation
for such purpose. Any instructions submitted by an Approved SFT Submitter to modify
the Rate Payment of an SFT must be submitted on behalf of both SFT Member parties
to the SFT.

(c) An SFT that has been novated to the Corporation in accordance with
Section 5 of this Rule may be terminated upon receipt by the Corporation of appropriate
instructions from the Approved SFT Submitter with respect to such SFT on behalf of
both SFT Member parties thereto, submitted in accordance with the communication
links, formats, timeframes and deadlines established by the Corporation for such
purposes. Following any such termination, no amounts or further obligations shall be
owing in respect of the SFT between the Corporation and Transferor or the Corporation
and the Transferee.

SEC. 11. Accelerated Final Settlement.

The Transferee may accelerate the scheduled Final Settlement of an SFT that
has been novated to the Corporation upon receipt by the Corporation of appropriate
instruction from the Approved SFT Submitter with respect to such SFT, submitted in
accordance with the communication links, formats, timeframes and deadlines
established by the Corporation for such purpose. Such accelerated Final Settlement
shall be effected by the Corporation in accordance with the provisions of Section 7 of
this Rule.

SEC. 12. Clearing Fund Obligations.

(a) Each SFT Member, other than an SFT Member that is a Sponsored
Member, shall make and maintain on an ongoing basis a deposit to the Clearing Fund
with respect to its SFT Positions (the “SFT Deposit”). For the avoidance of doubt, the
SFT Positions for an SFT Member that is a Sponsoring Member shall include all SFT
Positions held in its Sponsored Member Sub-Account(s) in addition to its proprietary
account(s).

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(b) The SFT Deposit shall be held by the Corporation or its designated agents
as part of the Clearing Fund, to be applied as provided in Sections 1 through 12 of Rule
4.

(c) The Corporation shall calculate the amount of each such SFT Member’s
required deposit for SFT Positions, subject to a $250,000 minimum (excluding the
minimum contribution to the Clearing Fund as required by Procedure XV, Section II.(A)),
by applying the Clearing Fund formula for CNS Transactions in Sections I.(A)(1)(a), 1 (b),
(c), (e), (f), (g) 2 of Procedure XV as well as the additional Clearing Fund formula in
Section I.(B)(5) (Intraday Mark-to-Market Charge) of Procedure XV, except as noted
otherwise, in the same manner as such sections apply to CNS Transactions submitted
to the Corporation for regular way settlement, plus, with respect to any Non-Returned
SFT, an additional charge that is calculated by (x) multiplying the Current Market Price
of the SFT Securities that are the subject of such Non-Returned SFTs by the number of
such SFT Securities that are the subject of the SFT and (y) multiplying such product by
(i) 5% for SFT Members rated 1 through 4 on the Credit Risk Rating Matrix, (ii) 10% for
SFT Members rated 5 or 6 on the Credit Risk Rating Matrix, or (iii) 20% for SFT
Members rated 7 on the Credit Risk Rating Matrix shall be applied to each SFT Member
that is a party thereto (collectively, the “Required SFT Deposit”); provided, however,
notwithstanding anything to the contrary, (x) a minimum of 40% of an SFT Member’s
Required SFT Deposit shall be made in the form of cash and/or Eligible Clearing Fund
Treasury Securities and (y) the lesser of $5,000,000 or 10% of an SFT Member’s
Required SFT Deposit, with a minimum of $250,000, must be made and maintained in
cash; provided, further, the additional Clearing Fund formula in Sections I.(B)(1)
(Additional Deposits for Members on the Watch List); (2) (Excess Capital Premium); (3)
(Backtesting Charge); (4) (Bank Holiday Charge); Minimum Clearing Fund and
Additional Deposit Requirements in Sections II.(A)1(a) – (b), II.(B), II.(C), and II.(D); as
well as Section III (Collateral Value of Eligible Clearing Fund Securities) of Procedure
XV shall apply to SFT Members in the same manner as such sections apply to
Members.

(d) The Corporation shall have the discretion to require an SFT Member to
post its Required SFT Deposit in proportion of cash higher than as required under
subsection (c) of this Section 12, as determined by the Corporation from time to time in
view of market conditions and other financial and operational capabilities of the SFT

1 For the purpose of applying Section I.(A)(1)(a)(i) of Procedure XV (Value-at-Risk (VaR) charge), the
volatility of an SFT Member’s SFT Positions shall be the sum of (a) the highest resultant value
between Section I.(A)(1)(a)(i)I. (Core Parametric Estimation) and Section I.(A)(1)(a)(i)III. (Margin
Floor) and (b) the resultant value of Section I.(A)(1)(a)(i)II. (Gap Risk Measure).
2 For the purpose of applying Section I.(A)(1)(g) of Procedure XV (Margin Liquidity Adjustment (MLA)
charge), SFT Positions shall be aggregated with Net Unsettled Positions, as defined in Rule 1, in the
same asset group or subgroup; provided, however, in the event such aggregation results in a
reduction of the aggregate positions in the relevant asset group or subgroup, the Corporation shall
apply the greater of (a) the sum of MLA charges separately calculated for SFT Positions and Net
Unsettled Positions in the asset group or subgroup and (b) the MLA charge calculated from
aggregating the SFT Positions and the Net Unsettled Positions in the asset group or subgroup.

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Member. The Corporation shall make any such determination based on such factors as
the Corporation determines to be appropriate from time to time.

(e) If an SFT has Incremental Additional Independent Amount SFT Cash, the
Transferor shall make an additional deposit to the Clearing Fund that equals the amount
of the Incremental Additional Independent Amount SFT Cash for such SFT
(“Independent Amount SFT Cash Deposit”, and such requirement the “Independent
Amount SFT Cash Deposit Requirement”). The Independent Amount SFT Cash
Deposit Requirement must be satisfied in cash and may, at the discretion of the
Corporation, be satisfied using Independent Amount SFT Cash Deposits that have
previously been made by the Transferor in respect of SFTs with the same Transferee
that have since settled. The Transferor shall satisfy any Independent Amount SFT
Cash Deposit Requirement in respect of an SFT on the date that the SFT is novated to
the Corporation pursuant to the timeframes and deadlines established by the
Corporation for such purpose. If, on a given day, the Transferor satisfies its
Independent Amount SFT Cash Deposit Requirement for some, but not all, SFTs
novated to the Corporation on that day, the Corporation will consider the Transferor to
have satisfied its Independent Amount SFT Cash Deposit Requirement for none of the
SFTs that were novated to the Corporation on that day.

(f) Each SFT Member, other than an SFT Member that is a Sponsored
Member, so long as such Member is an SFT Member, shall also provide Supplemental
Liquidity Deposits to the Clearing Fund, as may be required pursuant to Rule 4A.
References to Clearing Fund in the other Rules and Procedures shall include and apply
to SFT Deposit, and references to Required Fund Deposit shall include and apply to
Required SFT Deposit, unless specifically noted otherwise in this Rule 56 or in such
other Rules and Procedures.

SEC. 13. Ineligible SFT Securities and Supported Corporate Actions.

(a) The Corporation will remove an Ineligible SFT Security from the list
maintained by the Corporation as set forth in Rule 3; provided that the Corporation may
not be able to identify that an SFT Security is an Ineligible SFT Security and remove
such SFT Security from the list maintained by the Corporation if the reason for the
ineligibility is that the SFT Security is undergoing a corporate action or distribution not
supported by the Corporation and the Corporation is not in receipt of reasonably
advanced notice of such corporate action or distribution.

(b) Notwithstanding Section 12 of this Rule, if an SFT Security becomes an

Ineligible SFT Security because the Current Market Price of the SFT Security falls
below the threshold established by the Corporation from time to time, the Required SFT
Deposit of each SFT Member party to an SFT which has such Ineligible SFT Security as
its subject shall include an additional amount equal to the product of 100% of the
Current Market Price of such Ineligible SFT Security and the number of such Ineligible
SFT Securities that the SFT has as its subject.

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 (RULE 56)

(c) If the Corporation declares that an SFT Security has or will become an
Ineligible SFT Security because the security is or will become ineligible for processing
or is or will be undergoing a corporate action or distribution that is not supported by the
Corporation, the Final Settlement of all SFTs that have been novated to the Corporation
and have such SFT Security as their subject must occur before the Ineligibility Date. If
following such declaration the Transferee does not satisfy its Final Settlement
obligations in respect of any such SFT as provided in Section 7 of this Rule by the
Ineligibility Date, the Corporation shall, unless the Corporation has previously debited
and credited the Price Differential from and to the SFT Accounts of the SFT Member
parties to the SFT in accordance with Section 8 of this Rule on Ineligibility Date, debit
and credit the Price Differential from and to the SFT Accounts of the SFT Member
parties to the SFT as part of its end of day final money settlement process in
accordance with Rule 12 and Procedure VIII. If the Price Differential is positive, the
Corporation shall (x) credit an amount equal to the Price Differential to the Transferee’s
SFT Account and (y) debit an amount equal to the Price Differential from the
Transferor’s SFT Account. If the Price Differential is negative, the Corporation shall (x)
credit an amount equal to the absolute value of the Price Differential to the Transferor’s
SFT Account and (y) debit an amount equal to the absolute value of the Price
Differential from the Transferee’s SFT Account. Following the application of Price
Differential to an Ineligible SFT on or after the relevant Ineligibility Date, all rights and
obligations as between the Corporation and the SFT Member parties thereto with
respect to such SFT shall be discharged.

(d) If a corporate action supported by the Corporation in respect of the SFT

Securities that are the subject of an SFT is scheduled to occur, the Corporation may
cease to permit the discharge of the SFT’s Final Settlement obligations, whether
pursuant to Section 8 of this Rule or otherwise, and treat the SFT as a Non-Returned
SFT for such period of time determined by the Corporation as necessary to process the
corporate action, except that the additional SFT Deposit required for Non-Returned
SFTs under Section 12(c) of this Rule shall not apply. Notwithstanding the foregoing,
the Corporation shall not limit the ability of a Member to accelerate the Final Settlement
of an SFT in accordance with Section 11 of this Rule, provided that any Price
Differential for the SFT has settled in accordance with Section 9(a) of this Rule and that
such accelerated Final Settlement is permitted in accordance with the rules and
procedures of DTC.

SEC. 14. Cease to Act Procedures for SFT Members with Open Securities
Financing Transactions.

(a) The provisions of Rule 18 shall not apply to the SFTs, with the exception
of Sections 1 and 8 thereof.

(b) If the Corporation has ceased to act for an SFT Member and subject to
Section 14 of Rule 2C:

(i) Except as otherwise may be determined by the Board of Directors,

any SFT entered into by the SFT Member that, at the time the

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Corporation ceased to act for such SFT Member, has not been
novated to the Corporation pursuant to this Rule shall be excluded
from all operations of the Corporation applicable to such SFT.

(ii) The Corporation may decline to act upon any instructions,

transaction data or notices submitted by such SFT Member or an
Approved SFT Submitter on behalf of such SFT Member.

(iii) The Corporation shall close-out such SFT Member’s proprietary

SFT Positions as well as any SFT Positions established in the SFT
Member’s Agent Clearing Member Customer Omnibus Account by
(x) buying in or selling out, as applicable, some or all of the SFT
Securities that are the subject of each SFT of the SFT Member that
has been novated to the Corporation but for which the Final
Settlement has not occurred, (y) deeming the Corporation to have
bought in or sold out some or all such SFT Securities at the bid or
ask price therefor, respectively, from a generally recognized source
or at such price or prices as the Corporation is able to purchase or
sell, respectively, some such SFT Securities, or (z) otherwise
liquidating such SFT Member’s SFT Positions.

(iv) Any Sponsored Member Transactions for which a Defaulting SFT

Member is the Sponsoring Member and which have been novated
to the Corporation shall continue to be processed by the
Corporation. The Corporation, in its sole discretion, will determine
whether to close-out the SFT Positions established in a Defaulting
SFT Member’s Sponsored Member Sub-Accounts (if any), which
close-out shall be effected in accordance with the provisions of
subsection (b)(iii) above, or instead permit the relevant Sponsored
Members to complete settlement of the relevant Sponsored
Member Transactions.

(v) If, in the aggregate, the close-out of a Defaulting SFT Member’s

proprietary SFT Positions results in a profit to the Corporation, such
profit shall be applied to any loss to the Corporation arising from the
closing out of such Defaulting SFT Member (including losses
arising from closing out the SFT Positions established in any of the
Defaulting SFT Member’s Agent Clearing Member Customer
Omnibus Accounts or Sponsored Member Sub-Accounts or losses
arising from closing out any Net Close Out Positions of the
Defaulting SFT Member). If, in the aggregate, the close-out of a
Defaulting SFT Member’s proprietary SFT Positions results in a
loss to the Corporation, such loss shall be netted against, or
otherwise applied to, any amounts owed by the Corporation to such
SFT Member in its proprietary capacity and thereafter debited from
such Defaulting SFT Member’s Clearing Fund deposit at the
Corporation.

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(vi) If, in the aggregate, the close-out of the SFT Positions established
in the Agent Clearing Member Customer Omnibus Accounts of a
Defaulting SFT Member results in a profit to the Corporation, such
profit shall be credited to the Agent Clearing Member Customer
Omnibus Accounts. If, in the aggregate, the close-out of the SFT
Positions established in the Agent Clearing Member Customer
Omnibus Accounts of a Defaulting SFT Member results in a loss to
the Corporation, such loss shall be netted against, or otherwise
applied to, any amounts owed by the Corporation to such SFT
Member in its proprietary capacity and thereafter debited from the
Defaulting SFT Member’s Clearing Fund deposit at the Corporation.

(vii) If, in the aggregate, the close-out of the SFT Positions established
in a Defaulting SFT Member’s Sponsored Member Sub-Accounts
results in a profit to the Corporation, such profit shall be credited to
the Sponsored Member Sub-Accounts. If, in the aggregate, the
closing out of the SFT Positions established in a Defaulting SFT
Member’s Sponsored Member Sub-Accounts results in a loss to the
Corporation, such loss shall be netted against, or otherwise applied
to, any amounts owed by the Corporation to such SFT Member in
its proprietary capacity and thereafter debited from such Defaulting
SFT Member’s Clearing Fund deposit at the Corporation.

(viii) The Final Settlement Date of each SFT that has been novated to
the Corporation and that, prior to novation, was with a Defaulting
SFT Member (each, a “Default-Related SFT”) shall be the Business
Day following the day on which the Corporation ceased to act for
the Defaulting SFT Member.

(ix) Until Final Settlement, each Default-Related SFT shall be treated

as a Non-Returned SFT, and the Corporation will pay and collect
the Price Differential amounts described in Section 9(a) of this
Rule. The Corporation shall have all of the rights of a Transferor in
relation to any Default-Related SFT in respect of which the
Defaulting SFT Member was the Transferor, including the ability to
deliver a Recall Notice in relation to such Default-Related SFT and
to effect a Buy-In, and all of the rights of a Transferee in relation to
any Default-Related SFT in respect of which the Defaulting SFT
Member was the Transferee, including the ability to accelerate the
scheduled Final Settlement Date of the Default-Related SFT.
However, no additional SFT Deposit required for Non-Returned
SFTs under Section 12(c) of this Rule shall apply to any Default-
Related SFT, and no Rate Payments shall accrue on Default-
Related SFTs after the date on which the Corporation ceases to act
for the Defaulting SFT Member.

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SEC. 15. Sponsored Member SFT Clearing.

(a) A Sponsoring Member shall be permitted to submit, either directly as an

Approved SFT Submitter or via another Approved SFT Submitter, to the Corporation
Sponsored Member Transactions between itself and its Sponsored Member in
accordance with the provisions of this Rule and Rule 2C.

(b) The Corporation shall maintain for the Sponsoring Member one or more
Sponsored Member Sub-Accounts. The SFT Deposits for each Sponsored Member
Sub-Account shall be calculated separately based on the SFT Positions in such
Sponsored Member Sub-Account, and the Sponsoring Member, as principal, shall be
required to satisfy the SFT Deposits for each of the Sponsoring Member’s Sponsored
Member Sub-Accounts.

(c) Settlement of the Final Settlement, Rate Payment, Price Differential,

Distribution Payment and other obligations of a Sponsored Member Transaction that
have been novated to the Corporation shall be effected by the Sponsoring Member, as
settlement agent for the relevant Sponsored Member, crediting and debiting the account
the Sponsoring Member maintains for the Sponsored Member on the Sponsoring
Member’s books and records.

SEC. 16. Customer SFT Clearing.

(a) An Agent Clearing Member shall be permitted to submit, either directly as

an Approved SFT Submitter or via another Approved SFT Submitter, to the Corporation
for novation SFTs that are Agent Clearing Member Transactions. Any such submission
shall be in accordance with this Rule and Rule 2D.

(b) With respect to an Agent Clearing Member that submits SFTs to the
Corporation for novation on behalf of its Customers, the Corporation shall maintain one
or more Agent Clearing Member Customer Omnibus Accounts in the name of the Agent
Clearing Member for the benefit of its Customers in which all SFT Positions and SFT
Cash carried by the Agent Clearing Member on behalf of its Customers are reflected;
provided, that each Agent Clearing Member Customer Omnibus Account may only
contain activity where the Agent Clearing Member is acting as Transferor on behalf of
its Customers, or as Transferee on behalf of its Customers, but not both.

(c) With respect to SFTs entered into on behalf of its Customers and
maintained in the Agent Clearing Member Customer Omnibus Account, the Agent
Clearing Member shall act solely as agent of its Customers in connection with the
clearing of such SFTs; provided, that the Agent Clearing Member shall remain fully
liable for the performance of all obligations to the Corporation arising in connection with
such SFTs; and provided further, that the liabilities and obligations of the Corporation
with respect to such SFTs entered into by the Agent Clearing Member on behalf of its
Customers shall extend only to the Agent Clearing Member. Without limiting the
generality of the foregoing, the Corporation shall not have any liability or obligation
arising out of or with respect to any SFT to any Customer of an Agent Clearing Member.

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 (RULE 56)

(d) The SFT Deposits for each Agent Clearing Member Customer Omnibus
Account shall be calculated separately based on the SFT Positions in such Agent
Clearing Member Customer Omnibus Account, and the Agent Clearing Member shall,
as principal, be required to satisfy the SFT Deposit for each of the Agent Clearing
Member’s Agent Clearing Member Customer Omnibus Accounts.

SEC. 17. Corporation Default.

(a) If a “Corporation Default” occurs pursuant to Section 2 of Rule 41, all

SFTs that have been novated to the Corporation but not yet settled, and all obligations
and rights arising thereunder which have been assumed by the Corporation pursuant to
this Rule, shall be immediately terminated, and the Board of Directors shall determine
the Aggregate Net SFT Close-out Value owed by or to each SFT Member with respect
to each of its SFT Positions.

(b) For purposes of this Section 17, a Member shall be considered a different
SFT Member in respect of each of (i) its proprietary SFT Positions; (ii) the SFT Positions
established in its Agent Clearing Member Customer Omnibus Accounts (if any); and (iii)
the SFT Positions established in its Sponsored Member Sub-Accounts (if any).

(c) Each SFT Member’s Aggregate Net SFT Close-out Value shall be netted
and offset as described in Section 14(b)(v) through Section 14(b)(vii) of this Rule, as
though the Corporation had ceased to act for each SFT Member.

(d) The Board of Directors shall notify each SFT Member of the Aggregate
SFT Close-out Value, taking into account the netting and offsetting provided for above.
SFT Members that have been notified that they owe an amount to the Corporation shall
pay that amount on or prior to the date specified by the Board of Directors, subject to
any applicable setoff rights. SFT Members who have a net claim against the
Corporation shall be entitled to payment thereof along with other Members’ and any
other creditors’ claims pursuant to the underlying contracts with respect thereto, these
Rules and Procedures and applicable law. Nothing herein shall limit the rights of the
Corporation upon an SFT Member default (including following a Corporation Default),
including any rights under any Clearing Agency Cross-Guaranty Agreement or
otherwise.

SEC. 18. Other Applicable Rules, Procedures, and Addendums.

In addition to this Rule 56, the Rules, Procedures, and Addendums referenced in
this section shall also apply to SFTs and SFT Members, unless expressly stated
otherwise.

Rule 1 (Definitions and Descriptions), Rule 2 (Members, Limited Members and

Sponsored Members), Rule 5 (General Provisions), Rule 12 (Settlement), Rule 13
(Exception Processing), Rule 19 (Miscellaneous Rights of the Corporation), Rule 21
(Honest Broker), Rule 22 (Suspension of Rules), Rule 23 (Action by the Corporation),
Rule 24 (Charges for Services Rendered), Rule 26 (Bills Rendered), Rule 27
(Admission to Premises of the Corporation - Powers of Attorney, Etc.), Rule 28 (Forms),

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 (RULE 56)

Rule 29 (Qualified Securities Depositories), Rule 32 (Signatures), Rule 33 (Procedures),

Rule 34 (Insurance), Rule 35 (Financial Reports), Rule 36 (Rule Changes), Rule 37
(Hearing Procedures), Rule 38 (Governing Law and Captions), Rule 39 (Reliance on
Instructions), Rule 40 (Wind-Down of a Member, Fund Member or Insurance
Carrier/Retirement Services Member), Rule 41 (Corporation Default), Rule 42 (Wind-
down of the Corporation), Rule 45 (Notice), Rule 47 (Interpretation of Rules), Rule 48
(Disciplinary Proceedings), Rule 49 (Release of Clearing Data and Clearing Fund Data),
Rule 55 (Settling Banks and AIP Settling Banks), Rule 58 (Limitations on Liability), Rule
60 (Market Disruption and Force Majeure), Rule 60A (Systems Disconnect: Threat of
Significant Impact to the Corporation’s Systems), Rule 63 (SRO Regulatory Reporting),
Procedure I (Introduction), Procedure VIII (Money Settlement Service), Procedure XII
(Time Schedule), Procedure XIII (Definitions), Procedure XIV (Forms, Media and
Technical Specifications), Procedure XV (Clearing Fund Formula and Other Matters),
Addendum B (Qualifications and Standards of Financial Responsibility, Operational
Capability and Business History), Addendum H (Interpretation of the Board of Directors
Release of Clearing Data), Addendum L (Statement of Policy Pertaining to Information
Sharing), and Addendum P (Fine Schedule) shall apply to SFTs and SFT Members,
unless the context otherwise requires.

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 (RULE 57)

RULE 57. INSURANCE & RETIREMENT SERVICES

SEC. 1. (a) The Corporation may provide a service to enable Members, Mutual
Fund/Insurance Services Members, Insurance Carrier/Retirement Services Members
and Data Services Only Members to transmit such data and information relating to I&RS
Eligible Products (the “I&RS Data”) and, with respect to Members, Mutual
Fund/Insurance Services Members and Insurance Carrier/Retirement Services
Members, to settle payments relating to insurance products between themselves. Such
services shall be known as the Insurance & Retirement Services (“I&RS”) and will be
accomplished in accordance with the provisions of this Rule.

(b) Each Member, Mutual Fund/Insurance Services Member, Insurance

Carrier/Retirement Services Member and Data Services Only Member that desires
access to I&RS must complete and deliver to the Corporation such agreements as the
Corporation may from time to time require.

(c) I&RS Data must be submitted to the Corporation in such formats and by
such times as established by the Corporation from time to time, and, depending upon
the type of I&RS Data submitted, may require a response from the receiver of I&RS
Data.

(d) The Corporation will review I&RS Data received from Insurance
Carrier/Retirement Services Members, Mutual Fund/Insurance Services Members,
Members and Data Services Only Members for such information as the Corporation
determines from time to time to be necessary. If the I&RS Data does not contain the
information required by the Corporation, the Corporation will reject the I&RS Data and
will advise the appropriate Insurance Carrier/Retirement Services Member, Member,
Mutual Fund/Insurance Services Member, or Data Services Only Member in such form
and by such time as established by the Corporation from time to time.

(e) If the I&RS Data appears to contain the information required by the
Corporation, subject to any rights the Corporation may have as provided in the Rules
generally, the Corporation will transmit the I&RS Data to the appropriate Insurance
Carrier/Retirement Services Member, Member, Mutual Fund/Insurance Services
Member, or Data Services Only Member in such form and by such time as established
by the Corporation from time to time.

(f) Pursuant to the policies established by the Corporation from time to time,
the Corporation will notify, in such form and at such times as established by the
Corporation from time to time, an Insurance Carrier/Retirement Services Member,
Member, Mutual Fund/Insurance Services Member, or Data Services Only Member, in
respect of certain I&RS Data which requires a response, if no such response has been
received by the Corporation.

(g) Pursuant to the policies established by the Corporation from time to time,
a submitter of I&RS Data can withdraw certain I&RS Data submitted by submitting an
instruction to the Corporation in such form and by such time as established by the

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Corporation from time to time. Upon receipt of a withdrawal instruction, the Corporation
will (i) delete from I&RS the I&RS Data withdrawn and (ii) notify the appropriate party of
the withdrawn I&RS Data in such form and by such time as established by the
Corporation from time to time. Unless I&RS Data is rejected, withdrawn or deleted from
I&RS as provided herein, the Corporation will store and maintain all I&RS Data
submitted to it for transmission between and among Members, Mutual Fund/Insurance
Services Members, Insurance Carrier/Retirement Services Members and Data Services
Only Members and be permitted to evaluate the usefulness of such I&RS Data,
including by providing such I&RS Data to third parties under appropriate agreements of
confidentiality and to prohibit such third parties from using such I&RS Data other than
for evaluation purposes.

(h) Notwithstanding the foregoing, nothing prohibits an Insurance

Carrier/Retirement Services Member, Mutual Fund/Insurance Services Member,
Member or Data Services Only Member from requiring data or information in addition to
any I&RS Data that has been transmitted through the Corporation.

(i) Submission of I&RS Data to, or alteration or withdrawal of I&RS Data

from, the Corporation shall not relinquish, extinguish or affect any legal or regulatory
right or obligation of the Member, Mutual Fund/Insurance Services Member, Insurance
Carrier/Retirement Services Member or Data Services Only Member.

(j) The Corporation will not be responsible for the completeness or accuracy
of the I&RS Data received from or transmitted to an Insurance Carrier/Retirement
Services Member, Member, Mutual Fund/Insurance Services Member, or Data Service
Only Member transmitted through I&RS nor for any errors, omissions or delays which
may occur in the absence of gross negligence on the Corporation’s part, in the
transmission of such I&RS Data to or from an Insurance Carrier/Retirement Services
Member, Member, Mutual Fund/Insurance Services Member, or Data Services Only
Member.

(k) Settlement of money payments in respect of I&RS transactions shall be

made is accordance with Rule 12 and other provisions of these Rules. At any time, the
Corporation may prohibit any payment from settling through I&RS if the Corporation, in
its discretion, determines that such action is necessary for the protection of the
Corporation, Members, Mutual Fund/Insurance Services Members, Insurance
Carrier/Retirement Services Members, creditors or investors.

(l) If at any time the Corporation fails to receive payment from a Member,
Mutual Fund/Insurance Services Member or Insurance Carrier/Retirement Services
Member which payment was to be used to make payment to the contra side of the I&RS
transaction, the Corporation, in its discretion, may reverse in whole or in part any credit
previously given to the Member, Mutual Fund/Insurance Services Member, or Insurance
Carrier/Retirement Services Member who is the contra side to the I&RS transaction,
within such time frame as determined by the Corporation from time to time.

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COMMISSIONS AND COMPENSATION

SEC. 2. (a) The Corporation may provide a service to enable Insurance

Carrier/Retirement Services Members to transmit I&RS Data regarding commissions,
charge backs and other compensation (“Commissions”) to Members, Mutual
Fund/Insurance Services Members and Data Services Only Members and, with respect
to Members and Mutual Fund/Insurance Services Members, to settle payments in
respect of thereof.

(b) An Insurance Carrier/Retirement Services Member may initiate a

Commission transaction by submitting to the Corporation a payment instruction, in such
form and by such time as established by the Corporation from time to time.

(c) Commission transactions received for settlement through the Corporation

prior to the time established by the Corporation for this purpose will settle in the
settlement cycle occurring immediately following the completion of the processing of
data relating to such payment, unless the Insurance Carrier/Retirement Services
Member’s initiation instruction indicated that such transaction will settle on a date
thereafter; provided, however, that no transaction shall settle more than five Business
Days after the day on which the transaction was submitted to the Corporation.

APPLICATIONS AND PREMIUMS

SEC. 3. (a) The Corporation may provide a service to enable Members, Mutual
Fund/Insurance Services Members and Data Services Only Members to transmit I&RS
Data regarding applications and premiums (“Applications and Premiums”) to Insurance
Carrier/Retirement Services Members and, with respect to Members, Mutual
Fund/Insurance Services Members and Insurance Carrier/Retirement Services
Members, to settle payments in respect thereof.

(b) Applications and premiums transactions submitted for settlement through

the Corporation prior to the time established by the Corporation for this purpose will
settle in the settlement cycle occurring immediately following the submission of data
relating to such payment, provided however that the Member or Mutual Fund/Insurance
Services Member initiating the transaction may submit a cancel instruction prior to the
time established by the Corporation for this purpose. Applications and Premiums
transactions received for settlement through the Corporation and cancelled in a timely
manner will be deleted from I&RS.

LICENSING AND APPOINTMENTS

SEC. 4 The Corporation may provide a service to enable Members, Mutual

Fund/Insurance Services Members, Insurance Carrier/Retirement Services Members
and Data Services Only Members to transmit I&RS Data regarding licensing and
appointment authorizations and activity (including, but not limited to, licensing and
appointment authorizations and activity relating to licensee or appointee training)
(“Licensing and Appointments”) among themselves or to otherwise supply and access

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I&RS Data regarding Licensing and Appointments directly to or from NSCC, as the case
may be.

POSITIONS AND VALUATIONS

SEC. 5. The Corporation may provide a service to enable Insurance

Carrier/Retirement Services Members to transmit I&RS Data to Members, Mutual
Fund/Insurance Services Members and Data Services Only Members regarding
positions and valuations specific to an I&RS Eligible Product.

ACAT/TRANSFERS

SEC. 6. (a) The Corporation may provide a service to enable Members to

transmit I&RS Data regarding I&RS Eligible Product customer account transfer data
between Members.

(b) Within the time frame established by the Corporation, the Corporation may
transmit, to an Insurance Carrier/Retirement Services Member, I&RS Eligible Product
customer account transfer data in such form and by such time as established by the
Corporation from time to time. The Insurance Carrier/Retirement Services Member
must confirm, reject, or request a modification with respect to the transfer in such format
and by such time as established by the Corporation. Transfers that are not confirmed or
rejected within such time frame and in such manner as established from time to time by
the Corporation will be deleted from the I&RS system by the Corporation.

ASSET PRICING

SEC. 7. The Corporation may provide a service to enable Insurance

Carrier/Retirement Services Members to transmit I&RS Data to Members, Mutual
Fund/Insurance Services Members and Data Services Only Members regarding the
pricing of units and other values in respect of funds or other assets within annuities and
other insurance products.

FINANCIAL ACTIVITY REPORTING

SEC. 8. The Corporation may provide a service to enable Insurance

Carrier/Retirement Services Members to transmit to Members, Mutual Fund/Insurance
Services Members and Data Services Only Members I&RS Data regarding financial
transactions and related activity specific to an I&RS Eligible Product. The Corporation
may transmit and provide access to transaction-specific subaccount data (“Subaccount
Data”) received through the Financial Activity Reporting service relating to funds or
other assets within variable annuity and variable life insurance products to asset
managers that manage such funds or assets and to service providers on behalf of such
asset managers. Examples of Subaccount Data with respect to variable annuity and
variable life insurance product transactions include, but shall not be limited to, the name
of the insurance carrier, the date of the transaction, the broker-dealer named on the
transaction, the individual advisor listed on the transaction, the type of transaction (e.g.,

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 (RULE 57)

new purchase, death claim, rebalance, subaccount transfer to or from the subaccount,
etc.) and the amount of the transaction.

Asset managers which are not Members or Limited Members will be required to
enter into such agreements with the Corporation as determined by the Corporation to
gain access to the Subaccount Data, which agreements will include an agreement to
pay the fees set forth in the Rules to receive such Subaccount Data and to set up any
system requirements necessary to access the data. Service providers receiving the
Subaccount Data on behalf of asset managers will also be required to enter into such
agreements as determined by the Corporation in order to gain access to such
Subaccount Data on behalf of such asset managers to ensure the data is being used as
contemplated herein and that there are proper safeguards by the service provider to
ensure data security.

IN FORCE TRANSACTIONS

SEC. 9. (a) The Corporation may provide a service to enable Insurance

Carrier/Retirement Services Members, Members, Mutual Fund/Insurance Services
Members and Data Services Only Members to transmit I&RS Data relating to an
existing and effective insurance contract (“In Force Contract”) among themselves and,
with respect to Insurance Carrier/Retirement Services Members, Members and Mutual
Fund/Insurance Services Members, to settle payments in respect thereof.

(b) A Member, Insurance Carrier/Retirement Services Member, Mutual

Fund/Insurance Services Member or Data Services Only Member may initiate a request
relating to an In Force Contract by submitting to the Corporation instructions (“In Force
Transaction Request”) in such form and by such time as established by the Corporation
from time to time. The contra-side Member’s, Insurance Carrier/Retirement Services
Member’s, Mutual Fund/Insurances Member’s or Data Services Member’s response to
such In Force Transaction Request (“In Force Transaction Request Response”) shall be
submitted to the Corporation in such form and by such time as established by the
Corporation from time to time. In Force Transaction Requests and In Force Transaction
Request Responses shall be treated and processed by the Corporation as other I&RS
Data is treated and processed by the Corporation, and shall be subject to the terms, set
forth in Section 1 of this Rule 57.

(c) The Corporation may provide a service to enable Members, Insurance

Carrier/Retirement Services Members and Mutual Fund/Insurance Services Members to
settle money-only payment transactions between themselves in respect of In Force
Contracts. A Member, Insurance Carrier/Retirement Services Member or Mutual
Fund/Insurance Services Member shall initiate a money-only settlement transaction
(hereinafter, the “Initiating I&RS Member”) by submitting to the Corporation instructions
to debit such Initiating I&RS Member’s account in such form and by such time as
established by the Corporation from time to time. In no event shall the Initiating I&RS
Member be the Member, Insurance Carrier/Retirement Services Member or Mutual
Fund/Insurance Services Member to be credited as part of the money-only settlement

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 (RULE 57)

transaction. Settlement of money-only payments in respect of In Force Contracts shall

be subject to Section 1(k) and (l) of this Rule 57.

INSURANCE INFORMATION EXCHANGE (“IIEX”)

SEC 10. The Corporation may provide a service to enable Members, Insurance
Carrier/Retirement Services Members, Mutual Fund/Insurance Service Members and
Data Service Only Members (collectively, “I&RS Members”), and their respective
service providers, to transmit, view and retrieve I&RS Data using a centralized data
repository. Service providers will gain access to IIEX only by authorization from I&RS
Members and will be required to enter into such agreements as determined by the
Corporation, which agreements will include an agreement to pay the fees set forth in the
Rules for product data for which service providers are required to pay a fee as set forth
in the Rules.

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RULE 58. LIMITATIONS ON LIABILITY

SEC. 1. Notwithstanding any affiliation between the Corporation and any other
entity, including another clearing agency, except as otherwise expressly provided by
written agreement between the Corporation and such other entity:

(a) the Corporation shall not be liable for any obligations of such other entity
nor shall the Clearing Fund or other assets of the Corporation be available to such other
entity (or any person claiming through such other entity) for any purpose, and no
Member shall assert against the Corporation any claim based upon any obligations of
any other entity to such Member; and

(b) such other entity shall not be liable for any obligations of the Corporation,
nor shall the Participants Fund or any other assets of such other entity be available to
the Corporation (or any person claiming through the Corporation) for any purpose, and
no Member shall assert against such other entity any claim based upon any obligations
of the Corporation to such Member.

SEC. 2. Notwithstanding any other provision in the Rules:

(a) The Corporation will not be liable for any action taken, or any delay or
failure to take any action, hereunder or otherwise to fulfill the Corporation’s obligations
to its Members, Mutual Fund/Insurance Services Members, Settling Bank Only
Members, Municipal Comparison Only Members, Insurance Carrier/Retirement Services
Members, Investment Manager/Agent Members, TPP Members, TPA Members, Mutual
Fund/Insurance Services Members, Fund Members, Data Services Only Members, and
AIP Members (each hereinafter referred to as a “participant” for purposes of this Rule
58), other than for losses caused directly by the Corporation’s gross negligence, willful
misconduct, or violation of Federal securities laws for which there is a private right of
action. Under no circumstances will the Corporation be liable for the acts, delays,
omissions, bankruptcy, or insolvency, of any third party, including, without limitation, any
depository, custodian, sub-custodian, clearing or settlement system, transfer agent,
registrar, data communication service, AIP Non-Member Fund or delivery service
(“Third Party”), unless the Corporation was grossly negligent, engaged in willful
misconduct, or in violation of Federal securities laws for which there is a private right of
action in selecting such Third Party.

(b) Under no circumstances will the Corporation be liable for any indirect,
consequential, incidental, special, punitive or exemplary loss or damage (including, but
not limited to, loss of business, loss of profits, trading losses, loss of opportunity and
loss of use) howsoever suffered or incurred, regardless of whether the Corporation has
been advised of the possibility of such damages or whether such damages otherwise
could have been foreseen or prevented.

(c) With respect to instructions given to the Corporation by a Special

Representative/Index Recipient Agent, the Corporation shall have no responsibility or
liability for any errors which may occur in the course of transmissions or recording of

250
 (RULE 58)

any transmissions or which may exist in any magnetic tape, document or other media
so delivered to the Corporation.

(d) With respect to the Corporation’s distribution facilities, the Corporation

assumes no responsibility whatever for the form or content of any tickets, checks,
papers, documents or other material (other than items prepared by it) placed in the
boxes in its distribution facilities assigned to each participant, or AIP Member, or
otherwise handled by the Corporation; nor does the Corporation assume any
responsibility for any improper or unauthorized removal from such boxes or from the
Corporation’s facilities of any such tickets, checks, papers, documents or other material,
including items prepared by the Corporation.

(e) With respect to Fund/SERV transactions, the Corporation will not be

responsible for the completeness or accuracy of any transaction or instruction received
from or transmitted to a participant through Fund/SERV, nor for any errors, omissions or
delays which may occur in the transmission of a transaction or instruction to or from a
participant.

(f) The Corporation will not be responsible for the completeness or accuracy
of any I&RS Data received from or transmitted to a participant through I&RS nor for any
errors, omissions or delays which may occur in the transmission of such I&RS Data to
or from a participant.

(g) The Corporation will not be responsible for the completeness or accuracy
of any AIT Data received from or transmitted to a Member through the AIT service, nor
for any errors, omissions or delays which may occur in the transmission of such AIT
Data to or from a Member.

(h) The Corporation will not be responsible for the completeness or accuracy
of any AIP Data received from or transmitted to an AIP Member (including an AIP Fund
Administrator with respect to any AIP Settling Sub-Account thereof) through the
Corporation nor for any errors, omissions or delays which may occur in the transmission
of such AIP Data to or from an AIP Member (including an AIP Fund Administrator with
respect to any AIP Settling Sub-Account thereof).

(i) The Corporation will not be responsible for the completeness or accuracy
of LM Trade Date Data, LM Member-provided Data, LM Transaction Data, or other
information or data which it receives from Members or third parties and which is utilized
in DTCC Limit Monitoring, nor for any errors, omissions or delays which may occur in
the transmission of such data or information.

(j) The Corporation will not be responsible for the completeness or accuracy
of the transaction data received from the Approved SFT Submitters, nor shall the
Corporation, absent gross negligence on the Corporation’s part, be responsible for any
errors, omissions or delays that may occur in the transmission of transaction data from
any Approved SFT Submitter.

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 (RULE 59)

RULE 59. ACCOUNT INFORMATION TRANSMISSION SERVICE

The Corporation may provide a service to Members that enables Members to

transmit account related information between themselves on an automated basis in
respect of the movement of correspondent accounts between Members, or other
material events that result in the bulk movement of accounts between Members.
Members who desire to use this service must notify the Corporation in such form and by
such time as the Corporation may determine from time to time. Information transmitted
pursuant to this rule (referred to as “AIT Data”) must be submitted to the Corporation in
such form and within such time frame as established by the Corporation from time to
time.

252
 (RULE 60)

RULE 60. MARKET DISRUPTION AND FORCE MAJEURE

SEC. 1. Market Disruption Events

On the happening of any one or more of the events or circumstances set out
below (each a “Market Disruption Event”) which, in any case, is likely to materially affect
or has materially affected the business, operations, safeguarding of securities or funds,
or physical functions of the Corporation, including performance by the Corporation of
any obligations under these Rules & Procedures, the Corporation shall be entitled to
take such action as is set out in this Rule 60:

(a) a general suspension or limitation of trading on the New York Stock

Exchange, NASDAQ, or any other exchange or market relevant to the pricing or trading
of securities cleared and settled through the Corporation;

(b) the declaration of a trading or banking moratorium in the United States or

New York State;

(c) any international organization, the government of any nation, state, or

territory, or any institution or agency thereof, or any self-regulatory organization taking
action of a nature likely to affect the normal course of business, including performance
by the Corporation of obligations under these Rules & Procedures;

(d) the unavailability, failure, malfunction, overload, or restriction (whether

partial or total) of any payment, bank transfer or wire, or securities settlement system;

(e) the unavailability, failure, malfunction, overload, or restriction (whether

partial or total) of any cash or securities depository, custodian or clearing bank, or any
material variation of such depository’s, custodian’s or clearing bank’s processing or
turnaround times, whether or not occasioned by action of such depository, custodian or
clearing bank; or

(f) any Force Majeure, which shall include (without limitation) any terrorist or
other criminal action, war or hostilities between any nations, national emergency, riot,
civil unrest, acts of God or the public enemy, fire or other casualty, flood, accident,
disaster (including any nuclear, atomic, environmental, or natural disaster), sabotage,
bomb threat, labor dispute, embargo, the unavailability, failure, malfunction, or
restriction of communication, computer, or data processing systems or facilities, or of
software or technology, cyber attack, lack of transportation facilities, interruption
(whether partial or total) of power supplies or other utility or service, or any event,
situation, or circumstance beyond the reasonable control of the parties (whether or not
similar to any of the foregoing), including those imminent or threatened.

SEC. 2. Powers of the Corporation

If the Board of Directors or any officer of the Corporation listed below determines,
in its, his, or her judgment that there is a Market Disruption Event, the Corporation shall
be entitled to act (or refrain from acting) as prescribed in Section 3 of this Rule 60. To

253
 (RULE 60)

the extent practicable, the determination of the existence of a Market Disruption Event,
and the actions to be taken in response thereto, shall be made by the Board of Directors
at a meeting where a quorum is present and acting. However, if the Corporation is
unable to convene a Board meeting promptly and timely in such event, then such
determination may be made by either the Chief Executive Officer, the Chief Financial
Officer, the Group Chief Risk Officer, the Chief Information Officer, the Head of Clearing
Agency Services, or the General Counsel, or by any management committee on which
all of the foregoing officers serve (an “Officer Market Disruption Event Action”), provided
that the Corporation shall convene a Board meeting as soon as practicable thereafter
(and in any event within 5 Business Days following such determination) to ratify, modify
or rescind such Officer Market Disruption Event Action.

SEC. 3. Authority to take Actions

Upon the determination that there is a Market Disruption Event, the Corporation
shall be entitled, during the pendency of such Market Disruption Event, to:

(a) suspend the provision of any or all services of the Corporation; and

(b) take, or refrain from taking, or require Members and/or Limited Members
(whether or not they are affected by the Market Disruption Event) to take or refrain from
taking, any and all action which the Corporation considers appropriate to prevent,
address, correct, mitigate or alleviate the event and facilitate the continuation of
services as may be practicable, and, in that context, issue instructions to Members
and/or Limited Members.

SEC. 4. Notifications

(a) Each Member and Limited Member shall notify the Corporation
immediately upon becoming aware of any Market Disruption Event.

(b) The Corporation shall promptly notify Members and Limited Members of
any action the Corporation takes or intends to take pursuant to Section 3 of this Rule
60.

(c) The Corporation shall attempt to consult with officials of the SEC prior to
the Corporation taking any action pursuant to Section 3 of this Rule 60; provided,
however, that the authority contained herein shall not be conditioned by such
consultation.

The Corporation shall advise the SEC as soon as practicable by telephone, and
confirmed in writing, of any action taken by the Corporation pursuant to Section 3 of this
Rule 60, and a record of such writing shall be promptly made and filed with the
Corporation’s records and shall be available for inspection by any Member or Limited
Member during regular business hours on Business Days.

The Corporation shall also advise the SEC as soon as practicable by telephone,
and confirmed in writing, at such time it determines that there is no longer a Market

254
 (RULE 60)

Disruption Event and the Corporation terminates the actions taken by the Corporation
pursuant to Section 3 of this Rule 60. A record of such writing shall be promptly made
and filed with the Corporation’s records and shall be available for inspection by any
Member or Limited Member during regular business hours on Business Days.

SEC. 5. Certain Miscellaneous Matters

(a) Without limiting any other provisions in these Rules & Procedures
concerning limitations on liability, none of the Corporation, its directors, officers,
employees, agents, or contractors shall be liable to a Member, Limited Member or any
other person (including any customer or client thereof) for:

(i) any failure, hindrance, interruption or delay in performance in whole

or in part of the obligations of the Corporation under the Rules or
Procedures, if that failure, hindrance, interruption or delay arises
out of or relates to a Market Disruption Event; or

(ii) any loss, liability, damage, cost or expense arising from or relating
in any way to any actions taken, or omitted to be taken, pursuant to
this Rule 60.

(b) The power of the Corporation to take any action pursuant to this Rule 60
also includes the power to repeal, rescind, revoke, amend, or vary any such action.

(c) The powers of the Corporation pursuant to this Rule 60 shall be in addition
to, and not in derogation of, authority granted elsewhere in these Rules & Procedures to
take action as specified therein.

(d) In the event of any conflict between the provisions of this Rule 60 and any
other Rules or Procedures, the provisions of this Rule 60 shall prevail.

255
 (RULE 60A)

RULE 60A. SYSTEMS DISCONNECT:

THREAT OF SIGNIFICANT IMPACT TO THE CORPORATION’S SYSTEMS

SEC. 1. Major Event

For purposes of this Rule, the following terms shall have the following meanings:

“DTCC Systems” means the systems, equipment and technology networks of

DTCC, the Corporation and/or their Affiliates, whether owned, leased, or licensed,
software, devices, IP addresses, or other addresses or accounts used in connection
with providing the services set forth in the Rules, or used to transact business or to
manage the connection with the Corporation.

“DTCC Systems Participant” shall mean a Member, Limited Member, or third

party service provider, or service bureau that is connecting with the DTCC Systems.

“Major Event” shall mean the happening of one or more Systems Disruption(s)
that is reasonably likely to have a significant impact on the Corporation’s operations,
including the DTCC Systems, that affect the business, operations, safeguarding of
securities or funds, or physical functions of the Corporation, Members, Limited
Members, and/or other market participants.

“Systems Disruption” shall mean the unavailability, failure, malfunction, overload,

or restriction (whether partial or total) of a DTCC Systems Participant’s systems that
disrupts or degrades the normal operation of such DTCC Systems Participant’s
systems; or anything that impacts or alters the normal communication, or the files that
are received, or information transmitted, to or from the DTCC Systems.

SEC. 2. Powers of the Corporation

The determination that the Corporation has a reasonable basis to conclude that
there has been a Major Event and shall be entitled to act (or refrain from acting) as
prescribed in Section 3 of this Rule 60A may be made by either the Chief Executive
Officer, the Chief Financial Officer, the Group Chief Risk Officer, the Chief Information
Officer, the Head of Clearing Agency Services or the General Counsel (an “Officer
Major Event Action”). As soon as practical following such a decision, any management
committee on which all of the foregoing officers serve shall convene, and the
Corporation shall convene a Board of Directors meeting as soon as practicable
thereafter (and in any event within 5 Business Days following such determination), in
each case, to ratify, modify or rescind such Officer Major Event Action.

SEC. 3. Authority to take Actions

Upon the determination that there is a Major Event, the Corporation shall be
entitled, during the pendency of such Major Event, to:

(a) disconnect the DTCC Systems Participant’s system from the DTCC
Systems;

256
 (RULE 60A)

(b) suspend the receipt and/or transmission of files or communications to/from

the DTCC Systems Participant to the DTCC Systems; or

(c) take, or refrain from taking, or require the DTCC Systems Participant to
take or refrain from taking, any and all action that the Corporation considers appropriate
to prevent, address, correct, mitigate or alleviate the Major Event and facilitate the
continuation of services as may be practicable, and, in that context, issue instructions to
the DTCC Systems Participant.

SEC. 4. Notifications

(a) Each Member or Limited Member shall notify the Corporation immediately
upon becoming aware of any Major Event and cooperate with the Corporation to identify
the root cause and resolution.

(b) The Corporation shall promptly notify the DTCC Systems Participant(s) of
any action the Corporation takes or intends to take with respect to such DTCC Systems
Participant(s) pursuant to Section 3 of this Rule 60A.

SEC. 5. Certain Miscellaneous Matters

(a) Without limiting any other provisions in these Rules & Procedures
concerning limitations on liability, none of the Corporation or its Affiliates, its or their
directors, officers, employees, agents, or contractors shall be liable to a Member,
Limited Member or any other person (including any third party provider or service
bureau acting on behalf of the Member, Limited Member, or any customer or client
thereof) for:

(i) any failure, hindrance, interruption or delay in performance in whole

or in part of the obligations of the Corporation under the Rules or
Procedures, if that failure, hindrance, interruption or delay arises
out of or relates to a Major Event; or

(ii) any loss, liability, damage, cost or expense arising from or relating
in any way to any actions taken, or omitted to be taken, pursuant to
this Rule 60A.

(b) The power of the Corporation to take any action pursuant to this Rule 60A
also includes the power to repeal, rescind, revoke, amend, or vary any such action.

(c) The powers of the Corporation pursuant to this Rule 60A shall be in
addition to, and not in derogation of, authority granted elsewhere in these Rules &
Procedures to take action as specified therein.

(d) The Members(s) and Limited Member(s) shall, in accordance with the
Rules & Procedures, maintain the confidentiality of any DTCC Confidential Information
provided to them by the Corporation and/or DTCC in connection with a Major Event.

257
 (RULE 60A)

(e) In the event of any conflict between the provisions of this Rule 60A and
any other Rules or Procedures, the provisions of this Rule 60A shall prevail.

258
 (RULE 61)

RULE 61. INTERNATIONAL LINKS

The Corporation may establish links with one or more Foreign Financial
Institutions and may make available to such Foreign Financial Institutions for the benefit
or on behalf of the Foreign Financial Institution’s participants and members such
services of the Corporation which the Corporation in its sole discretion shall determine
to provide. The Corporation may enter into such agreements as it may deem
appropriate with any such Foreign Financial Institution which agreement and the Rules
of the Corporation, as well as the rules, procedures and other documents of the Foreign
Financial Institution shall govern link transactions between participants and members of
such Foreign Financial Institutions and the Members of the Corporation. The
Corporation may from time to time establish procedures which shall be applicable to the
operation of such links which procedure may be amended from time to time and such
procedures shall be a part of the Rules and Procedures of the Corporation.

259
 (RULE 62)

RULE 62. (RULE NUMBER RESERVED FOR FUTURE USE)

260
 (RULE 63)

RULE 63. SRO REGULATORY REPORTING

The Corporation may provide one or more data transmission services to permit
Members and others to meet regulatory reporting requirements imposed by self-
regulatory organizations, as defined in the Exchange Act. To the extent that Members
or others use any such service they shall be bound by the terms of any agreement
between the Corporation and any self-regulatory organization with respect to each such
service. Entities which are not Members shall be required to enter into such
agreements as determined by the Corporation in order to be permitted to use such
services.

261
 (RULE 64)

RULE 64. DTCC SHAREHOLDERS AGREEMENT

SEC. 1. For purposes of this Rule 64:

“DTCC” means The Depository Trust & Clearing Corporation, the holder of all of
the capital stock of the Corporation.

“Shareholders Agreement” means the Shareholders Agreement of DTCC, dated

as of November 4, 1999, as heretofore or hereafter amended and restated.

“Common Shares” has the meaning given to such term in the Shareholders
Agreement.

“Mandatory Purchaser Participant” has the meaning given to such term in the
Shareholders Agreement.

“Voluntary Purchaser Participant” has the meaning given to such term in the
Shareholders Agreement.

SEC. 2. As a condition to its use of the services and facilities of the Corporation,
a Member (other than a Member that is a central securities depository, Federal Reserve
bank, or central counterparty) shall be required to purchase and own Common Shares
in accordance with the terms of the Shareholders Agreement and be a party to the
Shareholders Agreement. For purposes of the Shareholders Agreement, a Member
(other than a Member that is a central securities depository, Federal Reserve bank, or
central counterparty) shall be a Mandatory Purchaser Participant.

SEC. 3. A Fund Member, Insurance Carrier/Retirement Services Member,

Municipal Comparison Only Member or Mutual Fund/Insurance Services Member (other
than any central securities depositories, Federal Reserve banks, and central
counterparties) shall be permitted (but not required) to purchase and own Common
Shares in accordance with the terms of the Shareholders Agreement and be a party to
the Shareholders Agreement. For purposes of the Shareholders Agreement, a Fund
Member, Insurance Carrier/Retirement Services Member, Municipal Comparison Only
Member or Mutual Fund/Insurance Services Member shall be a Voluntary Purchaser
Participant.

SEC. 4. This Rule 64 shall have no application to a Sponsored Member, Data

Services Only Member, Settling Bank Only Member, Investment Manager/Agent
Member, TPP Member, TPA Member or AIP Member. 1

1 Note that, if a Fund Member, Insurance Carrier/Retirement Services Member, Municipal Comparison
Only Member or Mutual Fund/Insurance Services Member is also a member or participant of another
clearing agency subsidiary of DTCC, such Fund Member, Insurance Carrier/Retirement Services
Member, Municipal Comparison Only Member or Mutual Fund/Insurance Services Member may be a
Mandatory Purchaser Participant pursuant to the terms of the Shareholders Agreement and the rules
and procedures of such other subsidiary. If a Sponsored Member, Data Services Only Member,

262
 (RULE 64)

SEC. 5. The Corporation shall execute and deliver the Shareholders Agreement
as attorney in fact for a Person that purchases Common Shares pursuant to Section 2
or Section 3 of this Rule 64 if such Person is not already a party to the Shareholders
Agreement. In addition, the Corporation may on behalf of DTCC pursuant to the
Shareholders Agreement, without duplication of payment, (A) debit a Person for any
amount payable by the Person to DTCC for Common Shares purchased by the Member
and (B) credit a Person for any amount payable by DTCC to the Person for Common
Shares sold by the Person.

Settling Bank Only Member, Investment Manager/Agent Member, TPP Member, TPA Member or AIP
Member is also a member or participant of another clearing agency subsidiary of DTCC, such
Sponsored Member, Data Services Only Member, Settling Bank Only Member, Investment
Manager/Agent Member, TPP Member, TPA Member or AIP Member may be a Mandatory Purchaser
Participant or a Voluntary Purchaser Participant pursuant to the terms of the Shareholders Agreement
and the rules and procedures of such other subsidiary.

263
 (RULE 65)

RULE 65. ID NET SERVICE

SEC. 1. General

(a) The Corporation may offer a service to provide a means by which a

broker/dealer Member can clear certain of its customer-side activity in Eligible ID Net
Securities (as defined in this Rule 65) that is transmitted to or from the Corporation’s
agency accounts established on behalf of the broker/dealer Member at a Qualified
Securities Depository. Such activity is processed through the CNS accounting system
of the Corporation when the customer is a contra-side participant of a Qualified
Securities Depository, and such participant has agreed with the applicable Qualified
Securities Depository to the delivery of applicable securities directly to the agency
accounts established on behalf of broker/dealer Members participating in this service.
Such a broker/dealer Member meeting the qualifications of this Rule (an “ID Net
Subscriber”) may participate in this service which shall be known as the “ID Net
Service,” and shall be accomplished in accordance with this Rule.

The rights, liabilities and obligations of ID Net Subscribers in their capacity as

such shall be governed by this Rule 65 in addition to the Rules of the Corporation as
they apply to them in their capacity as Members; except that in the event of a conflict
between such Rules, Rules applying to ID Net Subscribers in their capacity as Members
generally shall govern.

SEC. 2. Qualifications of ID Net Subscribers

An ID Net Subscriber must meet the qualifications set forth in this Rule. An ID Net
Subscriber must be: (i) an existing Member of the Corporation, and (ii) eligible for CNS
processing.

SEC. 3. Documentation and Requests for Status as an ID Net Subscriber

(a) Each Member that wishes to become an ID Net Subscriber shall complete
and deliver to the Corporation documentation, in such form as prescribed by the
Corporation from time to time and shall provide such other reports and information as
the Corporation may determine or appropriate. The applicant shall sign and deliver to
the Corporation an agreement or acknowledgement, the form of which shall be
determined by the Corporation from time to time, whereby the applicant shall agree to
the terms and conditions of this Rule 65 and such other terms not inconsistent with this
Rule 65 that are deemed by the Corporation to be necessary to protect itself or its
participants. An applicant shall provide such reports and information as the Corporation
may determine is appropriate.

(b) The Corporation shall approve a request of a Member to become an ID

Net Subscriber pursuant to this Rule 65 upon a determination by the Corporation that
the Member has satisfied the qualifications and requirements for ID Net Subscribers as
set forth in this Rule 65.

264
 (RULE 65)

SEC. 4. Eligible ID Net Securities

Subject to limitations set forth by the Corporation from time to time, any CNS
Security shall be an “Eligible ID Net Security”.

SEC. 5. Obligations and Rights applicable to an ID Net Subscriber

(a) An ID Net Subscriber covenants to the Corporation as follows:

(i) to abide by the Rules of the Corporation applicable to an ID Net

Subscriber and the use of the ID Net service, and to be bound by all the provisions
thereof, and that the Corporation shall have all the rights and remedies
contemplated by the applicable Rules of the Corporation;

(ii) that the applicable Rules of the Corporation shall be a part of the
terms and conditions of every transaction which the ID Net Subscriber submits to
the Corporation;

(iii) to pay to the Corporation such fees, charges and other amounts as
may be established by the Corporation in connection with the ID Net Subscriber’s
use of ID Net Service or its status as an ID Net Subscriber, and to pay such fines
or penalties as may be imposed in accordance with this Rule 65; and

(iv) to be bound by any amendment to the applicable Rules of the

Corporation subsequent to the time such amendment takes effect as fully as
though such amendment were now a part of the Rules of the Corporation,
provided, however, that no such amendment shall affect its right to cease to be an
ID Net Subscriber unless before such amendment becomes effective, it is given
an opportunity to give written notice to the Corporation of its election to cease to
be an ID Net Subscriber.

(b) The Corporation may determine to remove a Member’s status as an ID

Net Subscriber, or to suspend, limit or restrict its access to the ID Net Service, under the
following circumstances:

(i) if the ID Net Subscriber is in such financial or operating difficulty that

the Corporation has determined, in its discretion, that such action is necessary for
the protection of the Corporation and its participants;

(ii) the ID Net Subscriber has failed to comply with any requirement of
the Corporation, or if it no longer meets the qualifications for status as an ID Net
Subscriber set forth in this Rule;

(iii) if the ID Net Subscriber is “insolvent” as defined in Rule 20 of these

Rules; or

(iv) under any circumstances in which, in the reasonable discretion of the

Corporation, adequate cause exists to do so.

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 (RULE 65)

Such action may be taken summarily if the Corporation determines in its

reasonable discretion that such summary action is in the interests of the Corporation or
its participants.

(c) The ID Net Service shall not be a guaranteed service of the Corporation.
If the Corporation ceases to act for a Member that is an ID Net Subscriber pursuant to
Rule 18 it may post appropriate offsetting positions in order to exit any uncompleted
transactions from the ID Net Service.

SEC. 6. ID Net Processing

Transactions submitted through the ID Net Service shall be processed as set

forth in Procedure XVI.

SEC. 7. Limitations on Liability

(a) Notwithstanding any other provision in the Rules of the Corporation: The
Corporation will not be liable for any action taken, or any delay or failure to take any
action, hereunder or otherwise to fulfill the Corporation’s obligations to its ID Net
Subscribers, other than for losses caused directly by the Corporation’s gross negligence,
willful misconduct, or violation of federal securities laws for which there is a private right
of action. Under no circumstances will the Corporation be liable for the acts, delays,
omissions, bankruptcy, or insolvency, of any third party, including, without limitation, any
depository, custodian, sub-custodian, Settling Bank, Registered Clearing Agency,
Affirming Agency, data communication service or delivery service (“Third Party”), unless
the Corporation was grossly negligent, engaged in willful misconduct, or in violation of
federal securities laws for which there is a private right of action in selecting such Third
Party.

(b) Under no circumstances will the Corporation be liable for any indirect,
consequential, incidental, special, punitive or exemplary loss or damage (including, but
not limited to, loss of business, loss of profits, trading losses, loss of opportunity and loss
of use) howsoever suffered or incurred, regardless of whether the Corporation has been
advised of the possibility of such damages or whether such damages otherwise could
have been foreseen or prevented.

266
 (PROCEDURE I)

NATIONAL SECURITIES CLEARING CORPORATION PROCEDURES

PROCEDURE I. INTRODUCTION

These Procedures have been adopted under the Rules of National Securities
Clearing Corporation (the Corporation) with respect to services offered by the
Corporation. Each term used in these Procedures shall have the same definition as it
has in the Rules unless it is defined in Procedure XIII of these Procedures, in which
case it shall have the definition specified in said Procedure XIII.

The Corporation establishes data submission thresholds for data files transmitted
for processing. The purpose of these thresholds is to alert the Corporation to the
possibility of either missing (for a submission below the low threshold) or duplicate (for a
submission above the high threshold) data files. It is incumbent upon participants to
review these thresholds and make such adjustments as they deem necessary. Failure
to do so may result in the transmission being rejected, or not being processed to the
extent it exceeds, or is below, the established thresholds.

In addition, the Corporation may establish from time to time, such data field
requirements for transaction and instructional input, including mandatory identifying
details, as it determines are necessary or appropriate for the processing of activity
under the services it provides. The Corporation may reject any such input that does not
contain all mandatory data details.

A reference in any form, document or ticket referred to herein to NYSE, ASE,

NASD, Stock Clearing Corporation, SCC, American Stock Exchange Clearing
Corporation, ASECC, National Clearing Corporation, NCC, SCC Division, ASECC
Division or NCC Division, creates a contractual relationship solely between the
participant and the Corporation subject to the Rules or these Procedures. A reference
in any form, document or ticket to the By-Laws of any entity other than the Corporation
shall be deemed to have been deleted therefrom and shall not bind the Corporation or a
participant in any way.

All references to a “day”, “yesterday”, “today” and similar references herein refer
to settlement days, unless specified as “Business Days” or “calendar days”, or the
context otherwise requires. Terms used in any form, document, or ticket referred to
herein shall have the same definition as they have in the Rules and these Procedures.

267
 (PROCEDURE II)

PROCEDURE II. TRADE COMPARISON AND RECORDING SERVICE

A. Introduction

Trade Comparison is the first step in the clearance and settlement of securities
transactions. It consists of reporting, validating and matching the buy and sell sides of a
securities transaction and results in a compared trade. Except with respect to certain
transactions eligible and submitted for processing through the Obligation Warehouse
service and provided under these Rules & Procedures, Trade Comparison for
transactions in equity securities occurs outside of the Corporation through the facilities
of relevant Self-Regulatory Organizations and/or Qualified Special Representatives.
The Corporation may provide Comparison services with respect to transactions in debt
securities. Trade data submitted by Self-Regulatory Organizations and Qualified Special
Representatives on behalf of Members as permitted in this Procedure II is submitted on
a locked-in basis for Trade Recording, and is converted (if necessary), validated,
recorded and reported to Members. Except as specified below, compared and recorded
trades are then entered into the CNS Accounting Operation, the Foreign Security
Accounting Operation, or the Balance Order Accounting Operation.

All trade data submitted to the Corporation by Self-Regulatory Organizations, Qualified

Special Representatives and Special Representatives for recording pursuant to this
Procedure II must be submitted in Real-time, as that term is defined in Procedure XIII
and on a trade-by-trade basis, in the form executed without any form of pre-netting of
such trades prior to their submission. Trades submitted by Special Representatives for
which the counterparties are Affiliates, and Client Custody Movements, as defined in
Section 7 of Rule 7, are not subject to the requirements of this paragraph.

Compared and recorded trades are routed to either the CNS Accounting Operation, the
Balance Order Accounting Operation, or the Foreign Security Accounting Operation.
Separate Trade Recording is provided for regular way and when-issued and when
distributed transactions in equity securities (a) executed on securities exchanges, and
(b) traded in the Over-the-Counter (OTC) market. Separate Trade Comparison and
Recording is also provided for debt securities, including when issued and when-
distributed transactions, for transactions in all marketplaces.

B. Equity and Listed Debt Securities -- Locked-In Trade Input

(i) Recording of Regular-Way Transactions

Self-Regulatory Organizations and Qualified Special Representatives on behalf of

Members (as applicable) may submit to the Corporation trade data relating to regular
way transactions in securities executed on securities exchanges or OTC marketplaces.
Regular-way trade data may be submitted throughout T (“trade date”) until the time
specified by the Corporation (hereinafter referred to as “Original Trade Input”), and shall
include quantity, security identification, identification of the marketplace of execution,

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contra-broker, trade value and other identifying details as the Corporation may require
or permit.

Regular-way trade data as submitted by Self-Regulatory Organizations and Qualified

Special Representatives on behalf of Members (“Locked-in Trade Data”) is converted, if
necessary, and validated. Results of this process are reported by the Corporation to
Members on such reports and in such formats as determined by the Corporation from
time to time. Such reports are available to Members on a real-time and/or intra-day
basis as determined by the Corporation from time to time.

(ii) Recording of Cash, Next Day and Seller’s Option Transactions

Qualified Special Representatives and Self-Regulatory Organizations on behalf of

Members may submit to the Corporation, data relating to cash, next day, and seller’s
option transactions on securities other than securities processed under Procedure VI.
Such trade data may be submitted during the timeframes specified by the Corporation
from time to time and shall include such trade details as the Corporation may specify
(including, if the transaction is a seller’s option, the settlement date, which may be no
greater than 180 days beyond the trade date). Results of this input are reported by the
Corporation to Members on such reports and in such formats as determined by the
Corporation from time to time, and if the securities covered by such trades are CNS-
eligible, the recorded trades will be entered into the CNS accounting operation (unless
otherwise provided in these Procedures). Cash trades received after such cutoff time
as the Corporation designates will be recorded and reported, but may only be settled
directly between the parties. Next day as-of trades received on Settlement Date prior to
the Corporation’s designated cutoff time will settle on that date; otherwise the trade will
be assigned a new settlement date which will be the next settlement day following the
date the trade is recorded by the Corporation. Trades that are either (i) designated as
Special Trades, (ii) in a security which is not CNS-eligible, or (iii) in a CNS Security that
is undergoing a corporate action, or is scheduled to settle between a dividend ex-date
and record date, will be processed on a trade-for-trade basis.

C. Debt Securities

1. Trade Input and Comparison

The Corporation provides the following procedures for trade input and
comparison of transactions in regular way debt securities, including unit
investments trusts, in any par value (excluding fractions and decimals), other
than securities submitted through the correspondent clearing service and by
regional exchanges/marketplaces or Qualified Securities Depositories:

(a) Trade data as submitted by Members and Municipal Comparison

Only Members for comparison processing is converted, if necessary, validated
and matched by the Corporation to ensure that the details of each trade are in
agreement between the purchaser and the seller.

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(b) Trade data may be submitted during the timeframes specified by

the Corporation from time to time, and shall include quantity, security
identification, identification of the marketplace of execution, contra-broker, trade
value, settlement date (which may be no greater than 50 Business Days beyond
the trade date), trade date, unique reference number (x-ref), MPID (the market
participant identifier issued by the Financial Industry Regulatory Authority, Inc., or
“FINRA”), and other identifying details as the Corporation may require or permit
and shall be in such formats as specified by the Corporation relative to the
method utilized for trade submission.

(c) If the purchaser and seller have submitted trade data that matches
in all required respects other than for trade value, the trades shall be deemed
compared if one of the following tolerances apply:

(1) Trades that are submitted prior to the cut-off time for intraday
comparison established by the Corporation from time to time shall be
deemed compared using (a), for bilateral trades, the seller’s contract
amount if the contract amounts are within (i) a net $2 difference for trades
of $1 million or less and (ii) $2 per million for trades greater than $1
million, and (b), for Qualified Special Representatives and syndicate
trades, the Qualified Special Representative’s or syndicate manager’s
contract amount.

(2) Trades that remain uncompared after the intraday comparison

process shall be deemed compared during the end-of-day enhanced
comparison process using (a), for bilateral trades, the seller’s contract
amount if the contract amounts are within (i) a net $10.00 difference for
trades of $250,000 or less and (ii) $.04 per $1,000 for trades greater than
$250,000, and (b), for Qualified Special Representatives and syndicate
trades, the Qualified Special Representative’s or syndicate manager’s
contract amount.

(d) For trades that are submitted prior to the cut-off time for intraday
comparison established by the Corporation from time to time, when the
purchaser and seller have submitted trade data that matches in all required
respects, including contract amounts which were deemed matched pursuant to
the money tolerances in subsection (c), except for the trade date, the trades shall
be deemed compared if trade dates submitted by the purchaser and seller are
within 20 Business Days of each other and the earlier of the two trade dates is
used. If the trade dates submitted by the purchaser and seller are not within 20
Business Days of each other, the trade will remain uncompared.

(e) Trades deemed compared pursuant to subsections (c) and/or (d)

shall be identified on output made available by the Corporation in such format as
determined by the Corporation from time to time. Trades that remain
uncompared after any end-of-day enhanced comparison process shall be treated

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as if they were submitted prior to the cut-off time for the next available
comparison processing cycle.

(f) Trade input must indicate one of the following: corporate bond
security transactions, municipal security transactions or unit investment trust
transactions.

(g) Corporate bond and municipal bond trades in quantities other than
multiples of a thousand (round-lots) must be divided into separate trade
submissions of the round lot quantity and the odd-lot quantity (multiples of less
than one thousand). All compared corporate bond and municipal bond trades in
odd-lot quantities are processed on a trade-for-trade basis.

(h) Results of the comparison process shall be provided on intraday or

end-of-day output, as applicable, which shall categorize trade data as:

(1) Compared/Matched - Items identified either as compared or

matched on applicable output are those for which both a purchaser and a
seller submitted mandatory trade details that were either identical or were
compared pursuant to subsections (c) and/or (d) above and for which a
comparison has been effected.

(2) Uncompared/Unmatched - Items identified as uncompared or

unmatched on applicable output reflect trades submitted by the Member or
the Municipal Comparison Only Member for which the opposite side either
did not submit data or did not submit data which agreed in all required
respects including the use of tolerances set forth in subsections (c) and (d)
above.

(3) Advisory/Match Request – Items identified as advisory or match

request on applicable output represent trades submitted by another party
against the Member or Municipal Comparison Only Member, but which did
not match any trade the Member or Municipal Comparison Only Member
submitted.

Information made available to Members and Municipal Comparison Only

Members shall identify each trade as being CNS-eligible (to be processed
through the CNS Accounting System), non-CNS-eligible (to be processed
through the Balance Order Accounting System), or Special Trade (to be
designated for either trade-for-trade processing outside of the Corporation’s
facilities or comparison-only processing) through such designation as the
Corporation shall determine from time to time.

Information made available to Members and Municipal Comparison Only

Members may reflect such other details as the Corporation may determine from
time to time.

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(i) (i) The Corporation provides Members with the ability to clear
and settle any compared trade on a trade-for-trade basis. Such
transaction is referred to as a trade-for-trade Special Trade and may be
classified as such, whether or not the security is a CNS security. In order
for a transaction that is submitted for comparison processing to be
classified as a trade-for-trade Special Trade, each of the purchaser and
seller must indicate the appropriate trade-for-trade indicator (“Trade-for-
Trade Indicator”) on its trade input and such Trade-for-Trade Indicator
shall be part of the terms and conditions of the applicable contract.
Unless both parties submit the identical Trade-for-Trade Indicator, the
trade will not compare. In addition, the Corporation itself may determine
that some or all transactions in a security shall settle on a trade-for-trade
basis.

(ii) The Corporation provides Members and Municipal Comparison

Only Members with the ability to submit Special Trades for comparison-
only processing. Trade input must indicate that the trade is being
submitted for comparison-only processing and such trade will not be
reflected on a Consolidated Trade Summary. Trades submitted for
comparison-only processing are subject to the rules of the Municipal
Securities Rulemaking Board (“MSRB”). Information made available with
respect to such trades will not designate such trades as being CNS-
eligible, non-CNS-eligible, or trade-for-trade Special Trades.

(j) (i) All compared trades between Members in municipal

securities which are not eligible for deposit in a Qualified Securities
Depository are processed on a trade-for-trade basis.

(ii) All compared trades in municipal securities between Members and

Municipal Comparison Only Members and between two Municipal
Comparison Only Members, whether or not eligible for deposit in a
Qualified Securities Depository, are processed on a trade-for-trade basis.

(k) (i) All compared trades in municipal securities which have been
processed on a trade-for-trade basis are listed on the applicable
Consolidated Trade Summaries at the original contract amount. Each
such individual listing (including any such listing pursuant to Section
D.2(A)(2)(a) below) constitutes a security order for all purposes of these
Rules and Procedures, including the Fee Schedule. The Corporation may
make additional information regarding such trades available to Members
and Municipal Comparison Only Members by such means as the
Corporation determines from time to time.

(ii) Compared trades between Members in municipal securities which

are eligible for deposit in a Qualified Securities Depository are entered into
the CNS Accounting System, the Balance Order Accounting System, or
processed on a trade-for-trade basis, depending upon the Member’s

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standing instructions to the Corporation; provided, however, that if a

Member has a CNS standing instruction and the contra side has a trade-
for-trade standing instruction, the transaction is processed on a trade-for-
trade basis notwithstanding the CNS standing instruction, provided,
further, that Members may override a CNS standing instruction by
submitting trade input for comparison as a Special Trade.

(l) When the Corporation processes municipal securities transactions

as Special Trades, the resultant compared trades, as indicated on the applicable
Consolidated Trade Summaries, are subject to the rules of the MSRB, including
but not limited to such rules’ close-out provisions and delivery requirements, and
the transactions are not included in the Balance Order Accounting Operation.
Settlement of the resultant compared trades is the responsibility of the parties to
the trades.

(m) The Corporation may accept locked-in trade data reported by Self-
Regulatory Organizations, Qualified Special Representatives and Service
Bureaus on behalf of Members and Municipal Comparison Only Members. Such
trade data is reflected on appropriate output as determined by the Corporation.
Receipt of a locked-in trade that satisfies the Corporation’s trade input
requirements shall result in a compared trade. The status of such transaction as
a compared trade shall not be affected by output indicating a status of “match
request” or “unmatched”.

Submission of any input or instruction by a Member or Municipal

Comparison Only Member on behalf of whom locked-in trade data is being
submitted shall have no legal effect notwithstanding output made available by the
Corporation as a result of such submission.

Data submitted by a Qualified Special Representative which identifies a

trade as a syndicate takedown shall be rejected.

Member submission of a bilateral trade that matches a Qualified Special

Representative’s trade submission in all respects (other than its designation as a
bilateral trade) is converted into a Qualified Special Representative target trade
at the end of the day on which it is submitted.

(n) If a trade, other than a trade which the parties have identified as
being submitted for comparison-only processing, is submitted with a settlement
date of or prior to the date of submission after such cutoff time as the Corporation
may designate, the Corporation shall assign a delivery date of the next
Settlement Date.

(o) Trade input and comparison of transactions submitted for T+1

settlement is handled in the same manner as transactions submitted for regular
way settlement.

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(p) The Corporation shall accept cash transactions (where trade date is
the same date as settlement date) for comparison-only processing. Results of
the comparison-only process for these items are reported by the Corporation as
specified from time to time. Settlement of the resultant compared trades is the
responsibility of the parties to the trades.

2. Resolution of Uncompared Trades in Regular Way Debt Securities

The Corporation provides the following procedures for resolution of uncompared

trades in Regular Way Debt Securities:

(a) In order to accept a trade that is reported as advisory or match

request, a Member or Municipal Comparison Only Member must submit the
appropriate instruction within the timeframes specified by the Corporation from
time to time.

(b) A Member or a Municipal Comparison Only Member with an

advisory or match request that does not agree with the terms of the trade may
respond with the appropriate instruction indicating the reason, if any, that it
disagrees with the terms of the trade. Such instruction must be submitted within
the timeframes specified by the Corporation from time to time and causes the
trade to be deleted from processing. The Member or Municipal Comparison Only
Member may submit a subsequent instruction on the same day to return the
trade to processing.

(c) Members and Municipal Comparison Only Members may delete

uncompared trades by forwarding the appropriate instruction by the time
specified by the Corporation from time to time.

(d) Partial deletions for transactions in debt securities are not

permitted.

(e) Previously compared trades may be reversed through the

submission of offsetting trade details by both parties to the transaction. The
purchaser and the seller must each submit the trade details within the timeframes
specified by the Corporation from time to time and such trade details must match
in all respects or pursuant to the tolerances set forth in subsections (c) and/or (d)
of Section C.1 above.

(f) Transactions which are deleted or reversed, and offsetting

submissions which are matched appear on the appropriate output. Unless
otherwise specified herein, deletion or reversal of a trade pursuant to the
procedures set forth above does not extinguish the rights and obligations of
either party with respect to such trade.

(g) The Corporation may permit uncompared trade details to be

modified by the submitter through the use of the appropriate instruction within the
timeframes specified by the Corporation from time to time. Syndicate takedown

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submissions may only be modified on the submission date. After a trade is

matched, only such fields as determined by the Corporation from time to time
may be modified by the submitter.

(h) Transactions which compare after such cutoff time as the

Corporation may designate on the date on which they were scheduled to settle or
later are assigned a Settlement Date of the next Business Day following the date
the trade is compared. The assignment of a new Settlement Date applies to
trades designated for CNS-eligible processing, Balance Order processing, and
trade-for-trade Special Trades (i.e., trades other than those submitted for
comparison-only processing).

(i) Trade input which is not compared by such timeframes as

determined by the Corporation from time to time shall be deleted from
processing.

(j) The Corporation shall have no responsibility for determining

whether any trade submission is duplicative of an earlier trade submission. Any
such input shall be treated as a separate submission for all purposes of these
Rules and Procedures.

(k) Only the submitter of a locked-in trade may submit subsequent

processing instructions with respect to such trade and any action in this respect
taken by the Member or Municipal Comparison Only Member on behalf of whom
such trade has been submitted shall have no legal effect notwithstanding output
made available by the Corporation as a result of such action.

D. When-Issued and When-Distributed Securities

The Corporation provides Members with the ability to compare transactions in

debt when-issued securities. Trade Comparison for transactions in equity when-issued
securities occurs outside of the Corporation through the facilities of relevant Self-
Regulatory Organizations and/or Qualified Special Representatives.

1. Equity

(a) Input

Trade data for when-issued and when-distributed equity transactions must be

submitted and is recorded in the same manner as specified in subsection B of
this Procedure II.

(b) Settlement

The Settlement Date for issues traded on a when-issued and when-distributed

basis is established by the appropriate regulatory authority. When-issued and
when-distributed compared trades are netted and allotted with regular way trades
for the same Settlement Date as the when-issued and when-distributed trades.

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When-issued and when-distributed trading activity may enter either the Balance
Order Accounting Operation, the Foreign Security Accounting Operation, or the
CNS Accounting Operation for settlement at the appropriate time. Determination
of eligibility for CNS is at the discretion of the Corporation.

2. Debt

(A) The following provisions apply to municipal debt securities:

(1) (a) Municipal securities transactions that are submitted at least one
day prior to the initial Settlement Date for the issue are processed in accordance
with this subsection 2(A) if they specify (i) a final settlement amount and a
settlement date that is the initial Settlement Date for the issue, (ii) a final
settlement amount, a settlement date and a specified number of days after the
Initial Settlement Date for the issue, (iii) a dollar price or a dollar price and a
specified number of days after the initial Settlement Date for the issue, or (iv) a
price-to-yield and concession (if any) or a price-to-yield concession and a
specified number of days after the initial Settlement Date for the issue.

(b) Municipal securities transactions that are submitted one day prior to
the initial Settlement Date for the issue or later, and contain a settlement date
which is after the initial Settlement Date for the issue, but do not meet the above
criteria are treated as regular way transactions.

(c) All other transactions that are not submitted as specified in

subsections (1)(a) and (b) above are rejected.

(2) Trade input, comparison/trade recording, resolution of uncompared trades

and settlement for transactions accepted by the Corporation pursuant to
subsection (1)(a) of this subsection 2(A) above function in the same manner as
with respect to regular way transactions, except for the following:

(a) When the initial Settlement Date and all required pricing information
for an issue has been submitted to the Corporation (and, if deemed necessary by
the Corporation, confirmed in a manner satisfactory to the Corporation), the
Corporation shall calculate the final settlement amount for all transactions that do
not have a final settlement amount, and trades are deemed compared if either
(i) the final settlement amounts are identical or (ii) the final settlement amounts
fall within the money tolerances set forth in subsection (c) of Section C.1 of this
Procedure II. In addition, when the initial Settlement Date has been changed and
the Corporation is notified of a new initial Settlement Date least 2 days prior to
such date (and, if deemed necessary by the Corporation, confirmed in a manner
satisfactory to the Corporation), the Corporation recalculates the final settlement
amounts for all affected transactions (whether or not the original final settlement
amount was calculated by the Corporation), and the new final settlement
amounts are set forth on the applicable contract lists or other applicable output
made available by the Corporation.

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If a submission contains a settlement date and a final settlement amount,

but the Corporation does not have confirmation satisfactory to it of the initial
Settlement Date for the issue, then the Corporation shall report the transaction as
a memo item on the output it makes available to Members. If the Corporation
obtains, within 2 days of the submission, confirmation satisfactory to it of the
initial Settlement Date for the issue which matches the settlement date submitted
or matches the settlement date submitted by taking into account the specified
number of extended settlement days submitted, the memo items are changed to
compared or uncompared/advisory, as appropriate. If no such confirmation is
obtained within 2 days of submission, the items are deleted.

(b) Any when-issued compared trade which is to be entered into the

CNS Accounting Operation shall be netted with any regular-way compared
trades for the same Settlement Date.

(c) The initial Settlement Date for municipal issues is established by

the issuer or underwriter, but may be extended by agreement of the submitting
parties similar to regular way municipal trades. The Settlement Date for
syndicate takedown trades may not be extended.

(d) If the Corporation is notified that the initial Settlement Date is

postponed after the applicable Consolidated Trade Summary has been made
available, the fact that trades in such issue are indicated in such Consolidated
Trade Summary shall have no force and effect for purposes of the Corporation’s
Rules and Procedures unless the Corporation notifies Members to the contrary.
In such case, the Corporation may adjust accrued interest as determined by the
Corporation from time to time. The provisions of this paragraph also apply to
transactions that are treated as regular way transactions pursuant to subsection
(1)(b) of this subsection 2(A) above.

(e) If the Corporation receives notice that an entire issue has been
canceled prior to its initial Settlement Date, trades in such issue are deleted by
the Corporation from the comparison process and, if the applicable Consolidated
Trade Summary has been made available, trades in such issue that are indicated
in such Consolidated Trade Summary are considered null and void by the
Corporation. To the extent that any trades in such issue have been entered into
the CNS Accounting Operation, such trades shall be journalled out of CNS. The
provisions of this paragraph also apply to transactions that are treated as regular
way transactions pursuant to subsection (1)(b) of this subsection 2(A) above.

(f) Transactions that remain uncompared at the close of business on

the day prior to the initial Settlement Date for the issue shall be deleted from
processing.

(g) (i) Syndicate takedown trades may be submitted for

comparison by both the syndicate manager and the syndicate member,
and, in both cases, such trade input must be identified as a syndicate

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takedown trade. A syndicate manager or a syndicate member that does

not agree with the terms of a takedown trade as reported on the contract
sheet may delete the trade by submitting the appropriate instruction to the
Corporation by the time specified by the Corporation. Submissions of a
syndicate takedown trade by a syndicate manager that are not deleted
result in a compared trade; submissions of a syndicate takedown trade by
a syndicate member that are not deleted result in a compared trade only
after submission by the syndicate manager on that trade. Compared
trades are reported to the syndicate manager and the syndicate member
on output made available by the Corporation. The status of such
transaction as a compared trade shall not be affected by output indicating
a status of “match request” or “unmatched”.

(ii) Syndicate takedown submissions against Members and Municipal

Comparison Only Members designated as brokers’ brokers by the
Corporation will be rejected. The Corporation shall maintain a list of such
brokers’ brokers which shall be available to Members upon request.

(iii) Syndicate takedown reversals shall be submitted by both a

syndicate manager and the syndicate member, and, in both cases, such
trade input must be identified as a syndicate takedown trade. A syndicate
manager or a syndicate member that does not agree with the terms of a
reversal takedown trade as reported on the contract sheet may delete that
reversal trade by submitting an appropriate instruction to the Corporation
by such time specified by the Corporation.

Submissions of a syndicate takedown reversal by a syndicate manager

that are not deleted result in a compared reversal trade; submissions of a
syndicate takedown reversal by a syndicate member that are not deleted
result in a compared reversal trade only after submission by the syndicate
manager on that reversal trade. Compared reversal trades are reported to
the syndicate manager and syndicate member on output made available
by the Corporation.

(iv) Submission of any instruction by the syndicate member not

otherwise provided for under these Rules and Procedures shall have no
legal effect notwithstanding output made available by the Corporation as a
result of such submission.

(v) All syndicate takedown trades settle on a trade-for-trade basis.

Extended settlement date is not available for syndicate takedown trades.

(vi) Member submission of a bilateral trade that matches a syndicate

manager’s submission on a syndicate takedown trade or a syndicate
takedown reversal in all respects (other than its designation as a bilateral
trade) will be converted into a syndicate takedown trade or syndicate

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takedown reversal, as appropriate, at the end of the day on which it is

submitted.

(B) If the Corporation has received a transaction in a security for which the
Corporation does not have information with respect to its coming to market that satisfies
subsection (A)(1)(a) of this subsection 2 above, the Corporation shall pend the
transaction. If the Corporation does not receive information that the security is coming
to market by the cut-off time on the submission date, the transactions shall be deleted.

E. Special Trades

The Corporation provides (i) Members with the ability to clear and settle any
compared trade on a trade-for-trade basis, and (ii) SRO’s with the ability to submit
trades for processing on a trade-for-trade basis. Such transactions are referred to as
Special Trades and may be classified as such, whether or not the security is a CNS
Security. With respect to transactions submitted by Members, both the purchaser and
seller must agree to settle on a trade-for-trade basis and must identify the transaction in
its trade input as a “Special Trade”. If only one party identifies a transaction as a
Special Trade, it will not be compared by the Corporation. In addition, the Corporation
itself may determine that some or all transactions in a security shall settle on a trade-for-
trade basis.

F. Index Receipts

1. Composition and Preliminary Financial Data

Each day, by such time as required by the Corporation from time to time, the
Index Receipt Agent shall report to the Corporation a) the composition of index
receipts for creations and redemptions occurring on the next Business Day (“T”),
i.e., the shares and their associated quantities, b) the cash value of the portfolio
for creates and redeems made solely for cash, and, if applicable, c) the
estimated cash amount, representing accrued dividend, cash-in-lieu of
securities 1, if applicable, and balancing amount data (hereinafter referred to as
the “Divided/Balancing Cash Amount”), and d) such other financial data as the
Corporation may require or permit from time to time.

Each day, by such time as determined by the Corporation from time to time, the
Index Receipt Agent may also report to the Corporation the composition of index
receipts for purposes other than creations and redemptions.

Each evening, by such time as determined by the Corporation from time to time,
the Corporation will make available to Members a report detailing, if applicable,
the estimated Dividend/Balancing Cash Amount, other financial data and the

1 The “cash-in-lieu-of securities” portion of the cash amount represents cash substituted for a partial
quantity of the components underlying a creation or redemption rather than acting as the sole
underlying component.

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composition of the next Business Day’s index receipts (“Portfolio Report”). The
composition data within the Portfolio Report may be used by the Corporation to
process index receipt creations and redemptions on the next Business Day. The
Portfolio Report will also include, if available, portfolio holdings of the index
receipts.

2. Creation/Redemption Input

On each Business Day, the Corporation will perform reasonability checks of

transaction data submitted by an Index Receipt Agent to the Corporation. The
Corporation will pend any transaction data that exceeds thresholds established
by the Corporation. The Corporation will notify the Index Receipt Agent of any
transaction data that the Corporation has pended. The Index Receipt Agent
must provide confirmation, in the form and within the timeframe required by the
Corporation, that such pended transaction data should be accepted by the
Corporation. If the Index Receipt Agent fails to provide such confirmation, such
pended transaction data will be rejected. The Corporation may, in its sole
discretion, adjust thresholds from time to time and the Corporation may consider
feedback from its Members or market conditions.

From time to time, the Corporation shall inform Members of the time periods for
each cycle (the intraday cycle, the primary cycle, and the supplemental cycle)
applicable to creation/redemption input. On T, during any of the cycles, by such
time as established by the Corporation from time to time, an Index Receipt Agent
may submit to the Corporation on behalf of Members, index receipt creation and
redemption instructions and their scheduled settlement date, the final
Dividend/Balancing Cash Amount relative to such instructions and a transaction
amount representing the Index Receipt Agent’s fee for the processing of the
index receipt. The Index Receipt Agent may elect a Settlement Date of T+1 or
later for the index receipts and the component securities or cash. The Index
Receipt Agent may submit as-of index creation and redemption instructions, but
only if such as-of data is received by the cut-off time as designated by the
Corporation from time to time, with same-day settling creates and redeems
required to be received by such cut-off time on Settlement Date.

Any as-of index creation and redemption instructions for same-day settlement
received after the cut-off time, designated by the Corporation from time to time,
will be rejected.

On T, the Corporation will report to Members on the Index Receipt Detail Report
the details of the creations and redemptions submitted, the gross quantity of
underlying security components of creation and redemption instructions and the
quantity of index receipt shares associated with particular creation and
redemption activity. The report will also indicate the final Dividend/Balancing
Cash Amount that must be paid or received and the transaction amount that
must be paid on Settlement Date.

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3. Settlement

Index receipts and the underlying component securities which are eligible for
CNS or cash, if applicable, will be reported on the next available Consolidated
Trade Summary. The applicable Consolidated Trade Summary will also
separately indicate the other component securities, or cash component, if
applicable, due to settle. Component securities will be netted with all other CNS
and Non-CNS securities and entered into the CNS and Balance Order
Accounting operations for settlement.

G. Reports and Output

Reports and output may be made available to Members on a real-time and/or on

an intra-day basis as determined by the Corporation from time to time.

Reports identify each security as being eligible (a CNS Security) or non-eligible

(a Balance Order Security) for processing through the CNS system. Depending upon
the format of the report, separate totals may be provided for each of these categories. If
designated as a Special Trade, such designation will be reflected upon the
report/output.

With regard to Locked-in Trade Data reported on T by Self-Regulatory

Organizations and Qualified Special Representatives, the Corporation may report back
such data to Members on separate reports. If data received from a Self-Regulatory
Organization is the result of a trade executed on a system which provides trading
anonymity (i.e., the contra side is not revealed at the time of the trade) the report may
list, in lieu of the actual contra side for the trade, an acronym designated by such Self-
Regulatory Organization. In this case, the contra side shall, for all purposes, be
deemed to be one of the entities which the Self-Regulatory Organization includes as an
eligible entity which may participate in the anonymous trading system. 2

Reports are produced at such intervals and in such formats as determined by the
Corporation showing all compared trade data resulting from T+1 and older adjustments
processed by a Self-Regulatory Organization, as well as step out transactions
processed that day. Designations for CNS Securities and Balance Order securities are
shown in the same manner as on the reports issued as a result of T input. If trades are
listed on reports which include totals, the new data is added to or subtracted from such
totals, to arrive at new totals. The new totals represent the combined input for T
through such cutoff time on T+2 as the Corporation may designate. Trades received
after such cutoff time as established on T+2 are not included in the normal settlement
cycle. Such trades will be assigned a new settlement date which will be the next
settlement day following the date the trade is received by the Corporation.

2 In the event that the Corporation ceases to act for a Member which is the unidentified contra side of
any such trade and the Corporation determines that such trade is to be exited from trade processing,
the Self Regulatory Organization shall have the responsibility to identify to Members the trades
included in reports produced by the Corporation which are with the affected Member.

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Notwithstanding the previous sentence, with respect to Index Receipts, if Index

Receipts for same-day settlement are received by the Corporation after the applicable
cut-off time, such Index Receipts will not be assigned a new settlement date and will be
rejected.

The Reports for trade data other than Locked-in Trade Data will categorize the
trade data as compared, uncompared and advisory, and may display such other data
relevant to such trades as the Corporation shall determine from time to time.

(a) Compared – Items identified as compared are those for which both
a purchaser and a seller submitted identical trade data and for which a
comparison has been effected.

(b) Uncompared – Items identified as uncompared reflect trades

submitted by the Member for which the opposite side either did not submit data
or did not submit data which agreed in all respects.

(c) Advisory – Advisory data represents trades submitted by another

party against the Member, but which did not match any trade the Member
submitted. Advisory reports may be generated by the Corporation for items listed
as advisory data. The use of Advisory reports is explained below.

As with listed equity reports, reports for OTC and other exchange trades will
identify each security as being eligible (a CNS Security) or non-eligible (a Balance
Order Security) for processing through the CNS system and depending on the format of
the report may provide separate totals for each of these categories.

In order to maximize the number of compared trades, if the major and minor side
executing broker information, when used as a criteria in the trade comparison process,
results in an uncompared trade, the Corporation will recycle the trade data without the
major and/or minor side executing broker information originally submitted.
Reports/output will indicate when a resulting compared or uncompared trade has been
processed without the use of the major and/or minor side executing broker information.

H. Consolidated Trade Summaries

The Corporation produces a Consolidated Trade Summary distributed three

times daily for the reporting of CNS, Balance Order, and trade-for-trade transactions.
On each Settlement Day, each Consolidated Trade Summary includes Receive and
Deliver instructions for items designated by the Corporation to settle trade-for-trade that
day and the next Settlement Day. To facilitate settlement of such items, the Corporation
may aggregate and net Receive and Deliver instructions for trade-for-trade items
between counterparties such that a Member may have only one net buy obligation or
sell obligation, where applicable, in a particular security on a given day with a given
counterparty. When Members have an equal number of shares bought and sold
between counterparties for such Special Trades, NSCC will not issue a receive or
deliver obligation and will record any cash difference in the NSCC money settlement

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system. Where issuing of a net buy or sell instruction would result in an money
settlement that is directionally opposite what it would be for a typical money settlement
in relation to a securities movement (i.e., a Member receives an instruction to: (i)
receive securities with a corresponding receipt of money settlement payment, or (ii)
deliver securities with a corresponding delivery of a money payment) or if the
associated money settlement is flat in relation to a securities movement (i.e., a Member
receives an instruction to receive or deliver securities without a corresponding money
settlement amount) then the Corporation may, in lieu of netting, separately aggregate
the receive and deliver instructions so that a Member would have only one aggregate
buy obligation and one aggregate sell obligation in the given security with the given
counterparty.

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PROCEDURE II.A OBLIGATION WAREHOUSE

A. Introduction

The Obligation Warehouse (the “OW”) is a service available to Members for (i)
comparison of transactions that are not otherwise submitted by Members, Self-
Regulatory Organizations, or Qualified Special Representatives on behalf of Members
for trade comparison or recording through other services of the Corporation, (ii) tracking,
storage and maintenance of obligations either compared through the service or
forwarded to it from other services of the Corporation in accordance with the Rules and
Procedures, and (iii) the repricing and updating of fail obligations. 1

Other than Balance Order Contracts and obligations that have been forwarded to
CNS from the OW, which shall continue to be subject to the Rules, all Buy-Ins;
deliveries, receives and reclamations; adjustments for corporate actions, whether
mandatory or voluntary; and transactions of a Member that have been DK’ed, shall be
remain subject to the rules of the appropriate marketplace.

Members may submit to the Corporation trade data relating to securities eligible
for OW processing as provided in this Procedure. Obligations eligible for submission
must have a valid CUSIP or ISIN and be denominated in U.S. Dollars or such other
currencies as the Corporation determines from time to time. NSCC will designate
certain security or transaction types as eligible for the OW process from time to time. 2
Comparison of items submitted directly by Members to the OW shall occur daily on a
real-time basis in accordance with the OW Comparison process set forth below. Each
OW Obligation shall be assigned a unique “OW Control Number” to facilitate tracking
the obligation through its settlement, cancellation or closure. OW Obligations (as
defined in Rule 51) will be tracked, stored, and maintained until settled or otherwise
cancelled by Members or otherwise removed by the Corporation in accordance with the
Rules and Procedures. In addition, for those Members participating in the OW Service,
transactions exited from CNS, ACATS Receive and Deliver transactions (e.g., either
ACATs deliveries that were never eligible for the ACATS Settlement Accounting
Operation or those exited from the ACATS Settlement Accounting Operation) Balance
Orders, and Special Trades shall automatically be entered by the Corporation into the
OW for storage and for Reconfirmation and Pricing Service (“RECAPS”) processing, as
set forth below. Additionally, pursuant to Procedure XVIII, uncompleted transactions in
the ACATS Settlement Accounting Operation at the end of day whereby the Corporation
has issued ACATS Receive and Deliver transactions shall also be automatically entered
by the Corporation into the OW Service (if eligible). In addition, the Corporation will

1 Members should note that in accordance with MSRB rules, NSCC reports transactions in municipal
securities matched through its Real-Time Trade Matching (“RTTM”) service to the MSRB on behalf of
Members. Transactions submitted through the OW will not be reported to the MSRB. In order to
remain compliant with MSRB reporting requirements, transactions subject to MSRB rules should
continue to be submitted by Members to NSCC’s RTTM service.
2 The Corporation may determine from time to time, and shall announce by Important Notice, which
items are eligible for the Obligation Warehouse service.

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cause CNS-eligible OW Obligations to be entered into the CNS Accounting Operation

on a regular basis.

B. OW Comparison

The following steps will apply with respect to transactions submitted to the
Obligation Warehouse for comparison:

1. Transaction data as submitted by Members for processing in the

Obligation Warehouse is compared by the Corporation to ensure that the
matching criteria of each obligation are in agreement between the
purchaser and the seller.

2. Data may be submitted during the timeframes and in such form as may be
specified by the Corporation from time to time. Data required for a valid
submission will include quantity, which party is deliverer or receiver,
security identification, contra-broker, deliverer’s final money, settlement
date, unique reference number (“x-ref”), market participant identification
(MPID), where applicable, whether a transaction should be excluded from
CNS processing and other identifying details as NSCC may require or
permit, and shall be in such formats as specified by the Corporation
relative to the method utilized for submission. Criteria which must match
between contra-parties to effect a comparison of transaction details
includes quantity, an indication as to which party is deliverer or receiver,
security identification, contra-broker, deliverer’s final money, settlement
date, whether a transaction should be excluded from CNS processing and
other identifying details as NSCC may require or permit (collectively
referred to herein as the “Required Matching Fields”).

3. Upon receipt and validation by the Corporation of obligation information

from the initiating party, the contra side will receive an Advisory, to which
they must respond by submitting like details to facilitate a compared
obligation or they can DK the obligation entry. Any submission of a DK
must include the applicable reason code pertaining to the Member’s
disagreement with the transaction.

4. A Member against which a DK is submitted may respond with modifying

details of the applicable transaction within the timeframes specified by the
Corporation from time to time, otherwise the item will be deleted from
processing in accordance with timeframes specified by the Corporation
from time to time. If a Member submits modifying details in response to a
DK from a contraparty, the item will be treated as a new submission
pursuant to Section B(1) of this Procedure.

5. A Member may modify trade details of, or cancel, a transaction, that it has
submitted and is designated by the Corporation as uncompared by
forwarding the appropriate instruction to the Obligation Warehouse by the

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time specified by the Corporation from time to time, so long as notification

of settlement of the uncompared transaction has not been received by the
Obligation Warehouse prior thereto. If a Member submits modifying
details, the item will be treated as a new submission pursuant to Section
B(1) of this Procedure.

6. If the deliverer and receiver submit trade data that matches in all required
respects, the trades will be deemed compared if it meets money
tolerances as announced by the Corporation from time to time, and
deemed an OW Obligation.

7. The Corporation may delete trade input which is not matched by such
timeframes as determined by the Corporation from time to time.

8. The Corporation shall have no responsibility for determining whether any

trade submission is duplicative of an earlier trade submission. Any such
input shall be treated as a separate submission for all purposes of these
Rules and Procedures.

C. Obligation Warehouse Storage, Tracking, Maintenance and Settlement

1. The Corporation will track, store and maintain each OW Obligation until
settled or otherwise cancelled by the Members party to the obligation or
otherwise closed by the Corporation.

2. The Corporation may adjust compared OW Obligations with respect to the

following mandatory reorganization events: forward stock splits, name
changes, mergers (both cash and stock) and full calls with respect to
bonds. 3 In the case of such an event, at such time on or after the effective
date of the event as the Corporation shall determine it has all relevant
information, the affected OW Obligation will be adjusted in accordance
with the terms of the reorganization event. 4 With respect to name
changes and forward stock splits, OW positions in the subject security
shall be converted into the equivalent positions of the new securities
and/or cash and a new obligation will be created automatically as part of
the processing for OW. Any cash adjustment associated with a
mandatory reorganization will be included as part of the Member’s daily
money settlement with the Corporation and will appear on reports
generated in the OW.

3. On a regular basis, the Corporation will review all OW Obligations for CNS
eligibility. Unless otherwise excluded by a Member through its submission
3 Please note that the processing of dividends and interest will not be done for OW transactions and
remain the responsibility of the parties outside the facilities of the Corporation.
4 If the Corporation determines that it does not have the relevant information, Members may adjust OW
Obligations subject to such events by cancelling and resubmitting them.

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of an appropriate instruction, the Corporation will cause all CNS-eligible

OW Obligations: (i) that have not reached their scheduled settlement date
to be reported on the CNS Miscellaneous Activity Report the night prior to
Settlement Date (SD-1) and entered into the CNS Accounting Operation
for the night cycle on SD (i.e., the evening of SD-1), and (ii) that have
reached or passed their scheduled settlement date to be reported on the
Miscellaneous Activity Report on the evening of the date they become
CNS-eligible and entered into the CNS Accounting Operation for
settlement on the next Settlement Day (i.e, the night cycle which runs on
the same evening of the Miscellaneous Activity reports covering the
obligations is issued). Such items shall be subject to Rule 11 and other
provisions of these Rules and Procedures; provided, however, that subject
to any rights the Corporation may have as provided in these Rules
generally, the Corporation will guarantee the settlement of any such OW
Obligation only to the extent that the Member pays the Corporation its full
settlement obligation on the date the obligation is scheduled to settle in
the CNS Accounting Operation. To the extent that such Member fails to
pay in full its settlement obligation, in the sole discretion of the
Corporation, OW Obligations which have been sent to the CNS
Accounting Operation may, in whole or in part, be removed from the CNS
Accounting Operation by reversing all credits and debits for the Member
relating to OW Obligations that have entered the CNS Accounting
Operation. Settlement of such item shall be effected between the
Receiving and Delivering Member and not through the facilities of the
Corporation.

4. The Corporation will update OW Obligations for which deliveries have

been made through a Qualified Securities Depository to reflect their status
as settled, in accordance with instructions received from the Qualified
Securities Depository. 5 The Qualified Securities Depository’s instructions
shall use the OW Control Number and contain such other information as
the Corporation determines from time to time. In the event of a partial
delivery through a Qualified Securities Depository, the Corporation, in
accordance with proper instructions from the Qualified Securities
Depository, will update the records of the respective OW Obligation
accordingly.

5. In order to reflect the settlement of a transaction effected otherwise than

through a Qualified Securities Depository, one party must submit the
relevant obligation details, similar to the data required for OW comparison
(including the actual settlement date, quantity and amount settled), as
specified by the Corporation. At that point, the contraparty will receive an
advisory, to which they must respond by submitting like details, or by

5 In order to effect such an update, Members must provide the Qualified Securities Depository with
instructions in accordance with the Procedures of the Qualified Securities Depository.

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notification that it does not accept the submitted settlement details. If the
parties submit settlement data that matches in all required respects, the
obligation will be updated to reflect the amount so settled, if it meets
money tolerances as announced by the Corporation from time to time. If
the contraparty responds to an advisory that it does not accept the
submitted settlement details, however, the initiating party may submit
modifying details to the applicable transaction, in which case the item will
be treated as a new update of the settlement details.

6. Obligations that have been reflected in the OW as settled in accordance

with these Procedures may be re-opened (either partially or fully), as a
result of a delivery reclaim message sent by either party to the obligation
to OW. Updates to reflect reclaims of settled transactions will be made
once one party enters details of the original transaction, and the original
transaction’s OW Control Number. Once these details are submitted, an
advisory of the reclaim will be sent to the contraparty, who must either
submit identical transaction details to facilitate the reclaim and re-open the
obligation in OW, or submit notification that it does not accept the reclaim
details entered by the initiating party. Updates for reclaims may only be
submitted to the OW for a period of two Business Days following the
actual settlement date of the relevant obligation. If the reclaim message is
not accepted by the contraparty, it will be deleted from the OW, and the
parties will need to generate a new reclaim message in OW. If the original
obligation has been settled for longer than two Business Days, any
reclaim message will be rejected.

D. Reconfirmation and Pricing

1. Introduction

The OW system includes a reconfirmation and pricing service (“RECAPS”) which

will be run from time-to-time as established by the Corporation for such securities
in the OW system as the Corporation shall determine. The system provides an
opportunity to reconfirm and reprice transactions that already have been
compared. 6 The time on the day that the Corporation determines to commence a
cycle of the RECAPS process shall be referred to as “R”.

6 Obligations initially compared through the OW service, or forwarded to the OW from other NSCC
systems or services will not be reconfirmed; however, pre-existing fail obligations submitted by
Members will be reconfirmed upon their submission to the OW subject to the matching process
outlined in subsections A, B, and C above.

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2. RECAPS Processing

(a) Eligibility

OW Obligations (i.e., items that have either: (i) been matched pursuant to this
Procedure, or (ii) forwarded to the OW from other NSCC systems or services as
provided in this Procedure) and have a settlement date of at least two days prior
to the date of R will be considered for the RECAPS process; however, such OW
Obligations can be excluded from the RECAPS process if so designated by the
Member or the Corporation. Fail items not already in the OW but which are
eligible for RECAPS processing must have been submitted to, and matched in,
OW prior to R. Any such submission is subject to the eligibility and matching
provisions of subsections A and B of this Procedure.

(b) RECAPS Processing

On R, except as provided below, each eligible OW Obligation will be re-priced, if

appropriate, netted and allotted, if appropriate, the settlement date updated to the
next business date and opened as a new obligation. Certain securities, including
securities that are not CNS-eligible, securities that are designated to settle on a
trade-for-trade basis, municipal securities and securities for which the current
market price is not available, may not be netted and allotted.

In the event that the current market price for a security is not available, the fail
obligation will be priced at the amount at which the obligation previously was
compared and assigned a new settlement date; and such items may not be
netted and allotted.

(c) Cash Adjustment

The difference between the aggregate value of a Member’s original fails and the
aggregate value of the Repriced RECAPS positions (i.e., the current market price
of the reconfirmed trades) is known as the net cash adjustment. The net cash
adjustment will settle on the Business Day following the date on which the
RECAPS process is run and will be included as part of the Member’s daily
settlement with the Corporation. 7

(d) Adjustment of Settlement Date

For the purposes of the Corporation’s Buy-In Rules and Procedures the RECAPS
Settlement Date shall be considered to be the original RECAPS Settlement Date
for transactions processed through RECAPS.

7 Such net cash adjustments will be separately identified on Members’ money settlement statements.

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E. Pair Off

(a) Eligibility

Members may designate OW Obligations to which they are a party that are in the
“Open” status as eligible for pair off. NSCC may, in its discretion, exclude certain
obligations from pair off, and will announce such exclusions by Important Notice.

(b) Pair Off Processing

On a regular basis, the OW system will apply a pair off methodology to all eligible
OW Obligations based on the quantity of underlying securities, the final money
amount, and the settlement dates of the underlying obligations.

Only OW Obligations that have been designated as eligible for pair off by both
Members that are party thereto, and that are in the same CUSIP and have the
same counterparties, where the counterparties have offsetting long and short
obligations, will be paired-off. A pair off will never occur if it would result in (1) a
negative quantity of underlying securities in either of the original obligations, (2) a
negative final money amount, or (3) at least one of the obligations subject to the
pair off to remain open, with a reduced quantity of underlying securities and have
a final money amount of zero or less than zero.

(c) Closed Out or Cash Adjustment

If a pair off is successful, the underlying OW Obligations will either be closed out
of the OW or, where the quantities of underlying securities are not exactly
matched between obligations being paired off, the pair off will result in one or
more of the obligations being reduced by the quantity of securities that were
paired off with another OW Obligation. OW Obligations that are not closed out
as a result of a pair off will remain in “Open” status in OW, and will be adjusted to
reflect the reduced quantity of underlying securities.

Where the underlying final money amounts are not exactly matched between
obligations being paired off, the pair off will result in a cash adjustment, which will
be reflected in the Members’ money settlement with the Corporation on the
following Business Day.

F. Notifications and Reports

Members will be informed in real-time of status changes with respect to obligations

submitted to the OW.

The Corporation shall make available to each Member a report which reflects the end-
of-day status of OW activity which took place for such Member during each Business
Day.

Activity relating to RECAPS processing will be separately identified on such reports.

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Each Member participating in the OW service shall have an affirmative obligation to

monitor status updates and reports issued by the Corporation with respect to its OW
activity, and immediately inform the Corporation of any discrepancies between its OW
activity and the contents of such updates and reports.

G. Non-Guaranteed Service

The Obligation Warehouse shall not be a guaranteed service of the Corporation. If the
Corporation Ceases to Act for a Member pursuant to Rule 18 it may: (i) close all open
activity relating to that Member from the OW, (ii) reverse all credits and debits for the
Member relating to OW Obligations that have entered the CNS Accounting Operation,
and (iii) reverse any cash adjustments forwarded to settlement pursuant to this
Procedure.

H. Applicability of Marketplace Rules

It is intended that Buy-In executions, good delivery requirements for physical

deliveries, reclamation rights and transactions of a Member that have been DK’ed shall
be remain subject to the rules of the appropriate marketplace, notwithstanding that such
requirements would not otherwise apply to a transaction processed in the OW, unless
the relevant process is otherwise specifically provided for in these Rules & Procedures
(e.g., such as the buy-in process for CNS transactions).

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PROCEDURE III. TRADE RECORDING SERVICE (INTERFACE WITH QUALIFIED

CLEARING AGENCIES)

A. Introduction

Through arrangements with Qualified Clearing Agencies, the Corporation allows trades
from different marketplaces to be cleared and settled through the Corporation.

B. Settlement of Option Exercises and Assignments and Settlement of Stock

Futures Reaching Maturity

Through an arrangement (the “Accord”) with The Options Clearing Corporation

(“OCC”), Participating Members (defined below) may settle regular way through the
facilities of the Corporation security and money obligations arising out of (i) the exercise
or assignment of an option, and (ii) the maturity of a stock futures contract (collectively,
“E&A/Delivery Transaction”); provided that (x) the E&A/Delivery Transaction is between
two Participating Members, and (y) securities to be delivered or received in such
settlement are either (1) CNS Securities, or (2) Balance Order Securities.

A “Participating Member” is (i) a Member that is also a member firm of OCC, as

separately defined by the rules of that entity (“OCC Member”); (ii) a Member that has
been appointed by an OCC Member to effect settlement of E&A/Delivery Transactions
through the Corporation on the appointing OCC Member’s behalf; (iii) an OCC Member
that has appointed a Member to effect settlement of E&A/Delivery Transactions through
the Corporation on its behalf; (iv) the Canadian Depository for Securities Limited
(“CDS”); or (v) a Canadian clearing firm that is an OCC Member and settles activity at
the Corporation through an identifiable subaccount in the account at the Corporation of
CDS in which CDS effects settlement on behalf of such firm. Only Participating
Members that are Members identified in (i), (ii), and (iv) above shall be named as
counterparties on E&A/Delivery Transactions delivered to the Corporation pursuant to
the Accord.

A Participating Member that wishes to utilize this service must execute an

agreement with OCC in the form acceptable to OCC. OCC shall notify the Corporation
of all Participating Members that have executed such agreements.

Unless otherwise agreed between OCC and the Corporation, E&A/Delivery

Transactions are received by the Corporation from OCC each day on which both the
Corporation and OCC are open for accepting trades for clearance. Subject to the
paragraph below, the Corporation’s guarantee pursuant to Addendum K shall become
effective for each E&A/Delivery Transaction when the Required Fund Deposits to the
Clearing Fund, after taking into account that E&A/Delivery Transaction, are received by
the Corporation from all Participating Members.

If (i) a Participating Member has failed to satisfy its Clearing Fund obligations to
the Corporation pursuant to Procedure XV, or (ii) the Corporation has ceased to act for
a Participating Member pursuant to these Rules and Procedures prior to the time that
the Corporation’s guarantee of such Participating Member’s E&A/Delivery Transactions

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become effective (such Participating Member, a “Defaulting Participating Member”),

then none of the E&A/Delivery Transactions involving such defaulting Participating
Member for which the Corporation’s guarantee pursuant to Addendum K has not yet
become effective shall be guaranteed by the Corporation, and all such E&A/Delivery
Transactions shall be exited out of the CNS Accounting Operation or the Balance Order
Accounting Operation, as applicable, unless otherwise agreed between OCC and the
Corporation. The Corporation shall have no further obligation regarding the settlement
of the exited E&A/Delivery Transactions, other than such obligations as the Corporation
may have pursuant to its arrangement with OCC, and the non-defaulting Participating
Members’ Required Fund Deposit to the Clearing Fund will be recalculated excluding
the exited E&A/Delivery Transactions.

E&A/Delivery Transactions are routed to the Balance Order Accounting

Operation or the CNS Accounting Operation and are reported to Members on such
reports and in such formats as determined by the Corporation from time to time.

Exercised calls and assigned puts appear as purchases. Exercised puts and
assigned calls appear as sells. Physical delivery of matured futures appear as
purchases or sells.

The date of the maturity or exercise/assignment at OCC is recorded as the trade

date for the maturity or exercise/assignment. The Settlement Date for such transactions
is two days later. If the exercise occurs on a Saturday during exercise weekend, the
preceding OCC business day is the trade date.

Regarding any E&A/Delivery Transaction submitted to the Corporation by OCC,

(1) if and to the extent that a security to be delivered and received in

settlement of such E&A/Delivery Transaction is not a CNS Security or a Balance
Order Security, such transaction shall be treated as a trade-for-trade transaction
and the Corporation’s guarantee pursuant to Addendum K shall not apply to
these transactions; or

(2) if and to the extent that such E&A/Delivery Transaction is not submitted to
the Corporation for regular way settlement, such transaction shall be processed
in accordance with these Rules, as applicable.

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PROCEDURE IV. SPECIAL REPRESENTATIVE SERVICE

A. Introduction

A Special Representative which has been authorized by one or more other persons to
act on their behalf, may submit transactions in securities to the Corporation.

The Special Representative submits a transaction which is treated by the Corporation in

the same manner as if both parties had agreed to the details of the transactions.
Transactions entered by Special Representatives may enter the Accounting Operation.

As provided in Rule 7 hereof, all trade data submitted to the Corporation pursuant to
Sections C and D of this Procedure IV, other than trades excluded pursuant to Section 7
of Rule 7, must be submitted in Real-time, as that term is defined in Procedure XIII, and
on a trade-by-trade basis, in the form executed without any form of pre-netting of such
trades prior to their submission.

B. Institutional Clearing Service

The Institutional Clearing Service is a means by which a broker/dealer Member can

clear its customer-side activity through the accounting systems offered by the
Corporation when the customer is a Member or institutional participant of a Qualified
Clearing Agency. 1

The Institutional Clearing Service utilizes the institutional clearing and delivery services
operated by various Qualified Clearing Agencies for input and affirmation purposes.
Transactions which are affirmed through these systems and which are between a
broker/dealer Member and customer Member or institutional participant of a Qualified
Clearing Agency, as principal or agent, are then entered to the Accounting Operation for
purposes of delivery and settlement. The Qualified Clearing Agency is the Special
Representative in the Institutional Clearing Service.

The broker/dealer Member submits input to the institutional system in accordance with
the rules and/or procedures of the Qualifying Clearing Agency. After the agent bank or
institutional participant affirms the transaction, the transaction is removed from the
institutional system and entered as a compared trade into the CNS Accounting
Operation or Balance Order Accounting Operation as a transaction between (a) the
broker/dealer and (b) the customer Member.

If the customer is not a Member or elects not to clear transactions through this Service,
the broker/dealer-side of the transaction is removed from the institutional system and
entered into the CNS Accounting Operation or the Balance Order Accounting Operation.

1 For the purposes of this procedure, a Qualified Clearing Agency shall include an entity that performs
institutional trade matching and confirmation services that has received an exemption under the
Exchange Act to register as a clearing agency.

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The customer clears the transaction through the institutional system according to the
rules and/or procedures of the Qualified Clearing Agency involved.

C. Correspondent Clearing Service

The Correspondent Clearing Service permits Members to clear and settle transactions
executed for them by other Members acting as their Special Representative in the
following situations: first, to accommodate a Member with multiple affiliate accounts who
wishes to move a position resulting from an “original trade” in the process of clearance
from one affiliate account to another, and second, to accommodate a Member that
relies on its Special Representative to execute a trade in any market on its behalf to
enable the resulting position to be moved from the Special Representative to that
Member.

Through the Correspondent Clearing Service, the Special Representative offsets trades
that it has executed on behalf of the Member, which are in the process of clearance and
settlement (“original trades”) 2 by inputting transaction data as described below.

The Member functioning as a Special Representative submits transaction data to the

Corporation. For example, if the original trade is a purchase order, the Special
Representative inputs a transaction where it is the seller, and the Member is the
purchaser. The Member agrees to be bound by the details of all transactions submitted
on its behalf by the Special Representative. Any errors or omissions must be resolved
directly between the Member and the Special Representative. Corrective input may be
submitted to the Corporation by the Special Representative on a subsequent day.

The Corporation produces reports for both the Special Representative and the Member.
These reports identify the details of each transaction as submitted by the Special
Representative and identifies any transactions which have not been accepted by the
Corporation.

Transactions (other than cash, or next day fixed-income transactions, or cash equity
transactions received after the Corporation’s designated cut-off time) which are
accepted by the Corporation are then entered into the Balance Order Accounting
Operation or CNS Accounting Operation (pursuant to Procedure V and VII) which, when
processed through the Balance Order Accounting Operation or CNS Accounting
Operation, effectively net the Special Representative out of the original trade.

The Correspondent Clearing Service is not intended, and therefore may not be utilized,
by Special Representatives for the purpose of submitting original locked-in trade input,
as all such input shall be submitted pursuant to Procedure II hereof. This prohibition

2 The term “original trade” is used solely to distinguish between trades executed in the marketplace,
and trades booked for accounting purposes to accommodate the movement of positions between
Members as permitted in this Procedure.

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shall apply to any Member, including any Special Representative or Qualified Special
Representative that, directly or indirectly, engages in such activity.

D. Qualified Special Representatives

A Qualified Special Representative is a Special Representative who meets the

requirements set forth in Rule 7. As such, and subject to the requirements of Rule 7
and as otherwise set forth in these Rules, a Qualified Special Representative may
submit locked-in trades (pursuant to Procedure II above) for other Members and/or their
correspondent.

E. Automated Special Representative Facility

The Corporation may determine, in its discretion, to provide an automated facility

through which Members may establish and ultimately retire their Special Representative
relationships. A Member may appoint another Member as its Special Representative
through the automated facility, and that Member must then consent to via the
automated facility to acting in such capacity (or vice versa).

The establishment of such relationships through the automated facility shall meet
the written notice requirements for such services as otherwise set forth within these
Rules and Procedures. Members agree to be bound by the details of all transactions
submitted on their behalf by the Special Representative, and any errors or omissions or
disputes relating to such relationships and related transactions must be resolved directly
between the parties.

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PROCEDURE V. BALANCE ORDER ACCOUNTING OPERATION

A. Introduction

The Balance Order Accounting Operation includes transactions in all Balance Order
Securities and transactions which have been identified as Special Trades including
Special Trades in CNS Securities. The Balance Order Accounting Operation processes
trades compared or recorded under the provisions of Section II, trades recorded under
the provisions of Section III and transactions entered by Special Representatives under
the provisions of Section IV. The Balance Order Accounting Operation produces
Balance Orders which identify the receive and deliver obligations of Members. Balance
Orders may be issued on a trade-for-trade basis or a net basis. The Corporation will
make available to participants information detailing their receive or deliver obligations,
on a trade-for-trade or net basis, as applicable, in respect of Balance Order
transactions.
B. Trade-for-Trade Balance Orders

All transactions either: (i) identified as Special Trades, (ii) compared or otherwise
entered to the Balance Order Accounting Operation on SD-1, after the cutoff time
established by the Corporation, or thereafter, (iii) in securities which are subject to a
voluntary corporate reorganization which have a trade date on or before the expiration
of the voluntary corporate reorganization and which are compared or received on SD-1,
after the cutoff time established by the Corporation, and at least one day prior to the end
of the protect period, or (iv) identified as cash, next day or seller’s option transactions in
Balance Order Securities, or in securities which are subject to any corporate action,
whether mandatory or voluntary, are processed on a trade-for-trade basis. Receive and
Deliver Orders are produced instructing Members to deliver or receive a quantity of
securities to or from the contra-Member involved in that transaction.

C. Net Balance Orders

Trades in Balance Order Securities (except for Special Trades) which are
compared on T, and transactions entered through the Trade Recording or Special
Representative procedures on T, are netted so that the Member becomes a net
purchaser or net seller in each security issue in which it had activity. An allotting
procedure matches these net quantities and produces Net Balance Orders. Net
Balance Orders are instructions to a Member to deliver or receive a quantity of
securities to or from another Member. Net Balance Orders have the same status under
the Rules and these Procedures as Balance Orders.

In order to net trades executed at different prices, a uniform Settlement Price is

used. The uniform Settlement Price shall be established as the Settlement Price that is
the current market price of the applicable Balance Order Security.

A mechanism is required to adjust the differences between Contract Money (i.e.,

the price at which the trade was executed) and Settlement Money. To avoid calculating
an adjustment for each Balance Order, the Corporation computes a single adjustment

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amount for each Member. This amount is called the Clearance Cash Adjustment. The
Clearance Cash Adjustment amount for all Balance Orders, both bond and equity, plus
the net amount of both figures will appear on the applicable Consolidated Trade
Summary.

Since Special Trades produce Balance Orders at the Contract Price, Settlement Money
is the same as Contract Money and requires no Clearance Cash Adjustment.

D. Balance Order Contracts

Balance Orders issued under subsections B and C above are Balance Order Contracts
as defined in Rule 5.

E. Consolidated Trade Summaries

On each settlement day, three separate Consolidated Trade Summaries each indicating
Balance Order transactions settling that day and the next settlement day will be made
available to participants.

F. Obligation Warehouse

Balance Order transactions will be forwarded to the Obligation Warehouse for

processing in accordance with the Obligation Warehouse Procedure.

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PROCEDURE VI. FOREIGN SECURITY ACCOUNTING OPERATION

A. Introduction

The Foreign Security Accounting Operation includes transactions in all Foreign

Securities. The Foreign Security Accounting Operation processes trades compared and
recorded under the provisions of Procedure II and transactions entered by Special
Representatives under the provisions of Procedure IV. The Foreign Security
Accounting Operation produces Foreign Security receive and deliver instructions which
identify the receive and deliver obligations of Members.

B. Trade-for-Trade Foreign Security Receive and Deliver Instructions

Transactions identified as Special Trades and all transactions compared otherwise

entered to the Foreign Security Accounting Operations on SD-1 or thereafter are
processed on a trade-for-trade basis. Receive and deliver instructions are produced
instructing Members to deliver or receive a quantity of securities to or from the contra-
Member involved in that transaction.

C. Netted Member-to-Member Receive and Deliver Instructions

Transactions in Foreign Securities will net only on a Member-to-Member basis. Netted

Member-to-Member receive and deliver instructions are reported on the next available
Consolidated Trade Summary representing the netted positions of each Member with
respect to its transactions with another Member, and the related Foreign Security
Clearance Cash Adjustment, in each Foreign Security issue in which it had activity.
Both the settlement of the underlying transaction and payment of the Foreign Security
Clearance Cash Adjustment will not be guaranteed by the Corporation. In the event a
Member fails to make payment of the Foreign Security Clearance Cash Adjustment with
the Corporation, the Corporation will reverse all Foreign Security Clearance Cash
Adjustment debits and credits with respect to that Member, and the netted Member-to-
Member Foreign Securities receive and deliver instructions issued that day with respect
to that Member will be null and void.

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PROCEDURE VII. CNS ACCOUNTING OPERATION

A. Introduction

The CNS Accounting Operation processes transactions in CNS Securities. Subject to

the provisions of Procedure XVI, and for the purposes of this Procedure VII, references
to CNS Securities shall include Eligible ID Net Securities.

Transactions in CNS Securities which are reported as compared or recorded on the

various report output issued through such time on Settlement Date, as the Corporation
may determine, and those submitted by Special Representatives, are reported on
Consolidated Trade Summaries. The netted obligations are then entered into the CNS
Accounting Operation.

CNS is an on-going accounting system which nets today’s Settling Trades with
yesterday’s Closing Positions, producing new short or long positions per security issue
for each Member. The Corporation is always the contra side for all positions. The
positions are then passed against the Member’s Designated Depository (as defined in
Section C of this Procedure, below) positions and available securities are allocated by
book-entry. This allocation of securities is accomplished through a night cycle followed
by a day cycle. Positions which remain open after the night cycle may be changed as a
result of trades accepted for settlement that day. Members may influence the receipt
and delivery of their securities through the use of Exemptions (for deliveries) or
Priorities (for receipts).

Money settlement is not associated with the individual security movements but is the
result of comparing the Closing Money Balance to the Closing Net Market Value of the
Member’s CNS account.

Dividends are credited or charged to the Member’s account according to the security
positions that exist on record date. The record date positions are automatically updated
for “As-Of” trades and appropriate due bill activity. Interest is credited or charged to the
Member’s account according to the security position that exists on the day prior to the
payable date; and stock splits are credited or charged on the Member’s account
according to the security position that exists on due bill redemption date, as described in
Section G of this Procedure.

B. Consolidated Trade Summary

All compared and recorded transactions in CNS Securities (excluding Special

Trades) are processed through the CNS Accounting Operation. This includes
transactions compared under the provisions of Section II, recorded under the provisions
of Section III, or entered by Special Representatives under Section IV. Purchases and
sales due for settlement on a given day are summarized on the Consolidated Trade
Summaries that are issued three times daily and contain, with respect to CNS
Securities:

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(i) those trades compared or recorded through the Corporation’s cutoff time
on that day which are due to settle on the following settlement day (i.e., if the
report is issued late Monday evening, it will show trades due to settle on
Wednesday), and

(ii) with respect to trades due to settle on the same settlement day (i.e.,
Tuesday), T+1 and older as-of trades and next day settling trades not previously
reported on the prior Consolidated Trade Summary, in each case in CUSIP
order, reported as broad buys and sells by marketplace or source, netted by
issue, quantity and money.

Each Consolidated Trade Summary issued on each settlement day reports

activity compared or recorded, including cash trades which are due to settle on
that same day for the period beginning after the cutoff time for the prior
Consolidated Trade Summary and ending on the Corporation’s cutoff time for
such Consolidated Trade Summary.

Note: any T+2 or older as-of trades compared or recorded after such cutoff time
on settlement day will settle on the next settlement day and appear on that
night’s Consolidated Trade Summary. Notwithstanding the previous sentence,
with respect to Index Receipts, if Index Receipts for same-day settlement are
received by the Corporation after the applicable cut-off time, such Index Receipts
will not be assigned a new settlement date and will be rejected.

Net quantities purchased or sold in each security issue are entered into the CNS
Stock Record together with their associated contract monies at the beginning of
the Settlement Date processing cycle. Subsequent obligations (reflecting
supplemental activity), together with their associated contract monies, are
entered into the CNS stock record thereafter during such processing cycle until
such cutoff time as the Corporation may determine.

Each Consolidated Trade Summary shows all equity and debt transactions and
can be subdivided or totaled by marketplace of execution or source of trade
input.

C. Receipt and Delivery of Securities

1. Stock Record Update

Each day, Settling Trades shown on the Consolidated Trade Summary are
netted with the Closing Positions which have been carried forward from the
previous day. The resulting net positions represent the quantity of each security
due for settlement by the Member on Settlement Date. A long position
represents the quantity owed to the Member by the Corporation (the Member’s
fail-to-receive). A short position represents the quantity owed to the Corporation
by the Member (the Member’s fail-to-deliver). The Corporation is the contra side
to all long and short positions.

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2. Selection of Depository

Each Member must select a Qualified Securities Depository for purposes of CNS
settlement (the Member’s “Designated Depository”). All short positions must be
satisfied by, and long positions allocated to, the Member’s account at the
Designated Depository.

3. Night Cycle

After the procedures described in paragraph 1 have been completed, each

Member’s positions are passed to the Designated Depository. Subject to the
limitations imposed by Exemptions (see subsection D) and Procedure XVI,
securities are transferred from the Member’s applicable Designated Depository
account to satisfy its short positions. If the quantity on deposit is insufficient to
settle the entire short position, a partial movement occurs. Securities received
from Members in settlement of short positions are placed in the Corporation’s
applicable account at the Designated Depository. The Corporation then provides
instructions to deliver those securities from its account at that depository to the
Designated Depository accounts of those Members which have long positions.

The results of the night allocation are recorded on the CNS Settlement Activity
Statement distributed the following morning. All security movements in
Designated Depositories are made on a “free” basis. Money settlement
associated with such security movements is accounted for by the Corporation as
a separate function. The Current Market Value of each entry is shown on the
Settlement Activity Statement for informational purposes.

4. Day Cycle

Positions which remain open after the night allocation, or become open as a
result of subsequent activity, are recycled on the following day. As additional
securities are made available in Members’ Designated Depository accounts,
additional receipts and deliveries are made against long and short positions.
Subject to the differences in the allocation algorithm for receipts from CNS (see
subsection E of this Procedure VII), the daytime recycle functions essentially the
same as the night allocation except that the process is continual.

In order to notify Members of settlement activity as quickly as possible,

Settlement Activity output is issued throughout the day. This output is produced
by the Designated Depository which actually made the entry to the Member’s
account, and is made available to the Member shortly after the entry is made.

In addition, in order to notify Member of changes in their positions due to same

day (including cash) settling trades or miscellaneous activity, the Corporation will

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make available information in respect of such activity and new net settling
positions as a result thereof, in such form as the Corporation may determine.

At the end of the daytime recycle, all daytime activity is summarized on the CNS
Settlement Activity Statement.

D. Controlling Deliveries to CNS

As noted in subsection C, the delivery of securities from a Member’s Designated

Depository account to satisfy short positions is an automatic process and requires no
action on the part of the Member. Securities are removed from the Member’s
Designated Depository account to the extent that a sufficient quantity is on deposit.

In order for a Member to avoid segregation violations and to meet other delivery
needs, a procedure is provided to control this automatic system. The first phase of this
procedure provides the Member with its projected positions due for settlement the
following day. The second phase involves the submission of instructions by the
Member indicating which short positions it does not wish to settle. Members are
required to provide instructions to exempt from delivery any transactions compared or
received on SD-1 or thereafter, including cash or next day transactions, which are
processed for next day or same day settlement and which create or increase a short
position. This exemption shall hereinafter be referred to as the “One Day Settling
Exemption”.

1. Projection Report

Twice a day, a Projection Report is distributed to each Member. This report

shows, as of the time of its preparation, the Member’s long position or short
position for each security, settling trades for the next day, plus any miscellaneous
activity and stock dividends payable on the next day; and may include long and
short positions due to settle that day. Throughout the day the Corporation will
make available updates to this information, in such formats as it may determine.

Long and short positions reflect the Member’s status in each security issue as of
the time the Projection Report is prepared. These positions may change due to
same day settling trades and/or miscellaneous activity, and as the settlement
cycle on the day the report is issued continues. If a Member’s long and short
positions change during the day, the projection position will also change. The
Member must, therefore, update these positions based on same day settling
trade and settlement activity which occurs during the course of the day.

2. Exemptions

Except as described below, each Member has the ability to elect to deliver all or
part of any short position. It controls this process by Exemptions. By indicating a
particular quantity as an Exemption, the Member directs the Corporation not to
settle certain short positions or portions thereof. Exemptions govern short
positions in the CNS Stock Record and not Designated Depository positions. All

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short positions or positions thereof for which no Exemption is indicated are

settled automatically to the extent that the Member has made such securities
available in the Member’s Designated Depository account or they become
available in its Designated Depository account through other depository activity.
Notwithstanding the above, a Member may not exempt delivery of any securities
available in an agency account established at a Qualified Securities Depository
for the processing of transactions through the ID Net Service.

(a) Types of Exemption

The CNS system provides for two levels of Exemption. By proper use of
the Projection Report and Exemptions, Members can utilize current inventory as
well as securities received from other sources on settlement day in order to
satisfy delivery requirements.

(i) Level 1 Exemption - By submitting a Level 1 Exemption, the

Member indicates that the portion of the short position
exempted should not be automatically settled against its
current Designated Depository position or against any
securities which may be received into its Designated
Depository account as a result of other depository activity.

(ii) Level 2 Exemption - The submission of a Level 2 Exemption

is an instruction by the Member that the portion of the short
position exempted should not be automatically settled
against its current depository position. Such a position may
be satisfied, however, by certain types of “qualified” activity
in its Designated Depository account.

(b) Qualified Activity

There are four types of qualified activity which allow short positions
carrying Level 2 Exemptions to be settled:

(i) Coded Deposits - The Member deposits securities into its

Designated Depository account in the normal manner, but by
using a special deposit ticket which indicates that these
securities are available for settling Level 2 Exemption
quantities.

(ii) Coded Collateral Loan Releases - A Member may release

securities from its Designated Depository collateral loan
account and wish those securities to be used in settling a
Level 2 Exemption quantity. In this case, the Member uses
a special Collateral Loan Release form which authorizes
such use.

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(iii) Receipts from Banks - All securities received against

payment from banks are eligible to settle Level 2 Exemption
quantities. Settlement of such items is automatic and no
special instruction by the Member is required.

(c) Methods of Submitting Exemptions

Exemptions may be submitted by using such form or automated means as

are acceptable to the Corporation from time to time. Exemptions must either
indicate the quantity to be exempted, or indicate all, and designate that quantity
as Level 1 or Level 2. A Member may submit daily Exemption instructions to the
Corporation. If a Member has no Exemptions on a given day, instructions may
be submitted indicating no Exemptions for either Level 1 or Level 2.

A Member must submit standing Exemption instructions to the

Corporation. Standing Exemption instructions will govern all of the Member’s
short positions for any day on which (i) specific daily Exemption instructions are
not submitted to the Corporation, (ii) are not received by the Corporation, or (iii)
are unable to be processed by the Corporation.

Exemptions may be submitted by Members through the facilities of service

bureaus and other agencies provided that the service bureau or agency has
been authorized by the Corporation to act on behalf of its Member.

Exemptions must be submitted for each CNS Sub-Account maintained by

the Member (see subsection I of this Section).

(d) Exemption Override

With respect to one day and same day settling transactions, Members
may select a standing Exemption override to permit all such short positions to be
delivered. Additionally, during the daytime cycle, a Member may override the
One Day Settling Exemption as well as other Exemptions entered by the Member
the previous evening. To do so, the Member should prepare a Delivery Order
(DO) and submit it to its Designated Depository in the normal manner. If the
Designated Depository is DTC, the receiving Member must be designated as
888.

The securities designated to be delivered on the DO are first applied to

any quantity covered by a Level 1 Exemption and the One Day Settling
Exemption. Any remaining quantity (or if no Level 1 Exemption existed, the
entire delivery) is applied to any quantity covered by a Level 2 Exemption. If
there is still a remaining quantity, that quantity is not processed.

E. Influencing Receipts from CNS

After securities are received by the Corporation from Members with short
positions, they are allocated to other Members which have long positions. The

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allocation of these securities is designed so as not to benefit any one Member.

Members may change their relative rank by submitting Priority Requests. The
submission of a Buy-In Intent will also affect the priority of a Member’s long position in
that particular security.

1. Standing Priority Request

A Member may enter a Standing Priority Request which moves its long positions
in all securities to a higher rank in the allocation formula every day and remains
in effect until canceled or changed by the Member in writing.

A Member may enter a Standing Priority Request for the night cycle only, the day
cycle only, or both the night and day cycles in respect of its general account or
any sub-account.

2. Priority Overrides

A Member may override a Standing Priority Request which it has previously

submitted, or obtain priority when it has not submitted a Standing Priority
Request by submitting a Priority Override. Each Priority Override changes the
Member’s relative rank in the allocation algorithm for its long position in one
security only. The Priority Override remains in effect for one day.

The Member may submit a Priority Override for the specified security for the
night cycle only, the day cycle only, or for both the night and day cycles.

3. Buy-In Intent Notices

A Member which submits a Buy-In Intent in accordance with the provisions of

subsection J of this Procedure VII is assigned to a higher relative rank in the
allocation algorithm for the quantity of securities specified on the Buy-In Intent
than those Members which have requested high priority through the use of a
Standing Priority Request or Priority Override.

4. Allocation Algorithm

The algorithm which governs the allocation of long positions is based on priority
groups in descending order and, for the day cycle only, age of position within a
priority group and random numbers within age groups.

Priority groups include the following:

(a) long positions in a CNS Reorganization Sub-Account established

pursuant to paragraph H.4. of this Procedure VII;

(b) long positions against which Buy-In Intent notices are due to expire
that day but which were not filled the previous day;

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(c) long positions against which Buy-In Intent notices are due to expire
the following day;

(d) (i) long positions in a receiving ID Net Subscriber’s agency account

established at a Qualified Securities Depository, and (ii) long
positions against the component securities of index receipts;

(e) in descending sequence, priority levels as specified by Standing

Priority Requests and as modified by Priority Overrides.

For the day cycle only, when more than one long position in a given security
exists within the same priority group, the “oldest” position is allocated first. Age is
defined as the number of consecutive days during which the position has been
long, irrespective of quantity.

For the day cycle only, when more than one long position in a given security
exists within the same priority group all of which have been long the same
number of consecutive days, the allocation rank is determined by a computer
generated random number. Random numbers, which change daily, are
computed so that each Member’s random number is different for each security.

The allocation algorithm for the night and day delivery cycles is computed
separately to allow for different allocation factors used for night and day cycles as
well as Standing Priority Requests and Priority Overrides which have specified
different levels of priority for night and day cycles.

5. Fully-Paid-For Account

(Procedures for Movements to the Long Free Account)

The Corporation’s processing day is divided into two parts. It begins with a night
cycle on the evening preceding the settlement day for which the work is being
processed and is followed by a day cycle which ends on the settlement day for
which the work is processed. If a Member with a long position and/or a position
due for settlement on the next settlement day, in anticipation of receiving
securities from the Corporation (other than municipal securities, as that term is
defined by the Exchange Act), as a result of the allocation process during the
night or day cycle for that settlement day, instructs that securities within its
possession or control (other than municipal securities) be delivered on the next
day and is subsequently not allocated the securities during the night or following
day cycle, the Member may, in order to meet the “customer segregation”
requirements of Rule 15c3-3 of the Exchange Act, instruct the Corporation,
during the day cycle for that settlement day by the time specified by the
Corporation, to transfer the position(s) which has not been allocated to a special
CNS sub-account (the “Long Free Account”). The Corporation will then debit the
Member’s settlement account for the value of the position in the Long Free
Account. The Long Free Account will be guaranteed by the Corporation and will
be marked daily.

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All funds which the Corporation receives from debiting the Member’s settlement
account for the value of a position moved into the Long Free Account and all
marks credited to the Long Free Account as a result of marking positions to the
market daily, will be segregated by the Corporation from all other funds received
by the Corporation. Any time that a Member determines that he no longer needs
the position(s) in the Long Free Account for 15c3-3 purposes, he may instruct the
Corporation to transfer back the position(s) to its Long Valued Account and make
the appropriate adjustment to its settlement account.

F. Computation of CNS Money Settlement

The computation of the Net CNS Money Settlement Amount is based on the
Accounting Summary and the Cash Reconciliation Statement. The Net CNS Money
Settlement is then recorded in the Settlement Statement (described in Section VIII) and
is netted with settlement obligations resulting from other services.

1. Accounting Summary

The Accounting Summary constitutes the official record of all CNS activity,
positions and settlements. CNS accounting is completed with the issuance of an
Accounting Summary at the end of the settlement day. This report is divided into
two parts. The first part deals with CNS Stock Record security movements and
positions; the second part summarizes money activity and balances. Security
and money accounting are two distinct functions under CNS and are performed
separately.

The part of the Accounting Summary which deals with security accounting shows
the Member’s Opening Position, Settling Trades, stock dividends and
miscellaneous activity, receipts and deliveries, Closing Position, and Current
Market Value of Closing Positions for each security in which it had a position or
activity that day. The Current Market Value of closing long positions and closing
short positions is totaled at the end of the report. The net of these two figures is
the Net Market Value of the Member’s account at the end of the day and
represents the net value of securities which the Member owes to the Corporation
or which the Corporation owes to the Member.

The last section of the Accounting Summary reflects the Member’s Opening
Money Balance, net money amounts for Settling Trades, cash dividends and
interest, miscellaneous activity and Closing Money Balance. The Closing Money
Balance represents the net amount of money which the Member owes to the
Corporation or which the Corporation owes to the Member.

The net CNS Money Settlement Amount is calculated by subtracting the Net
Market Value from the Closing Money Balance. The effect of this calculation is to
bring the Member’s money balance into agreement with the market value of its
Closing Positions.

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The Accounting Summary is the final report produced by the CNS system for
each Settlement Date. Members are required to reconcile all security and money
balances shown thereon by comparing the Accounting Summary to their own
records and promptly reporting any difference to the Corporation for
reconciliation.

2. Cash Reconciliation Statement

Members are also provided with a separate report known as the Cash
Reconciliation Statement. Although the Cash Reconciliation Statement is a
different method of computing the settlement amount arrived at on the
Accounting Summary, it relies on the same concepts in that the value of Closing
Positions is compared to the money balance for that day, the difference being the
Member’s money settlement amount. In the case of the Cash Reconciliation
Statement, the money settlement is computed in the early morning and is
continuously updated throughout the day cycle to reflect activity which takes
place during the day. The Corporation will make such updated information
available to Members throughout the day cycle in such manner as it may from
time to time determine.

The results of the daytime delivery cycle are summarized on a Settlement Activity
Statement issued on the afternoon of Settlement Date. Each entry is valued at
the Current Market Price with totals at the end of the report. These totals must
be posted by the Member to the Cash Reconciliation Statement. When these
totals are netted with the preliminary figure shown on the report, the result will be
the final Net CNS Money Settlement Amount.

A final Cash Reconciliation Statement is issued on the afternoon of each

settlement day, and shows all information shown on the Preliminary Cash
Reconciliation Statement updated for daytime activity to arrive at a final
settlement amount.

G. CNS Dividend Accounting

Dividend Accounting within the CNS system is based primarily on the Member’s Closing
Position on the record date for the dividend, distribution, etc. Cash dividends, stock
dividends, spinoffs, etc. are calculated and reported to the Member on the morning after
record date. On payable date, the appropriate debit or credit is applied to the Member’s
CNS account. In the case of a non-U.S. sourced dividend or other income distribution,
such debit or credit may be adjusted for any applicable non-U.S. withholding taxes at a
rate to be determined by the Corporation in its sole discretion.

Stock splits and interest are charged to or credited in a similar manner, but calculations
are based on the CNS record date positions updated through the Due Bill period.

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1. Record Date Report

Each day the Corporation issues a Record Date Report advising Members of the
Closing Positions on record date for the previous day. Appropriate dividend,
distribution and interest data including dates, rates and calculated amounts are
also shown. The purpose of this report is to advise the Member of the pending
dividends which will be applied to its account at a later date. These record date
positions should be compared by the Member against its internal records for
accuracy.

2. Dividend Activity Report

Cash and stock dividends which are to be applied to a Member’s account are
shown on the Dividend Activity Report usually produced on the day before
payable date. Dividends are calculated according to record date closing
positions updated for As-Of Trades. As-Of Trades submitted up to two days prior
to payable date and which have an original trade date before ex-dividend date
are automatically included in the payment calculation.

Stock dividends shown on this report appear on the Accounting Summary.

The net of all cash dividends appears on the Dividend Activity Report as well as
the Accounting Summary and the Cash Reconciliation Statement.

Fractional shares resulting from stock dividends are credited and charged in
cash. The cash in-lieu amount is shown on the Dividend Activity Report and is
included in the overall total along with cash dividends. Fractional shares are
valued using the Current Market Price for the day the report is produced.

Distributions for stock splits and interest calculations are not reflected on this
report as updating is necessary during the Due Bill period.

3. Due Bill Accounting

The credit or charge to Members for interest, stock splits, rights distributions or
any other distribution which involves trading of a CNS Security with Due Bills, is
processed in a different manner. The Designated Depositories automatically
account for security receipts and deliveries during a Due Bill period through an
interim accounting system. The Corporation, therefore, credits or debits a
Member’s CNS account for the appropriate securities or money based only on
the Member’s Closing Position on Due Bill Redemption Date in the case of stock
splits and distributions, and the day prior to payable date in the case of interest.

The quantity or money due to or from each Member appears on a separate

Dividend Activity Report which is issued on the morning after Due Bill
Redemption Date. Share quantities are added to each Member’s long or short
position prior to the night delivery cycle for the day’s settlement. Cash-in-lieu of

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fractions, as well as interest amounts, are included in that day’s money

settlement.

In the case of stock splits, the Current Market Price is adjusted by the rate of the
split during the one day prior to the Due Bill Redemption Date. This process
synchronizes the application of additional quantities to the Member’s account
with the valuation of that security at the new price.

If a particular distribution is not eligible for processing through the interim

accounting systems of the Designated Depository, the Corporation records the
record date position of the security carrying the Due Bill as well as all receipt and
delivery activity during the Due Bill period. Based on the net of these amounts,
the Corporation computes the amount to be debited or credited to each Member
and records such quantities on the Dividend Activity Report.

4. Optional Dividends

Dividends which may be paid in the form of securities or cash at the option of the
holder are processed as follows:

Record date positions are initially recorded in the CNS Dividend Accounting
system using the option specified by the issuer as the “default option” (the
“default option” is the form in which payment will be made by the issuer if
instructions to the contrary are not received).

Each Member with a long position as of the close of business on record date may
change the form of payment for all or part of its position by submitting an
Optional Dividend Instruction. The Optional Dividend Instruction must be
received by the Corporation no later than the cutoff time and date specified by
the Corporation. If an Optional Dividend Instruction is not received from a
Member with a long position on record date, that Member will be credited on the
basis of the default option.

The Corporation will charge Members with short positions on record date
according to the options selected by members with long positions on record date
using a random method of allocation. Members with short positions will be
advised of the form by which they will be charged.

H. Miscellaneous CNS Activity

Certain types of activity occur within the CNS system which are reflected on
Miscellaneous Activity Reports. Each entry shown on these reports is identified by
legend as to type, e.g., reorganization, OW Obligations, journal entry, etc. Security
entries also appear on the Accounting Summary identified as “miscellaneous”. Money
entries are netted to a single figure on the Miscellaneous Activity Reports and are
identified as “miscellaneous” on the Accounting Summary.

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1. Removal of Eligible Securities from CNS

When the Corporation declares a security ineligible for processing through CNS,
all net positions in that security are removed from the CNS Stock Record on the
effective date. Any pending positions (trades, stock dividends, etc.) are removed
as soon as they are posted to the CNS Stock Record. Such entries are posted to
the Member’s next available Miscellaneous Activity Report issued on the date of
removal. The Current Market Value of the security, as of the date of removal,
appears on the next available Miscellaneous Activity Report and is posted to the
Member’s Money account.

When a security is removed from CNS, a random allocation procedure matches

Members with long positions to Members with short positions. CNS Receive and
Deliver Instructions are produced instructing a Member to receive securities from
or deliver securities to another Member of the Corporation or a participant of an
interfacing clearing corporation. CNS Receive and Deliver Instructions for
equities and corporate bonds are considered Balance Orders (see Section V)
and are due for settlement on the date issued and must be settled in the same
manner as are Balance Orders. Municipal Bond Receive and Deliver Instructions
are subject to the rules of the MSRB and the settlement thereof are the
responsibility of the parties to the Receive and Deliver Instructions.

Securities removed from CNS that result in a CNS Receive and Deliver
Instruction may be entered into the Obligation Warehouse service in accordance
with the Obligation Warehouse Procedure.

2. Journal Entries

Occasionally, it is necessary to adjust positions or money balances within the

CNS system. These entries appear on the applicable Miscellaneous Activity
Report which identifies, by legend, the type of journal entry made.

3. Member Mergers

If two or more Members merge their operations, or if one Member assumes the
obligations of one or more other Members, all CNS Stock Record positions and
money balances are merged under the new Member number. Such entries are
made at the opening of business on the effective date, and appear on the
Miscellaneous Activity Report.

4. Corporate Reorganizations

Through the facilities of the CNS Reorganizations Processing System, the

Corporation offers Members the ability to process within the CNS System
transactions in certain securities undergoing corporate reorganizations. For the
purpose of the CNS Reorganization Processing System, reorganizations are
divided into two categories: “mandatory” reorganizations, which may include, for
example, mergers, full redemptions, liquidations, reverse splits and name

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changes; and “voluntary” reorganizations, which may include, for example,

mergers with elections, and either tender offers or exchange offers (collectively
“voluntary offers”).

All CNS Securities subject to a reorganization (hereinafter referred to as “the

subject security”) may be included in the CNS Reorganization Processing
System other than: (i) securities subject to a conversion event; (ii) securities
subject to a reorganization where baby bonds are issued; (iii) securities made
ineligible for processing at a Qualified Securities Depository during a corporate
reorganization; and (iv) in circumstances when the Corporation determines that
operational difficulties prevent the processing of the security in the CNS
Reorganization Processing System, in which case the security shall be removed
from the CNS System, and Receive and Deliver Instructions for such security are
issued as explained in paragraph 1 of this subsection H, above. For example, in
general, the Corporation will not process a reorganization event where the
protect period for such event is greater than two Business Days.

Notwithstanding the foregoing, the Corporation may, from time to time, process
corporate actions through the CNS Reorganization Processing System that
would otherwise be ineligible, if the Corporation, in its sole discretion, determines
that it has the capability to do so. In such circumstances, the Corporation will
provide Members with notice detailing how such security will be processed.

To the extent the Corporation receives timely notification of a reorganization,

each Business Day, starting two Business Days before the effective day of a
mandatory reorganization, or four Business Days before the expiration date of a
voluntary reorganization (“effective day” and “expiration day” hereinafter referred
to as “E”) through such time as the Corporation shall determine, the
reorganization information received by the Corporation will be provided to
Members. If the Corporation does not receive sufficient notification of a pending
reorganization to provide to Members on the dates prior to E specified above, the
Corporation will provide such information to Members as soon as practical after
receipt of such information. While the Corporation uses its best efforts to ensure
that the reorganization information provided is complete and accurate, the
information provided is solely an unofficial summary prepared by the Corporation
for the convenience of its Members, and the Corporation is not responsible for
the completeness and accuracy of the information.

Processing within the CNS Reorganization Processing System is handled in the

following manner:

(a) Mandatory Reorganizations

At such time on or after E as the Corporation shall determine, positions in

the subject security are updated into equivalent positions of the new securities
and/or cash. Fractional shares resulting from a reorganization are credited and
charged in cash, and are valued using the Current Market Price.

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These updates appear on Members’ CNS Miscellaneous Activity Reports

and the type of mandatory reorganization is identified.

(b) Voluntary Reorganizations

The Rules below assume the processing of subject securities with a

protect period of two days. The processing of subject securities with a protect
period of one day or less shall be in accordance with the time frames set forth in
the table below.

After Night Cycle – E+1

After the night cycle on E+1, by such time and in such manner as
established by the Corporation from time to time, the Corporation shall advise
Members with short positions (including short positions due to settle up to and
including the last day of the protect period) in a subject security of their potential
liability based on their short positions as of that time in such subject security.

Note: Any same day settling trade in such subject security that is received
for processing after the night cycle of E+1 will be designated a Special Trade and
will be cleared and settled on a Member-to-Member basis between the parties
directly.

On E+1

On E+1, by such time and in such manner as established by the

Corporation, a Member with a long position in a subject security (including long
positions due to settle up to and including the last day of the protect period) at
the close of business on such day who seeks to have the Corporation provide the
protection described below for such long position, must instruct the Corporation
to move such long positions into a CNS Reorganization Sub-Account.
Instructions by a Member to move a position to a CNS Reorganization Sub-
Account constitute a formal request by the Member for the Corporation to provide
such protection for the position moved.

On E+2 (Protect Period Expiration Date)

The regular CNS allocation process takes place through the day cycle on
the last day of the protect period. A long position in a subject security for which
an instruction has been received by the Corporation to establish a position in the
CNS Reorganization Sub-Account, as described above, has the highest priority
for CNS allocation, as provided for in Section E, 4(a) of this Procedure VII.

By such time and in such manner as established by the Corporation from

time to time, the Corporation shall inform Members who have given the
Corporation instructions to move a long position in a subject security into a CNS
Reorganization Sub-Account of the expected move of that position to a CNS
Reorganization Sub-Account. On E+2, until such time as established by the

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Corporation from time to time, Members may add, adjust, or delete long positions
which will be moved to the CNS Reorganization Sub-Account in whole or in part
by submitting an instruction to the Corporation in such form and until such time
on E+2 as established by the Corporation from time to time.

Members are prohibited from moving positions in subject securities

between the CNS General Account and that Member’s Fully-Paid-For
Subaccount.

After Day Cycle – E+2

At the time established by the Corporation after the day cycle on E+2, long
positions for which proper instructions have been received are moved to a CNS
Reorganization Sub-Account. Simultaneously, the Corporation shall move into
the CNS Reorganization Sub-Account a corresponding number of short positions
in the subject security held by those Members with the oldest such short
positions. If more than one short position in the subject security is of the same
age, the Corporation may utilize a random allocation procedure to select short
positions to be moved into the CNS Reorganization Sub-Account. On E+2, when
the long and short positions in the subject security are moved into the CNS
Reorganization Sub-Account, the Corporation provides Members with long
positions in the subject security notification of their final protection, and provides
Members with short positions in the subject security notification of their final
liability.

The Corporation may, following a request by a Member and an approval of

that request by the Member with the corresponding long or short position in a
subject security, move their respective positions from a CNS Reorganization
Sub-Account back to the CNS General Account.

The Corporation may establish a minimum of two separate CNS

Reorganization Sub-Accounts for each security subject to multiple voluntary
offers; provided, however, that if applicable, and provided it has the operational
capabilities to do so, the Corporation may establish additional CNS
Reorganization Sub-Accounts in order to process affected securities.

On and Following E+3

Short positions in the CNS Reorganization Sub-Account are marked from

the Current Market Price to the voluntary offer price on E+3 and on each
subsequent day; funds received as a result of such mark payments are retained
by the Corporation until the conclusion of the voluntary offer. The Corporation
freezes the positions in the CNS Reorganization Sub-Account; corresponding
long and short positions in the CNS Reorganization Sub-Account only will be
moved out of the CNS Reorganization Sub-Account (i) upon the request of both
the Members with a long and short positions, as described above, (ii) upon
conclusion of the voluntary offer, (iii) when the voluntary offer is canceled, or (iv)

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when the expiration date of the voluntary offer is extended. In such cases,
positions in the CNS Reorganization Sub-Account are automatically returned to
the Members’ CNS General Account, and the mark to the voluntary offer price
returned to Members with short positions.

The table below sets forth the time frames for the processing of subject
securities subject to a voluntary reorganization with a protect period of one day
and voluntary reorganizations with no protect period.

Date long Date long Last date

position Members are long Date long
member must prohibited Members may Member
instruct Last date
from moving submit Date long notified of Short
NSCC Date short Date long long
positions in Protect Add positions Final position
to move Member Member members
subject or Adjust moved to Protection marked to
position notified of notified of may
securities Instructions Reorg. and short voluntary
to Reorg. potential potential submit
between CNS (protect add Sub- Member offer
Sub- Liability Protection Delete
General or adjust Account notified of price
Acct. instructions
Account and submitted on Final
(Standard Fully-Paid-For CNS end Liability
Date) Subaccount date)*

1 Day E+2 or
E E E+1 E+1 E+1 E+1 E+1 E+1
Protect thereafter

No E+1 or
E-1 E-1 E E E E E E
Protect thereafter

* “CNS end date” is either the protect expiration date of the offer or, when there is no protect, it is
the expiration date of the offer.

On Conclusion of Voluntary Offers

Upon conclusion of the voluntary offer, at a time determined by the

Corporation, the Corporation shall make journal entries to unwind positions in the
CNS Reorganization Sub-Account and established positions representing the
terms of the voluntary offer in the CNS General Account by:

(i) crediting a long Member’s CNS General Account for the securities
distributed under the terms of the voluntary offer and/or crediting a
long Member’s settlement account for the cash or securities
distributed under the terms of the voluntary offer;

(ii) debiting a short Member’s CNS General Account for the securities
distributed under the terms of the voluntary offer and/or debiting a
short Member’s settlement account for the cash or securities
distributed under the terms of the voluntary offer; and

(iii) crediting the settlement account of short Members with the mark to
the voluntary offer price being retained by the Corporation.

In the event that not all positions in a subject security are accepted
pursuant to the terms of a voluntary offer, entries crediting and debiting the
positions and/or cash under the terms of the voluntary offer are made on a pro

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rata basis, based on the pro rata acceptance ratio of the voluntary offer as
reported to the Corporation by a Qualified Securities Depository. All entries with
respect to the voluntary offer appear on the Member’s CNS Miscellaneous
Activity Report and are identified as resulting from a voluntary offer. Fractional
shares resulting from a pro rata acceptance are credited to Members’ settlement
accounts and charged in cash, and are valued using the voluntary offer price.

The Corporation shall provide protection to the long Member for a position
in the CNS Reorganization Sub-Account upon completion of the voluntary offer
only to the extent of the monetary difference between the Current Market Price
and the voluntary offer price, and only to the extent of the pro rata acceptance
ratio of the voluntary offer as discussed above.

5. ID Net Service

Pursuant to Rule 65 and Procedure XVI, ID Net Subscribers may enter into
transactions eligible for the ID Net Service, and all such transactions are
recorded on the Miscellaneous Activity Report. All removals of such transactions
from the ID Net Service occurring in either day or night cycle are also recorded
on the Miscellaneous Activity Report.

6. Obligation Warehouse

Pursuant to Rule 51 and Procedure II.A, OW Obligations submitted for

processing through the Obligation Warehouse service that are CNS-eligible may
be entered into the CNS Accounting Operation. Unless otherwise excluded by
the Member pursuant to Procedure II.A, CNS-eligible OW Obligations are
recorded on the Miscellaneous Activity Report on the night before Settlement
Date (SD-1) and included in the CNS Accounting Operation in the night cycle on
Settlement Date in accordance with the provisions of Procedure II.A. All OW
CNS activity is reflected on the Miscellaneous Activity Report.

7. Asset Servicing and Other Events; Revealing Counterparties

The Corporation may support asset servicing or other events or payments and
the Corporation may, in its sole discretion, determine that such event or payment
be processed outside the Corporation’s facilities for any reason, including, for
example, operational difficulties in processing the payment or event or because
the payment or event is not processed by a Qualified Securities Depository.

Examples of payments or other events that the Corporation may determine shall
be processed outside its facilities include payments pursuant to litigation or other
disputes, distributions on class actions, bankruptcy payments, consent
solicitations, other distributions, claims, fees, or events with respect to which a
Member has notified the Corporation that it either has incurred or anticipates it
will incur liabilities greater than the terms of the reorganization event.

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In order to assist Members in processing a payment or other event that is not

applied by the Corporation, or to assist Members to address claims, disputes or
information requests related to an event that the Corporation has processed and
that requires the Member to work directly with the counterparty, the Corporation
may utilize a random allocation procedure (as described in this Procedure VII,
Section H(1)) to match Members with long positions with Members with short
positions over the critical event date, and identify such counterparties to each
other.

I. CNS Sub-Accounting

The Corporation provides sub-accounts for Members for use within certain specialized
CNS services, e.g., reorganizations of CNS Securities. For the most part, a sub-
account functions as if it were a completely separate Member account in that positions
in sub-accounts are maintained separately and separate CNS reports are issued in
most cases.

Members do not maintain Designated Depository sub-accounts for the purpose of

settling CNS sub-account obligations. Before passing long and short positions in sub-
accounts to a Designated Depository for security settlement, the Corporation converts
the sub-account number to the Member’s regular account. All Designated Depository
reports, therefore, reflect activity for CNS sub-accounts under the Member’s regular
number. When the results of Designated Depository activity are received by the
Corporation, the information is converted back to the sub-account before it is posted to
the CNS Stock Record.

The CNS Cash Reconciliation Statement reflects a consolidation of the Member’s

regular account and all sub-accounts.

All other reports are issued separately for each CNS sub-account.

J. Recording of CNS Buy-Ins

1. Equity Securities and Corporate Debt Securities

Defined Terms

For the purpose of this Section J,

The day the Buy-In Intent is transmitted is referred to as N; and N+1 and
N+2 refer to the succeeding Business Days. As noted in Section A of this
Procedure VII, each day commences in the evening and includes a night
allocation of securities and a day allocation of securities.

An “originator” shall mean the Member with a Long Position who submits a
Buy-In Intent to the Corporation pursuant to this Procedure.

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“Buy-In Position” shall mean the quantity of securities the originator

intends to buy-in as identified on its Buy-In Intent.

“Original Buy-In Intent” shall mean a Buy-In Intent transmitted by a

Member with a Long Position for which such Member is the original
submitter.

“Buy-In Retransmittal Notice” shall mean a Buy-In Intent submitted by a

Member with a Long Position with respect to a Buy-In Position for which
the Member has a corresponding obligation as to which it has received a
Buy-In Intent initiated outside of the CNS System.

Unless the context otherwise requires, where these Procedures refer to a

“Buy-In Intent” without distinction, such reference refers to both an Original
Buy-In Intent and a Buy-In Retransmittal Notice.

“Buy-In Liability” shall mean the quantity specified on each CNS

Retransmittal Notice.

Buy-In Intent

Except with respect to securities subject to a voluntary corporate reorganization

(as described in Section H.4. of this Procedure VII), a Member having a Long
Position at the end of any day may transmit, in such form and within such times
as determined by the Corporation, to the Corporation a Buy-In Intent specifying
its Buy-In Position, which shall not exceed the long positions which it intends to
buy-in.

With respect to securities subject to a voluntary corporate reorganization, a

Member may not transmit a Buy-In Intent after the expiration date of the
reorganization event until the end of the protection period for the reorganization
event; provided, however, that at no time may a Member submit a Buy-In Intent
for a Long Position in a CNS Reorganization Sub-Account.

A Buy-In Intent may be submitted to the Corporation by a Member on successive

days, provided the succeeding Buy-In Intent does not specify a quantity of
securities covered by the prior Buy-In Intent and the quantity of securities
representing the sum of the Buy-In Intent notices does not exceed the Member’s
total Long Position.

If, at any time after a Buy-In Intent is submitted and processed, until the
completion of CNS allocation processing on the day the Buy-In expires, the
originator has settling trades or miscellaneous activity that reduce their Long
Position such that the originator becomes either short or flat in a security covered
by the Buy-In Intent, or such that the originator’s Long Position in CNS is less
than its Buy-In Position, NSCC will consider that Buy-In Position (or portion
thereof) satisfied, and will either reduce its Buy-In Position accordingly or the
Buy-In Intent will be removed from the system, as applicable.

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CNS Allocation Priority and CNS Retransmittal Notices

Original Buy-In Intent (expiring on N+2):

A Buy-In Position on an Original Buy-In Intent is given high priority for

CNS allocation from N+1 through the daytime allocation on N+2. If a Buy-
in Position remains unfilled after the night allocation on N+1, the
Corporation issues CNS Retransmittal Notices on the morning of N+1 to a
sufficient number of Members with Short Positions. Such CNS
Retransmittal Notices shall specify the originator and the remaining portion
of the Buy-In Position not yet received and demand delivery from each
such Member of a specified quantity of securities. CNS Retransmittal
Notices are issued in an aggregate quantity at least equal to the Buy-in
Position. In no case will the Buy-In Liability of a Member exceed the Buy-
in Position or the total Short Position of the Member. If several Members
have Short Positions with the same age, all such Members are issued
CNS Retransmittal Notices, even if the total of their Short Positions
exceeds the Buy-in Position.

Buy-In Retransmittal Notice (expiring on N+1):

A Member that has a Long Position in CNS at the end of any day and that
has received a Buy-In Intent initiated outside of the CNS System in that
same CUSIP, may submit a Buy-In Retransmittal Notice to the
Corporation for execution on N+1 as described below. Buy-In
Retransmittal Notices shall be submitted in such form and within such
times as determined by the Corporation and include the identity of the
entity that initiated the Buy-In against the Member. A Buy-In Position on a
Buy-In Retransmittal Notice is given high priority for CNS allocation from N
through the daytime allocation on N+1.

Upon receipt of the Buy-In Retransmittal Notice on N, the Corporation

issues CNS Retransmittal Notices to a sufficient number of Members with
Short Positions. Such CNS Retransmittal Notices shall specify the
originator and the remaining portion of the Buy-In Position not yet received
and demand delivery from each such Member of a specified quantity of
securities. CNS Retransmittal Notices are issued in an aggregate quantity
at least equal to the Buy-in Position. In no case will the Buy-In Liability of
a Member exceed the Buy-in Position or the total Short Position of the
Member. If several Members have Short Positions with the same age, all
such Members are issued CNS Retransmittal Notices, even if the total of
their Short Positions exceeds the Buy-In Position.

A Member’s Buy-In Liability may be satisfied by the actual settlement of the Short
Position up to the time on N+1 (for a Buy-In Retransmittal Notice), or N+2 (for an
Original Buy-In Intent). If a deposit of securities is required to satisfy the Short
Position, that deposit should be made prior to the Designated Depository daytime

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deposit cut-off time on the expiration date of the Buy-In Intent and prior to the
time specified below. Going from a Short Position to a flat or Long Position due
to settling trades, stock dividends, or other activity on N through N+2 does not
free a Member from Buy-In Liability.

Prior to the execution of a Buy-In, the originator must accept and pay for any
portion or all the remaining securities delivered to the originator.

Buy-In Execution

If the Buy-In Position is not satisfied by the completion of the CNS allocation
process in the day cycle on the expiration date of the Buy-In Intent, the Buy-In
may be executed, as provided for under Procedure X.

2. Municipal Securities

Notwithstanding the foregoing, a Member that has transmitted a Buy-In Intent to

the Corporation with respect to a municipal security shall have its Buy-In Position
removed from the CNS System prior to commencement of the CNS night cycle
on N+1. The Corporation will remove corresponding Short Position(s)
representing the Member(s) with the oldest Short Position(s) in an aggregate
quantity at least equal to the Buy-in Position, and will produce special close-out
receive and deliver orders, which may name Members or a participant of an
interfacing clearing corporation as the contra side and which receive and deliver
orders will be subject to the rules of the MSRB.

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PROCEDURE VIII. MONEY SETTLEMENT SERVICE

The Money Settlement Service is the end product of a number of other Services.
Individual sections of these Procedures and the Rules specify the method of calculation
for determining the total net amounts owed to the Member, Mutual Fund/Insurance
Services Member, Insurance Carrier/Retirement Services Member or Fund Member or
owed by the Member, Mutual Fund/Insurance Services Member, Insurance
Carrier/Retirement Services Member or Fund Member for each service. The function of
the Money Settlement Service is to record these individual totals or net amounts on the
Settlement Statement, together with amounts due to or from Members (and, if
applicable, Mutual Fund/Insurance Services Members) as a result of Clearing Agency
Cross-Guaranty Agreements, and determine a single net amount owed to or owed by
each such participant.

A. Settlement Statement

Each Business Day at such time as determined by Corporation, the Corporation

produces a Settlement Statement for each Member, Mutual Fund/Insurance Services
Member, Insurance Carrier/Retirement Services Member and Fund Member. The
Settlement Statement reflects each credit or debit which has been entered to such
participant’s account for each service in which it had activity that day together with
amounts due to or from Members (and, if applicable, Mutual Fund/Insurance Services
Members) as a result of Clearing Agency Cross-Guaranty Agreements. All credit and
debit amounts are totaled and the net of the two is calculated. This net amount
represents the amount owed to the participant or owed by the participant.

B. Money Settlement

If the net settlement for the day is a debit, the Member, Mutual Fund/Insurance
Services Member, Insurance Carrier/Retirement Services Member and/or Fund Member
must settle such amount in accordance with Rule 12. If the net settlement for the day is
a credit, the Corporation must settle such amount in accordance with Rule 12.

C. Final Settlement Statement

Each Business Day at such time as determined by the Corporation, a Final

Settlement Statement is produced for each Member, Mutual Fund/Insurance Services
Member, Insurance Carrier/Retirement Services Member or Fund Member which
contains the credit and debit amounts shown on the prior Settlement Statement, any
adjustments to those amounts and the status of the settlement of these amounts. Any
resulting debit or credit amount reflected on such statement is recorded as “Suspense”.
Suspense amounts are settled between such participant, and the Corporation, in
accordance with the procedures established by the Corporation. Participants must
verify all figures on all Settlement Statements and immediately bring any discrepancies
to the attention of the Corporation.

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D. Settling Bank Procedures

1. Settling Bank Obligations

(a) Each day at such time as determined by the Corporation, NSCC will make
available to Settling Banks the final net-debit or net-credit figure for the account of each
Member, Mutual Fund/Insurance Service Member, Insurance Carrier/Retirement
Service Member or Fund Member (each, a “Settlement Member”) for which it is the
designated Settling Bank and the Settling Bank’s net-net debit or net-net credit figure.
This action initiates the settlement process. If the Settling Bank’s final settlement
balance (“Settlement Balance”) is a net-net debit, it should pay that amount in the
manner provided in Sections 3 and 4 below to NSCC’s Settlement Agent by such time
as established by the Corporation.

(b) By the Acknowledgment Cutoff Time, Settling Banks, without exception,

must acknowledge to the Settlement Agent via the terminal system their Settlement
Balances and (1) their intention to settle with NSCC their net-net settlement amount by
the settlement deadline, or (2) their refusal to settle for particular Settlement Members.
Notwithstanding the foregoing, a Settling Bank that is a Member and settles solely for its
own accounts may opt, pursuant to such procedures as the Corporation may, from time
to time, establish, to not acknowledge its Settlement Balance; 1 if such Settling Bank
opts to not acknowledge its Settlement Balance, it shall not be subject to subsections
(c) and (e) below. 2 A Settling Bank that is a Member may not refuse to settle for itself.

(c) If a Settling Bank does not, by the Acknowledgement Cutoff Time, either:
(i) affirmatively acknowledge its Settlement Balance or (ii) notify the Settlement Agent
that it refuses to settle for one or more for Settlement Members, then, at the
Acknowledgement Cutoff Time, the Settling Bank is deemed to have acknowledged its
Settlement Balance.

(d) If the Settling Bank sends refusal messages for one or more Settlement
Members but not all Settlement Members for which it is the designated Settling Bank,
the Settlement Agent shall remove from the Settlement Balance the net settlement
balance(s) of the Settlement Member(s) for which the Settling Bank has refused to
settle, and will provide the Settling Bank with a new Settlement Balance. The Settling
Bank must acknowledge to the Settlement Agent by the Acknowledgment Cutoff Time
its new Settlement Balance and its intention to settle by the settlement deadline. This
new Settlement Balance shall be subject to subsection (c) above.

1 If the Settling Bank is also a settling bank at DTC, then to be eligible for such “opt out”, it must also
settle at DTC solely for its own accounts, and any such “opt out” must apply to both its NSCC and
DTC settlement balances.
2 If the Settling Bank is also a settling bank at DTC, then to be eligible for such “opt out”, it must also
settle at DTC solely for its own accounts, and any such “opt out” must apply to both its NSCC and
DTC settlement balances.

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(e) The Settlement Agent will attempt to contact the Settling Bank if no
acknowledgment or notice of a refusal to settle is received by the Acknowledgement
Cutoff Time. If (x) the Settlement Agent is able to contact the Settling Bank, and (y) the
Settling Bank notifies the Settlement Agent that it cannot, at that time, acknowledge or
refuse its Settlement Balance, then the Settling Bank will not be deemed to have
acknowledged its Settlement Balance. If the Settling Bank cannot be reached, the
Settling Bank will be deemed to have acknowledged its Settlement Balance.

The Corporation may exclude a Settling Bank’s balance from the NSS file if the
Settling Bank (i) does not acknowledge its Settlement Balance by the Acknowledgement
Cutoff Time or does not acknowledge its new Settlement Balance pursuant to
subsection (d) above by the Acknowledgement Cutoff Time and (ii) is not deemed to
have acknowledged its Settlement Balance or its new Settlement Balance pursuant to
subsection (d) above because the Settling Bank has notified the Settlement Agent that it
is unable to affirmatively acknowledge its Settlement Balance or that it refuses to settle
on behalf of a Member, Mutual Fund/Insurance Services Member, Insurance
Carrier/Retirement Services Member or Fund Member.

(f) Note: A Settling Bank that cannot send an acknowledgment or refusal

message to the Settlement Agent may contact the Settlement Agent and instruct the
Settlement Agent to act on its behalf.

(g) The Settlement Agent uses the most recent contact information provided
by the Settling Bank to the Settlement Agent. Each Settling Bank must ensure that it
maintains up-to-date and accurate contact details with the Settlement Agent on an
ongoing basis when previously provided contact details are no longer accurate, to
facilitate the Settlement Agent’s ability to contact a Settling Bank regarding this
settlement process and any settlement issues.

(h) A Settling Bank with a net-net debit that has sent an acknowledgment
message to the Settlement Agent must settle by the settlement deadline. (See the
payment procedure below.) If the Settling Bank has acknowledged its net-net
settlement debit and the Settlement Agent has not received funds from the Settling
Bank by the settlement deadline, NSCC begins failure-to-settle procedures in respect to
the Settling Bank at this time.

(i) Note: A refusal to settle for a Settlement Member is a refusal to settle all
accounts of that participant. The Settling Bank cannot refuse to settle only some of the
accounts of a participant with multiple accounts. A Settling Bank that has sent a refusal
message must send an acknowledgment of its new net-net settlement amount.

(j) At such time as the Settlement Agent has received sufficient funds it will
initiate payments to Settling Banks with net-net credits.

2. Settlement Agent

DTC provides NSCC with services with respect to NSCC’s money settlement operations
as described in, and in accordance with, these procedures. DTC will act as “Settlement

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Agent” (as that term is used in the Federal Reserve Board’s Operating Circular 12 and
in these Rules and Procedures) for NSCC and Settling Banks, for purposes of
(i) receiving and paying, as NSCC’s settling bank and for the account of NSCC, end-of-
day money settlement payments from or to, as applicable, Settling Banks and
participants, (ii) with respect to the NSS, as the means of effecting money settlement for
NSCC, and (iii) aggregating and netting the Settlement Balance of those Settling Banks
that act as such for both DTC and NSCC participants, and crediting or debiting the
account of either NSCC, or DTC, as the appropriate clearing agency, with the
settlement amounts determined in accordance with this procedure, as described in item
4 below.

3. Settlement Payment By Net-Net Debit Settling Bank

The Settling Bank with a final net-net debit must settle its net-net debit balance via the
FRB’s NSS. Note: Any bank or trust company applying to act as a Settling Bank must
execute such agreements authorizing the Corporation’s Settlement Agent to utilize NSS
for end of day money settlement as the FRB may, from time to time require. Those
Settling Banks that also act as Settling Bank for DTC participants are required to sign a
Settler Agreement with the FRB designating DTC as their NSS Settlement Agent for
purposes of DTC settlement. Accordingly, those banks will not be required to sign new
Settler Agreements to separately cover NSCC’s NSS settlement. Rather the Settler
Agreements they provide to DTC for delivery to the FRB are hereby deemed to include,
as covered in the NSS settlement arrangements, the Settling Bank’s NSCC settlement
obligations as well as their DTC settlement obligations.

After receiving an acknowledgment (if applicable) from the Settling Bank, NSS will allow
the Corporation’s Settlement Agent to instruct the FRB to debit the Settling Bank’s
account at the FRB by the amount of its net-net debit balance. The Settlement Agent
will send a “pre advice” to each Settling Bank, notifying it that the Settlement Agent is
about to send its NSS transmission to the FRB.

Any Settling Bank that settles for both participants of NSCC and for participants of DTC
will have its net-net credit or debit balances at each corporation aggregated and netted
to one consolidated sum (see Section 4 below). At the end of each day, after receiving
the applicable acknowledgments from the Settling Bank, DTC, as Settlement Agent will
then instruct the FRB to debit the FRB account of each such Settling Bank which has a
Consolidated Settlement Debit Amount (as defined in Section 4 below) by the amount
determined in accordance with Section 4 below. If the Settling Bank settles only for
NSCC participants, then DTC will instruct the FRB to debit such bank’s FRB account by
the amount of its net-net debit owed to NSCC. If the Settling Bank’s account at the FRB
has sufficient funds, it will be debited. Upon confirmation from the FRB, the Settling
Bank will be credited to reflect payment to NSCC of its net-net debit amount. If the
Settling Bank’s account has insufficient funds, DTC will receive notification from the
FRB that the account was not debited. If this occurs, DTC will notify the Settling Bank
of the deficiency. Any Settling Bank with a deficiency must then wire the funds to the
Settlement Agent.

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Note – Settling Banks must monitor their Settling Bank Account Statement to ensure
that funds have been credited to their account and that no balance exists. The Settling
Bank must be prepared to wire payment to the Settlement Agent if funds are not
available or if the NSS is unavailable or inoperable. NSCC requires that a bank
representative authorized to wire funds be available at the Settling Bank until settlement
is complete. If a Settling Bank is experiencing extenuating circumstances and, as a
result, needs to opt out of NSS for one Business Day and send its wire directly to DTC’s
FRBNY account for its debit balance, that Settling Bank must notify the settlement
operations department prior to acknowledging its Settlement Balance.

If funds need to be wired to the Settlement Agent’s account at the FRBNY for any
reason the following guidelines for sending settlement wires should be used. The
format of the instructions conforms to Fedwire standards for funds transfers. Other
formats are acceptable as well. NSCC expects to receive settlement payments by the
settlement deadline.

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Fedwire Message Entry Instructions

Receiving Bank Enter Settlement Agent’s ABA Number

ABA Number:

Receiving Bank Enter the name of the Settlement Agent

Name:

Originator to Beneficiary SET(indicating Settlement as the purpose of the wire)

Information (OBI):

Type Code: Settling Banks should use type code 1600 for Settlement
wires. Type code wires may be wired to the Settlement
Agent after the Interdistrict Fedwire cutoff, whereas the
type code 1000 wires cannot. In the event a Settling
Bank experiences system problems which delay its
outgoing wires, use of type code 1600, the Fedwire code
for settlement wires, will prevent the bank’s wire to the
Settlement Agent from being rejected by the Fed due to
the Interdistrict cutoff.

Other Information: The bank will complete other required fields in the
Fedwire structured format according to the bank’s
standard procedures.

The Settlement Agent will advise as to the receipt of any wires.

4. DTC/NSCC Settling Bank Netting Arrangements

Any Settling Bank that settles for both participants of the Corporation and for
participants of DTC will have its net-net credit or debit balances at each clearing
corporation aggregated and netted, and shall pay, or be paid, as follows:

(i) For purposes of this item 4, the following terms have the meanings specified:

(a) “Common Settling Bank” means any entity that has qualified and acts as a
Settling Bank for both DTC and NSCC in accordance with their respective
rules and procedures.

(b) “DTC Credit Amount” or “NSCC Credit Amount” means, as applicable, any
net-net credit settlement payment due from the relevant clearing agency to
a Common Settling Bank, as determined in accordance with the Rules and
Procedures of the relevant clearing agency.

(c) “DTC Debit Amount” or “NSCC Debit Amount” means, as applicable, any
net-net debit settlement payment due to the relevant clearing agency from

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a Common Settling Bank, as determined in accordance with the

respective Rules and Procedures of the relevant clearing agency.

(d) “Consolidated Settlement Debit Amount” means on any settlement day

the net sum, if a negative number (i.e. debits being deemed negative
numbers, and credits being deemed positive numbers) of a Common
Settling Bank’s applicable DTC Debit or Credit Amount, plus its applicable
NSCC Debit or Credit Amount.

(ii). For each Common Settling Bank on each settlement day, DTC, as Settlement
Agent, shall aggregate and net the DTC Credit and/or Debit Amount of the Common
Settling Bank with the applicable NSCC Credit or Debit Amount of such Common
Settling Bank and:

(a) If the Common Settling Bank has both a DTC Debit Amount and an
NSCC Debit Amount, then following the acknowledgment of those
respective balances by such bank in accordance with DTC’s procedures
and NSCC’s procedures, DTC shall (i) advise the Common Settling Bank
of its intention to transmit debit instructions to the FRB, and (ii) instruct the
FRB via NSS to debit the FRB account of such Common Settling Bank by
the aggregate sum of such debit balances. DTC, upon receipt of such
monies, shall credit NSCC with the amount of the NSCC Debit Amount,
and credit DTC with the amount of the DTC Debit Amount, from such
Common Settling Bank.

(b) If the Common Settling Bank has both a DTC Credit Amount and an
NSCC Credit Amount, then at the time established in DTC’s and NSCC’s
procedures, DTC shall credit payment to the FRB account of the Common
Settling Bank with the aggregate sum of such credit balances, and shall
debit NSCC with the amount of the NSCC Credit Amount, and debit DTC
with the amount of the DTC Credit Amount, for such Common Settling
Bank.

(c) If the Common Settling Bank has a Debit Amount at one clearing agency
and a Credit Amount at the other, then:

-- if the sum of such DTC Credit Amount and NSCC Debit Amount (or
DTC Debit Amount and NSCC Credit Amount, as the case may be) is a
positive number, that excess amount (i.e. equal to the positive number)
shall be paid by the Settlement Agent for the account of the clearing
agency with the Credit Amount to the Common Settling Bank, and the
clearing agency with the Credit Amount shall pay the other clearing
agency an amount equal to the Common Settling Bank’s Debit Amount
owed to the other clearing agency. Payments made as so provided shall
be in full satisfaction of the settlement obligation of (i) the clearing agency
that owes the Credit Amount to the Common Settling Bank and (ii) the
Common Settling Bank to the other clearing agency.

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--if the sum of such DTC Credit Amount and NSCC Debit Amount (or DTC
Debit Amount and NSCC Credit Amount, as the case may be) is a
negative number, then the absolute value of that amount shall be paid by
the Common Settling Bank to the Settlement Agent for the account of the
clearing agency to which the Common Settling Bank has a Debit Amount,
via NSS in the manner provided above in full satisfaction of the settlement
obligation of the Common Settling Bank to such clearing agency, and the
clearing agency with the Credit Amount shall pay the other clearing
agency an amount equal to the Credit Amount, in full satisfaction of the
settlement obligation of the clearing agency from whom such Credit
Amount was owed to the Common Settling Bank.

--if the sum of such amounts equals zero (i.e. the Credit Amount due from
one clearing agency equals the Debit Amount owed to the other clearing
agency), then the clearing agency that owes the Credit Amount to the
Common Settling Bank shall pay the amount of such Credit Amount to the
other clearing agency in full satisfaction of both the settlement obligation
of the Common Settling Bank to the clearing agency owed the Debit
Amount and the settlement obligation of the clearing agency that owes the
Credit Amount to such Common Settling Bank. In that instance, no
payment shall be due to or from such Common Settling Bank to or from
either DTC or NSCC.

(iii) Notwithstanding the foregoing, if any Common Settling Bank fails to pay its
Consolidated Settlement Debit Amount in full by the time specified in DTC and NSCC’s
procedures, then (i) if that bank has an NSCC Debit Amount, NSCC shall implement its
failure to settle procedures, and (ii) if that bank has a DTC Debit Amount, DTC shall
implement its failure to settle procedures.

(iv) Under FRB Operating Circular No. 12, DTC, as Settlement Agent, has certain
responsibilities in allocating an indemnity claim made by an FRB as a result of NSS. In
making such an allocation, NSCC and DTC will first apportion any such liability between
them (and their respective participants) in proportion to the amount of the net-net debit
due to each clearing agency by the Settling Bank to which the indemnity claim relates.
If that Settling Bank owed a debit to one and had a credit due from the other clearing
agency, then the entire indemnity amount will be allocated to the clearing agency to
which the Settling Bank owed the debit amount (and for which, via NSS, its FRB
account was debited) relating to the indemnity claim. NSCC and DTC will then further
allocate the FRB claim among their participants for whom the Settling Bank was then
acting. If for any reason such allocation is not sufficient to fully satisfy the FRB
indemnity claim, then the remaining loss will be allocated pro rata among all the
applicable clearing agency’s participants in the same manner as provided in NSCC’s
and DTC’s Rules with respect to a general (i.e., non-system related) loss.

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5. Settlement Payment To Net-Net Credit Settling Bank

As soon as NSCC is advised by its Settlement Agent that settlement payments made by
Settling Banks with net-net debits have been received, and it has sufficient available
funds the Settlement Agent will begin to credit funds to Settling Banks with net-net
credits.

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PROCEDURE IX. (RESERVED FOR FUTURE USE)

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PROCEDURE X. EXECUTION OF BUY-INS

Equity Securities and Corporate Debt Securities

A Member who has transmitted a Buy-In Intent under Section J of Procedure VII
(as defined in Section 7 of Rule 11 as “the originator”) and has not received either all or
a portion of the Buy-In Position shown on its Buy-In Intent, may submit a Buy-In Order
to the Corporation on the expiration date of the Buy-In Intent (N+2 for an Original Buy-In
Intent, and N+1 on a Buy-In Retransmittal Notice), in such form and by such time as
determined by the Corporation.

An originator that does not submit a Buy-In Order by this time, may not submit a
Buy-In Execution pursuant to this Procedure, and it will be necessary for the originator
to recommence the buy-in process by submitting another Buy-In Intent to the
Corporation, as described in Section J of Procedure VII.

If an originator submits a Buy-In Order as provided for above, but does not
submit a Buy-In Execution pursuant to this Procedure, such that the Buy-In Order is not
executed on its expiration date, the Buy-In Order shall not be executed thereafter, and it
will be necessary for the originator to recommence the Buy-In process by submitting
another Buy-In Intent to the Corporation in order to have its Long Position bought-in.

An originator who has submitted a Buy-In Order as described above, and has still
not been allocated its Buy-In Position by the completion of the CNS allocation process
in the day cycle on that day, or has only been allocated a portion of such Buy-In
Position by that time, may execute the buy-in, as described below.

The Buy-In Order is executed by the originator in such marketplace and through
such agents as the originator shall elect, and such execution shall be subject to the
relevant rules of such marketplace. Upon completion of the buy-in execution, the
originator shall submit to the Corporation a Buy-In Execution, which shall include the
position and price of the buy-in execution in such form and within such time as
determined by the Corporation from time to time.

The Corporation does not validate the terms of the buy-in execution provided to it
by the originator. Any disputes between the originator and the Members with Buy-In
Liability shall be addressed between such parties away from the Corporation.

Members with Short Positions who receive CNS Retransmittal Notices and do
not satisfy them assume liability for the loss, if any, which occurs as a result of the buy-
in execution.11

1 If the originator transmits does not timely rescind a Buy-In Order, notwithstanding any agreements
that may have been entered into with Member(s) with Short Positions away from the Corporation,
such Member(s) with Short Positions shall remain liable for the executed buy-in.

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The execution of a buy-in is reported in the Miscellaneous Activity Report on the

next Business Day following the day such execution is reported to the Corporation.

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PROCEDURE XI. FEES – SEE ADDENDUM A

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PROCEDURE XII. TIME SCHEDULE

These Procedures state that the Corporation will receive and deliver information,
data and other items at specified times. The specified times may change from time to
time.

Members may, upon request to the Corporation, obtain the time schedule then in
effect. The Corporation will notify Members of any change in the time schedule ten (10)
days in advance of the change.

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PROCEDURE XIII. DEFINITIONS

CNS Stock Record - The CNS System accounting of all CNS Securities owed to and by
the Corporation which operates on a perpetual inventory basis providing each Member
a single long or short position per CNS Security.

Contract - A Balance Order Contract or CNS Contract.

Contract List – Reports and/or output prepared by the Corporation showing compared
trades, uncompared trades and advisory data.

Contract Money - The unit price of the securities traded multiplied by the quantity of
securities traded or the stated value agreed to by both parties to the trade.

Current Market Value - The number of units of a security multiplied by the Current
Market Price per unit.

Current Position - The long or short position of a Member in the CNS Stock Record at
any time or, when the term is used in a report or statement to a Member, at the time the
report or statement is prepared.

Designated Depository - The Qualified Securities Depository designated by a Member.

ESS - The Envelope Settlement Service provided for under Section 1 of Rule 9.

IESS - The Intercity Envelope Settlement Service provided for under Section 2 of
Rule 9.

Non-Participant - A participant in a Qualified Clearing Agency who is not a Member.

NYSE - New York Stock Exchange LLC.

NYSE Alternext – NYSE Alternext US LLC.

OCC - The Options Clearing Corporation.

OTC - The over-the-counter securities market.

Qualified Clearing Agency - A Registered Clearing Agency which has entered into an
agreement or agreements with the Corporation pursuant to which transactions
submitted to the Corporation or the Registered Clearing Agency may be transferred to
the other for comparison and/or settlement.

Real-time – The term “Real-time”, with respect to the submission of trade data to the
Corporation, means the submission of trade data on a trade-by-trade basis promptly
after trade execution, in any format and by any communication method acceptable to
the Corporation.

Security - A cleared security.

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SIAC - Securities Industry Automation Corporation

T - T denotes the day on which the trade occurred. T+1 is the next Business Day, and
so on. T+2 is normally the Settlement Date.

when-issued transaction - Typically, a transaction in a security which has occurred prior

to the issuance of such security and is determined to be a when-issued transaction by
the marketplace or exchange on which it trades.

when-distributed transaction - Typically, a transaction in a security which has occurred

prior to the initial distribution of such security and is determined to be a when-distributed
transaction by the marketplace or exchange on which it trades.

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PROCEDURE XIV. FORMS, MEDIA AND TECHNICAL SPECIFICATIONS

From time to time the Corporation may specify various forms which participants
must use to submit instructions and data to the Corporation and which the Corporation
uses to report transactions and information to participants. The information called for by
such forms may be submitted or received by use of a hard copy paper form or by such
other media as the Corporation shall from time to time permit. Submission of such
information on other media shall be made in accordance with specifications determined
from time to time by the Corporation.

The Corporation will notify participants of any change in such forms, media or
specifications ten (10) days in advance of the effective date of the change.

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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.

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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.

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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.

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(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 positions4 (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.

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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

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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.

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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.

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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
percentage designated by the Corporation, which percentage shall
not be less than 10%; and

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.

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(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.

(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

6 The Current Market Price for each sub-penny security is deemed to be one cent.

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 (PROCEDURE XV)

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

(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;

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 (PROCEDURE XV)

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.

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,

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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
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.

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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

If a Member’s contribution to the Clearing Fund, as computed pursuant to Section I.(A)

of this Procedure (but excluding any charges as set forth in Subsections I.(A)(1)(c), (e),
(f), and (g); and I.(A)(2)(c), (d), (e), and (g) of this Procedure), plus any amount
collected pursuant to 1.(B)(1) above or Rule 15 (such aggregate amount referred to as
the “Calculated Amount”), when divided by its excess net capital or capital (as
applicable), as defined in the membership standards set forth in Addendum B, is greater
than 1.0 (the “Excess Capital Ratio”), then the Corporation may require such Member to
deposit, within such timeframe as the Corporation may require, an additional amount
(the “Excess Capital Premium”) to the Clearing Fund equal to the product of: (a) the
amount by which the Calculated Amount exceeds its excess net capital or capital (as
applicable), as defined in the membership standards set forth in Addendum B, multiplied
by (b) its Excess Capital Ratio.

Notwithstanding the foregoing, the Corporation may: (i) collect an amount less than the
Excess Capital Premium (including no premium), and (ii) return all or a portion of the

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Excess Capital Premium if it believes that the imposition or maintenance of the Excess
Capital Premium is not necessary or appropriate. 7

(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 both on the start of the day portfolio
(the “Regular Backtesting Charge”) or on an intraday basis (the “Intraday Backtesting
Charge”), 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 Regular
Backtesting Charge and the Intraday Backtesting Charge shall generally be equal to the
Member’s third largest deficiency and fifth largest deficiency, respectively, 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 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.

7 The Corporation has identified the following guidelines or circumstances, which are intended to be
illustrative, but not limited, where the premium will not be imposed: (a) where the premium results
from charges applied with respect to municipal securities trades settling in CNS, where the member
has offsetting compared trades settling on a trade-for-trade basis through DTC; and (b) management
will look to see whether the premium results from an unusual or non-recurring circumstance 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 or trade recording 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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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.

II. Minimum Clearing Fund and Additional Deposit Requirements

(A) Each Member of the Corporation shall be required to contribute a minimum of

$250,000 (the “minimum contribution”), excluding Required SFT Deposit. The
first 40% (but no less than $250,000) of a Member’s Required Fund Deposit
(excluding Required SFT Deposit) must be in cash and the remaining amount,
may be evidenced by open account indebtedness secured by the pledge of
Eligible Clearing Fund Securities, which shall be valued, for collateral purposes,
as set forth in subsection III below. A Mutual Fund/Insurance Services Member’s
entire deposit is required to be in cash.

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1. Special Provisions Related to Eligible Clearing Fund Securities:

(a) Any deposits of Eligible Clearing Fund Agency Securities8 or

Eligible Clearing Fund Mortgage-Backed Securities 9, respectively,
in excess of 25 percent of the Member’s Required Fund Deposit will
be subject to an additional haircut equal to twice the percentage as
specified in the proposed haircut schedule detailed in subsection III
below, and

(b) No more than 20 percent of a Member’s Required Fund Deposit

secured by pledged Eligible Agency Securities may be of a single
issuer.

(B) All Clearing Fund requirements and other deposit requirements shall be made by
Members and Mutual Fund/Insurance Services Members, within one hour of
demand unless otherwise determined by the Corporation; provided, however,
that to the extent the Member and Mutual Fund/Insurance Services Member is
meeting such obligation with a (1) deposit of cash, such deposit shall be made by
Federal Funds wire transfer and be received no later than fifteen minutes prior to
the close of the Federal Funds wire, and (2) delivery of eligible securities, such
delivery shall be received within the deadlines established by DTC. At the
discretion of the Corporation, cash deposits may be included as part of the
Member’s or Mutual Fund/Insurance Services Member’s, daily settlement
obligation.

(C) Additional Clearing Fund deposits shall not be requested unless they exceed
such threshold as determined by the Corporation from time to time; provided that
the affected Member or Limited Member is not on the Watch List.

(D) Where the amount of a Member’s and Mutual Fund/Insurance Services

Member’s deficiency is in excess of $1,000 but less than $5,000, the Corporation
may require payment in multiples of $1,000. Where the amount of the deficiency
is in excess of $5,000, the Corporation may require payment in multiples of
$5,000.

8 A Member that is an Agency may not pledge Eligible Clearing Fund Agency Securities of which it is
the issuer.
9 With regard to a Member that pledges Eligible Clearing Fund Mortgage-Backed Securities of which it
is the issuer, such securities will be subject to a premium haircut, as set forth in subsection III below.

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III. Collateral Value of Eligible Clearing Fund Securities

(A) Eligible Clearing Fund Securities pledged to secure Clearing Fund deposits shall,
for collateral valuation purposes, be haircut as follows, or as otherwise
determined by the Corporation from time to time:

Security Type Remaining Maturity Haircut

1. Treasury
Bills, Notes, Bonds, TIPS Zero to 1 year 2.0%
1 year to 2 years 2.0%
2 years to 5 years 3.0%
5 years to 10 years 4.0%
10 years to 15 years 6.0%
15 years or greater 6.0%

Zero Coupon Zero to 1 year 5.0%

1 year to 2 years 5.0%
2 years to 5 years 5.0%
5 years to 10 years 12.0%
10 years to 15 years 12.0%
15 years or greater 12.0%

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2. Agency*
Notes, Bonds Zero to 1 year 7.0%
1 year to 2 years 7.0%
2 years to 5 years 7.0%
5 years to 10 years 7.0%
10 years to 15 years 10.0%
15 years or greater 10.0%

Zero Coupon Zero to 1 year 7.0%

1 year to 2 years 7.0%
2 years to 5 years 7.0%
5 years to 10 years 18.0%
10 years to 15 years 18.0%
15 years or greater 18.0%

3. Mortgage-Backed Security
Pass-Throughs* Ginnie Mae 7.0%
Fannie Mae/Freddie Mac 7.0%

Self-issued ** 14% (or 21% if

Concentration limit
is exceeded)

* Any deposits of Eligible Clearing Fund Agency Securities or Eligible Clearing Fund Mortgage-Backed
Securities in excess of 25 percent of a Member’s Required Clearing Fund deposit will be subject to a
haircut that is twice the amount of the percentage noted in the haircut schedule. Eligibility
requirements will be announced by the Corporation from time to time.
** A Member may deposit Eligible Clearing Fund Mortgage-Backed Securities of which it is the issuer,
however such securities will be subject to a premium haircut. This haircut shall be 14% as an initial
matter. If a Member also exceeds the 25% concentration limit, the haircut shall be 21%.

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PROCEDURE XVI. ID NET SERVICE

The ID Net Service utilizes the settlement and delivery services operated by a
Qualified Securities Depository for input and affirmation purposes related to transactions
qualifying for the ID Net Service as set forth in Rule 65. Certain transactions which are
between an ID Net Subscriber and a participant of the Qualified Securities Depository
are affirmed through: (i) a Registered Clearing Agency, (ii) other entities which have
obtained an exemption from such registration from the SEC, or (iii) Qualified Vendors as
defined in the rules of the New York Stock Exchange, the National Association of
Securities Dealers, or other self-regulatory organizations, as applicable, (an “Affirming
Agency”) in accordance with the applicable procedures of the Affirming Agency and
then confirmed by such Affirming Agency as eligible for processing in the ID Net
Service. If the transaction is affirmed and eligible for processing in the ID Net Service,
such Affirming Agency then forwards the appropriate delivery instructions to the
Qualified Securities Depository, which facilitates the movement of the transaction to an
account at the Qualified Securities Depository maintained by the Corporation as agent
on behalf of the ID Net Subscriber (the “ID Netting Subscriber Deliver Account”). The
transaction is then entered into the CNS Accounting Operation on the evening prior to
Settlement Date by the Corporation on behalf of the ID Net Subscriber. On the night
prior to Settlement Date, the ID Net Subscriber’s CNS position, if any, will be updated
for the quantity and value of the transaction versus creating an open obligation in the ID
Netting Subscriber Deliver Account. For transactions in which the ID Net Subscriber is
delivering securities to a participant at the Qualified Securities Depository, the ID Net
Subscriber’s position in the CNS Accounting Operation, if any, will be updated for the
quantity and value of the transaction versus creating an open obligation in an agency
account established for this purpose at the Qualified Securities Depository by the
Corporation on behalf of the ID Net Subscriber (the “ID Netting Subscriber Receive
Account”). Once the securities are credited to this account, the securities will be
delivered to the appropriate participant account at the Qualified Securities Depository.

The ID Net Subscriber’s counterparty settles transactions in the ID Net Service

through the depository against the ID Netting Subscriber Deliver Account or the ID
Netting Subscriber Receive Account, respectively, depending on whether it is delivering
or receiving shares from the ID Net Subscriber.

If for any reason the full amount of the Eligible ID Net Securities for any ID Net
transaction entered into the CNS Accounting Operation with respect to a particular
transaction are not delivered to the Corporation prior to the cut-off time established by
the Corporation from time to time or if before such cut-off time the securities delivered to
the Corporation with respect to a particular transaction pursuant to this Procedure XVI
no longer qualify as Eligible ID Net Securities the Corporation will make the following
entries in order to remove the transaction from the ID Net Service and the CNS
Accounting Operation, leaving the ID Net Subscriber and its counterparty to complete
(or terminate) the original trade: (i) the Corporation will create an offsetting position in
the ID Netting Receive Account versus the ID Net Subscriber position for the failed
delivery in order to “return” the securities to the CNS Accounting Operation for normal
allocation processing (pursuant to Section E.4. of Procedure VII), and (ii) the

357
 (PROCEDURE XVI)

Corporation will post a long position to the ID Net Subscriber in the CNS Accounting
Operation.

With respect to a particular transaction in the ID Net Service, in the event (i) a
participant of the Qualified Securities Depository fails to deliver to the ID Netting
Subscriber Deliver Account, and this failure to deliver is allocated pursuant to Section
E.4. of Procedure VII to a Member other than the appropriate ID Net Subscriber, or (ii)
securities are returned to the Corporation after a cut-off time established by the
Corporation from time to time due to a failure of delivery from a ID Netting Subscriber
Receive Account to a participant of the Qualified Securities Depository, then the
Corporation shall post appropriate offsetting positions in order to exit the transaction
from the ID Net Service.

358
 (PROCEDURE XVII)

PROCEDURE XVII. DTCC LIMIT MONITORING PROCEDURE

A. Introduction

DTCC Limit Monitoring is a risk management tool available to Members as

provided in Rule 54 and this Procedure.

Members registered for DTCC Limit Monitoring may create Risk Entities (as
defined in Rule 54 and more fully described below) and other parameters that:
(1) define the rules for the aggregation of trade data, (2) set parameters for the
monitoring of each Risk Entities’ activity in relation to such data, and (3) trigger
alerts to Members of parameter breaks.

B. DTCC Limit Monitoring Processing

1. Data Capture and Member Input

a. Data Capture

On each trade date, the Corporation may, within timeframes it may establish from
time to time, populate DTCC Limit Monitoring with LM Trade Date Data which
has been compared or recorded through trade capture mechanisms as it
determines from time to time. 1

b. Member Input

Members may, in their sole discretion, input or load LM Member-provided Data to

DTCC Limit Monitoring. Such data shall be submitted by Members within such
timeframes as determined by the Corporation from time to time and in format(s)
deemed acceptable by the Corporation.

2. Establishing Risk Entities

Within timeframes as permitted by the Corporation from time to time, Members

that are registered for DTCC Limit Monitoring may establish Risk Entities.
Members shall define Risk Entities utilizing strings of data elements (referred to
as “trade arrays”) according to categories established for this purpose by the
Corporation from time to time. Members may utilize multiple trade arrays in the
definition of a single Risk Entity. Examples of data elements that a Member may
select to be included in a trade array are clearing broker account number (i.e.,
the Member’s own main account or sub-account number(s)), executing broker
symbol, market, and other identifying details as the Corporation may permit.

1 Such mechanisms include all new settling trades including trades compared and/or recorded by the
Real-Time Trade Matching service and the Universal Trade Capture system. Transaction details
submitted to the Obligation Warehouse are not forwarded to DTCC Limit Monitoring.

359
 (PROCEDURE XVII)

3. Processing

LM Transaction Data for each Member shall be aggregated and sorted by the
Corporation by Risk Entity and made available to that Member at the Member’s
own convenience. Intraday allocations in the settlement system are not taken
into consideration as they are not effective until the Effective Time (as defined in
Rule 12). LM Transaction Data may include values on a net notional basis, and
as calculated on other bases as determined by the Corporation from time to time.
LM Trade Date Data shall be carried at contract amount unless the Corporation
otherwise has added a pricing methodology for the relevant security, and LM
Member-provided Data shall include pricing as provided by the applicable
Member.

4. Parameter Breach Warnings

Members registered for DTCC Limit Monitoring may designate parameters to

associate with each Risk Entity from certain parameter types that are established
or permitted by the Corporation from time to time. DTCC Limit Monitoring then
sets “early warning” limits at 75% and 90% of the parameters set by Members for
each Risk Entity.

Members may review reports and alerts on an on-going basis and, as necessary,
modify established parameters to reflect current trading activities within each of
their Risk Entities. While Members are ultimately responsible for ensuring that
the parameters set on trading activity are appropriate, NSCC staff may, in its sole
discretion, review trade activity reports and alerts, and may contact Members to
discuss any concerns if, for example, the parameters set are not aligned with
recent average trading activity.

The Corporation maintains totals of the relevant information which it compares to

the designated parameters. The identification of an early warning or parameter
breach triggers an alert by the Corporation to the Member. An alert shall be
issued within such timeframe as the Corporation deems reasonable and
necessary for it to process, validate, and report the relevant data or information.

5. End of Day and Monthly Reporting

The Corporation may provide Members end of day and monthly reports, which
include Members’ current Risk Entity definitions, alert history, and other data or
information as the Corporation determines to make available from time to time.

6. Contacts for DTCC Limit Monitoring

Members may identify primary and secondary contacts within their firm for DTCC
Limit Monitoring.

360
 (PROCEDURE XVIII)

PROCEDURE XVIII. ACATS SETTLEMENT ACCOUNTING OPERATION

The ACATS Settlement Accounting Operation provides settlement efficiencies for

eligible transactions as it may reduce the number of ACATS transactions a Member
may be obligated to settle on a given day, as applicable.

Items shall be eligible for processing by the ACATS Settlement Accounting

Operation that are: (i) staged for settlement processing in accordance with Rule 50 and
are (ii): (a) CNS-eligible items, or (b) otherwise eligible for DTC settlement services,
unless such a transaction is: (1) otherwise determined by the Corporation at its
discretion to be ineligible for the ACATS Settlement Accounting Operation, or
(2) subject to a corporate reorganization.

For items eligible for the ACATS Settlement Accounting Operation, the
Corporation will aggregate the receive and deliver instructions so that a Member will
have only one aggregate receive obligation and one aggregate deliver obligation on
ACATS Settlement Date in the given security processed into separate subaccounts
established with the Corporation for this purpose.

If on ACATS Settlement Date, a transaction within the ACATS Settlement

Accounting Operation is no longer eligible for processing by the ACATS Settlement
Accounting Operation, the transaction will be exited from the accounting system and
instructions will be issued to the Members to the transaction to settle directly among
themselves. The Corporation will debit and credit the Members’ settlement accounts as
appropriate for the value of the applicable items. The actual delivery and corresponding
money settlement of the underlying assets, regardless of whether a Member’s account
has been debited or credited pursuant to this subsection, shall be the responsibility of
the applicable Members and, to the extent applicable, shall be pursuant to the rules of
the Member’s DEA.

For transactions within the ACATS Settlement Accounting Operation on ACATS

Settlement Date, the Corporation will send an Instruction File to the Qualified Securities
Depository specifying the securities to be delivered and/or received, in each case
pursuant to the standing instructions filed with the Corporation by the Delivering
Member. Such deliveries and receives will be updated to the applicable subaccounts of
the Member established with the Corporation for this purpose.

At end of day on Settlement Date, any uncompleted transaction that is CNS

eligible will be entered into the CNS General Accounting process made pursuant to
Rule 11. 1 For any uncompleted transaction that is not CNS eligible, the Corporation will
issue instructions to the Members to the transaction to settle directly with one another
and the transaction may be entered into the Obligation Warehouse in accordance with

1 Any such transaction will become guaranteed on settlement day after the Member has paid their final
money settlement to NSCC and the transaction is entered into the CNS Accounting Operation. If the
Member has not paid final money settlement, the transactions will be reversed in accordance with the
provisions of Rule 18 and Rule 50.

361
 (PROCEDURE XVIII)

Rule 51 and Procedure II.A. Additionally, the Corporation will debit and credit the
Member’s settlement account for the value of the applicable items. The actual delivery
and corresponding money settlement of the underlying assets, regardless of whether a
Member’s account has been debited pursuant to this subsection, shall be the
responsibility of the appropriate Member and, to the extent applicable, shall be pursuant
to the rules of the Member’s DEA. If a Member fails to make a delivery, such failure, to
the extent applicable, shall be subject to the rules of the Member’s DEA and not the
Rules of the Corporation.

Exemptions and Exemption Overrides

Except as described below, each Member has the ability to elect to deliver all or
part of any short position. It controls this process by establishing a “Level 1” Exemption.
By indicating a particular quantity as an Exemption, the Member directs the Corporation
not to settle certain short positions or portions thereof. Exemptions govern short
positions in this ACATS Settlement Accounting Operation and not Designated
Depository positions. All short positions or positions thereof for which no Exemption is
indicated are settled automatically to the extent that the Member has made such
securities available in the Member’s Designated Depository account or they become
available in its Designated Depository account through other depository activity.

By submitting a Level 1 Exemption, the Member indicates that the portion of the
short position exempted should not be automatically settled against its current
Designated Depository position or against any securities which may be received into its
Designated Depository account as a result of other depository activity.

With respect to same day settling transactions, Members may select a standing
Exemption override to permit all such short positions to be delivered. Additionally,
during the daytime cycle, a Member may override same day exemption entered by the
Member the previous evening. To do so, the Member should prepare a Delivery Order
(DO) and submit it to its Designated Depository in the normal manner. If the
Designated Depository is DTC, the receiving Member must be designated as 8902.

The securities designated to be delivered on the DO are applied to any quantity

covered by a Level 1 Exemption and the One Day Settling Exemption. If there is still a
remaining quantity, that quantity is not processed.

Allocation of ACATS Deliveries and Receives

After securities are received by the Corporation from Members with short ACATS
positions, they are allocated to other Members which have long ACATS positions. The
allocation of these securities is governed by an algorithm as formulated by the
Corporation from time to time as to not to benefit any one Member.

Transfers of securities from a Member’s account at the Member’s Designated

Depository to NSCC will be deemed by the Corporation to satisfy a Member’s ACATS
deliver obligation prior to any CNS-related obligation of the Member in the same

362
 (PROCEDURE XVIII)

security. This information shall be provided to the Member’s Designated Depository to

facilitate processing in accordance with the Designated Depository’s procedures.

Reporting

Final accounting reports in relation to the ACATS Settlement Accounting

Operation shall be made in conjunction with the CNS Accounting Summary provided for
under Procedure XVII. The inclusion of reporting of the accounting summary for the
ACATS Settlement Accounting Operation in conjunction with the CNS Accounting
Summary has no effect on the status of the reported ACATS transactions as non-
guaranteed.

363
 (ADDENDUM A)

ADDENDUM A

NATIONAL SECURITIES CLEARING CORPORATION

FEE STRUCTURE

I. TRADE COMPARISON AND RECORDING SERVICE FEES –

represents the fees to enter and correct original trade data.

A. Trade Comparison:

1. Each side of each bond trade submitted – $0.85 per side.

B. Trade Correction Fees: 1

1. Listed Equity System Correction Fees:

Suggested Name Deletes submitted to the Corporation directly by

participants on T+1 – $0.40 to both sides.

2. Bond Correction Fees:

All supplemental input after T (Advisory, As Of, Reversal): $0.95 to the

submitter

C. Trade recording fees will be charged as follows on those items originally

compared by other parties, but cleared through the Corporation 2:

1. Each side of each bond item entered for settlement, but not compared by
the Corporation – $0.85 per side.

2. Each side of a foreign security trade entered for settlement, but not
compared by the Corporation – $0.85 per side.

D. OBLIGATION WAREHOUSE

1. Warehouse Fee for each compared item $0.02

2. Matching Fee for each submission $0.85

3. Fee for each pending comparison advisory aged 5 days

or more $5.50

1 Trade Submission Fees (see I.A. above) will be charged in addition to the Trade Correction Fees
detailed in I.B. Trade Correction Fees will not be applied on OCS, IDC and ACT input.
2 Trade recording fees for equities are incorporated into the Clearance Activity Fee set forth in II.A.
below.

364
 (ADDENDUM A)

4. Fee to apply mandatory corporate action events to

compared obligations warehoused in Obligation Warehouse $2.50

5. Fee for OW delivery notification request advisories aged

2 days or older $2.50

6. Fee for OW pending cancel request advisories aged

2 days or older $2.50

7. Fee for each obligation closed due to Envelope Settlement

Service (ESS) (charged per obligation side) $0.35

E. Index Receipts

Index Creation and Redemption Units – each side of each Index Creation and
Redemption instruction submitted – $35 per side.

II. TRADE CLEARANCE FEES –

represents fees for trade recording, netting, issuance of instructions to receive or
deliver, effecting book-entry deliveries, and related activity.

A. Clearance Activity Fees –

1. Non-SFT – The sum of: (a) a “value into the net” fee of $0.47 per million
of processed value (i.e. for CNS and Balance Order netting, the sum of
the contract amount and any CNS fail value), plus (b) a “value out of the
net” fee of $2.56 per million of settling value (i.e. the absolute value of the
CNS Long and Short Positions).

2. SFT –

a. $1.00 per side of each new SFT submitted (excluding any Linked
SFT and Sponsored Member Transactions).

b. $0.14 per million of outstanding SFT notional balance.

B. Fails to Deliver to CNS (Short-In CNS) –

1. $0.25 per item short in CNS for 1 to 30 days at close of business.

2. $3.00 per item short in CNS for more than 30 days at close of business.

365
 (ADDENDUM A)

C. Security orders generated 3 – $0.40 per item.

D. CNS Buy-In (long Broker and short Broker) – $5.00 per item.

E. Clearing Interface Exemption or Inclusion Instruction to the Corporation –

$0.75 per item.

F. Reorganizations

1. Mandatory Reorganizations – $2.50 each

2. Voluntary Reorganizations –

a. Long Broker (per input submitted on $15.00 each

the Business Day prior to the protect
expiration date or, when there is no
protect period, the Business Day prior
to the expiration date)
Automated Input

b. Long Broker (per input or add $500.00 each

submitted on the protect expiration
date or, when there is no protect
period, on the expiration date)

c. Short Broker (per reorganization) $35.00 each

G. Dividends

CNS Stock Dividend, Cash Dividend, and Interest Payment (Long & Short) -
$1.85 per item

3 A security order, or non-CNS settling item, is an instruction to deliver or receive securities outside of
the CNS system. These instructions will be generated when cleared securities are not eligible for
CNS or when both parties to a transaction wish to settle in this manner. Security orders may be
issued on an item-by-item basis or netted through balance order procedures.

366
 (ADDENDUM A)

III. DELIVERY SERVICE FEES

A. Envelope Settlement Service:

ESS Deliveries or Receives 4 $10.00 per envelope

B. New York State Transfer Taxes $175.00 per month

IV. OTHER SERVICE FEES

A. Reorganizations $10.00 per item

B. Non-CNS Buy-ins $10.00 per item

C. Check and Draft processing $165.00 per month

D. Reconciliation and Proof of Settlement $100.00 per month

E. Processing Daily Settlement activity entered on Settlement Statement

$1.00 per item (minimum $25.00; maximum $250.00 per month)

F. Automated Customer Account Transfer Service

1. Account Transfers $0.50 per transfer initiation

2. Recording

Asset Receives $0.06 per asset which is

received by the receiving firm

3. Non-CNS Receive/Deliver Orders $0.12 per order issued

4 This fee applies to all ESS deliveries and receives (including intercity).

367
 (ADDENDUM A)

G. Mutual Fund Services

1. Fund/SERV®

a. Membership Fee: $50.00 per month

for each participating Member, Mutual
Fund/Insurance Services Member and
Fund Member regardless of activity level

b. Transaction Fee: $0.06 per side per order or

transfer request settling
through the Corporation

2. Networking7

a. Membership Fee: $200.00 per month

for each participating Member, Mutual
Fund/Insurance Services Member and
Fund Member regardless of activity level

b. Activity Fee (all types except for $0.001 per record

Networking Omnibus Activity Position
Files (Omni/SERV))

c. Networking Omnibus Activity/Position $1,500.00 monthly file fee

Files (Omni/SERV) for omnibus file
transmissions

368
 (ADDENDUM A)

3. DTCC Payment aXis7

a. Commission & Fee Settlement

(i) Membership Fee $50.00 per month

(ii) Transaction Fees

A. For the first 500,000 records $0.30 per hundred records,

submitted each month $50 minimum

B. For each record in excess of $0.20 per hundred records

500,000, but not
exceeding1,000,000
submitted each month

C. For each record in excess $0.10 per hundred records

of1,000,000 submitted each
month

b. Invoicing & Fee Settlement

(i) Membership Fee $500.00 per month

(ii) Transaction Fees (excluding Detail

Records):

A. For the first 500,000 $0.10 per record

records submitted each
month

B. For each record in excess $0.08 per record

of 500,000, but not
exceeding1,000,000
submitted each month

C. For each record in excess $0.06 per record

of 1,000,000 submitted
each month

369
 (ADDENDUM A)

(iii) Detail Record Fees

A. For the first 500,000 $0.30 per hundred records

records submitted each
month
$0.20 per hundred records
B. For each record in excess
of 500,000, but not
exceeding 1,000,000
submitted each month
$0.10 per hundred records
C. For each record in excess
of 1,000,000 submitted
each month

4. Profile

a. Phase I (price and rate) only $325.00 per month

b. Phases I and II $1,250.00 per month 5

5. MF Info Xchange

a. Tier 1 – Fund Members with greater than $1,500.00 per month

25 Security Issue IDs on Fund/SERV
and all users other than Fund Members

b. Tier 2 – Fund Members with 25 or fewer $250.00 per month

Security Issue IDs on Fund/SERV

5 Users of Profile II with 25 or fewer funds in their family will receive a $1,000.00 credit per month
against the base $1,250.00 per month fee. Thus, the net fee for fund families which meet this
criterion will be $250.00 per month.

370
 (ADDENDUM A)

H. Insurance & Retirement Services 6, 7

1. Membership Fee $250.00 per month (will be

waived if aggregate
Transaction and Other
Service Fees in such month
equal or exceed $250.00)

2. Transaction Fees

a. Positions (Full, New and Retirement

(i) Plans)

• From 0 to 500,000 items/month $6.00 per 1,000 items

• From 500,001 to 2,000,000 items/month $3.50 per 1,000 items

• From 2,000,001 to 4,000,000 $3.00 per 1,000 items

items/month

• For 4,000,001 or more items/month $1.25 per 1,000 items

6 Unless otherwise noted, all Insurance & Retirement Services transaction fees are per side, and both
sides are charged for each item. Volume is calculated on an aggregate basis among qualified carrier
members or qualified distributor members, as applicable.

Multiple destination fees apply. Participants directing NSCC to deliver Insurance & Retirement
Service files to more than two (2) destinations will be charged an additional monthly fee, per product,
as follows: (i) Participants directing NSCC to deliver Insurance & Retirement Service files to three (3),
four (4) or five (5) destinations will be charged an additional $50 per month, per product; and
(ii) Participants directing NSCC to deliver Insurance & Retirement Service files to more than five (5)
destinations will be charged an additional $100 per month, per product.
7 Extraordinary Event Pricing: if arranged in advance with NSCC, a Participant may qualify for a credit
on transaction fees incurred due to extraordinary events such as mergers or mass reconciliations that
generate unusually high transaction volume for a limited duration. With respect to transaction types
for which the participant has no history of prior usage, the credit is in the amount of 85% of the
transaction fees chargeable in respect of the transaction type, with an additional credit in the amount
of 5% if the participant continues use of the transaction type after the event. With respect to
transaction types for which the participant has a history of prior usage, the credit is in an amount
sufficient to produce an aggregate fee for the transaction type that is no more than 120% of the
average amount charged to the participant in respect of such transactions in the prior three months.

371
 (ADDENDUM A)

(ii) Positions (Focused)

• From 0 to 500,000 items/month $3.00 per 1,000 items

• From 500,001 to 2,000,000 items/month $1.50 per 1,000 items

• From 2,000,001 to 4,000,000 $1.00 per 1,000 items

items/month

• For 4,000,001 or more items/month $0.50 per 1,000 items

b. Asset Pricing

• From 0 to 49,999 items/month $0.75 per 1,000 items

• From 50,000 to 249,999 items/month $0.65 per 1,000 items

• From 250,000 to 999,999 items/month $0.55 per 1,000 items

• More than 999,999 items/month $0.45 per 1,000 items

c. Commissions

• From 0 to 999 items/month $40.00 per 1,000 items

• From 1,000 to 9,999 items/month $35.00 per 1,000 items

• From 10,000 to 29,999 items/month $30.00 per 1,000 items

• More than 29,999 items/month $25.00 per 1,000 items

d. Initial Application Information (APP) 8

• From 0 to 1,999 items/month $1.50 per item

• From 2,000 to 3,499 items/month $1.00 per item

• More than 3,499 items/month $0.50 per item

e. Subsequent Activity (SUB) $0.50 per item

8 Each initial application with a new business attachment will be subject to a $0.25 discount.

372
 (ADDENDUM A)

f. Financial Activity Report (FAR) $0.05 per zero to 100,000

items

$0.04 per 100,001 to

150,000 items

$0.03 per 150,001 to

200,000 items

$0.02 per 200,001 or greater

items

Subaccount Data access (for each $2,500.00 per month

participating asset manager)

g. Settlement Processing for Insurance

• 0 to 20,000 items/month $0.65 (per transaction / per

side)

• 20,001 to 30,000 items/month $0.35 (per transaction / per

side)

• 30,001 to 40,000 items/month $0.25 (per transaction / per

side)

• More than 40,000 items/month $0.15 (per transaction / per

side)

373
 (ADDENDUM A)

h. Producer Management Portal

1. Distributor Batch Service Fees $6,000 per month

2. Distributor Subscription Fee $1.25 per inquiry, $6,000

maximum per month

3. For Insurance Company providers of producer training completions

Number of Active
Band Producers Managed Monthly Fee
1 0-999 $0
2 1,000-9,999 $1,000
3 10,000-49,999 $3,000
4 50,000-99,999 $4,000
5 100,000-249,999 $5,000
6 250,000 + $5,000, plus $0.018 per active produc
managed

i. Insurance Information Exchange (IIEX)

Policy Data

IIEX Fees for Members and Limited Members

Monthly subscription fee based on the number of policies that the

Member, Mutual Fund/Insurance Services Member, Insurance
Carrier/Retirement Services Member or Data Services Only
Member, as applicable, would be entitled to access from the IIEX
data repository as follows:

Number of Policies Monthly Fee

0 – 50,000 $1,500

50,001 – 200,000 $2,000

200,001 – 400,000 $3,000

Greater than 400,000 $5,000

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 (ADDENDUM A)

Product Data

(1) Insurance Carrier/Retirement Services Members

Subscription Monthly Fee

Full Data Subscription $3,000

Limited Data Subscription $1,500

(2) Members, Mutual Fund/Insurance Services Members,

Data Services Only Members and Service Providers

Subscription Monthly Fee

Full Data Subscription $3,000

Limited Data Subscription $1,500

Full Data Subscription $500, plus $1.25

(User Web Interface Only) per CUSIP download
transaction charge

Limited Data Subscription $250, plus $1.25

(User Web Interface Only) per CUSIP download
transaction charge

3. Other Service Fees

TIER FEE PRODUCT/SERVICE

TIER 1 $0.05 All Attachments (per attachment, per side)-

TIER 2 $0.15 Licensing and Appointments (L&A) Periodic

Reconciliation (per item)

375
 (ADDENDUM A)

TIER FEE PRODUCT/SERVICE

TIER 3 $0.35 Licensing and Appointments (L&A)

Transaction (per item)

Registered Representative Change Confirm

(per transaction, per side)

Registered Representative Change

Request (per transaction, per side)

Brokerage Identification Number Change

Request (per transaction, per side)

Brokerage Identification Number Change

Confirm (per transaction, per side)

Values Inquiry (per inquiry, per side)*

Policy Administration inquiry (per inquiry, per

side)*

TIER 4 $0.65 Customer Account Transfer Output (per

transaction, charged to Insurance
Carrier/Retirement Services Member only)

Customer Account Transfer Confirm (per

transaction, per side)

Time Expired Transaction (per transaction,

per side)

Producer Management Portal (per inquiry)

Policy Administration Request (per request,

per side)*

Death Notification Request (per request, per

side)*

Fund Transfer (per request, per side)*

Withdrawals (per request, per side)*

Arrangements (per request, per side)*

376
 (ADDENDUM A)

* For the transactions identified above with an asterisk (*) (“IFT Transactions”), entities must pay a minimum
monthly fee based on the chosen threshold level as set forth in the *IN FORCE TRANSACTIONS CHART
below. For a participant that has chosen Level 2, Level 3 or Level 4 for a month, when the transaction fees
for such month for IFT Transactions exceed the minimum monthly fee for such threshold level, the
transaction fees above the minimum monthly fee amount will be discounted at the rate specified for such
threshold level as reflected in the *IN FORCE TRANSACTIONS CHART below.

*IN FORCE TRANSACTIONS CHART

DISCOUNT FOR
MINIMUM TRANSACTIONS AFTER
THRESHOLD LEVEL
MONTHLY FEE FEES EXCEED MINIMUM
MONTHLY FEE AMOUNT
No Discount
Level 1 $250 (pay base price of $0.65/$0.35
for Requests/Inquiries)
Level 2 $500 5%

Level 3 $1,000 10%

Level 4 $3,000 20%

I. (RESERVED FOR FUTURE USE)

J. (RESERVED FOR FUTURE USE)

K. Account Information Transmission Service $200.00 per month

for each Member participating in the service

L. Alternative Investment Products

1. Higher Volume 9 Eligible AIP Product Fees

a. Records

(i) The first 2,999,999 records $0.10 per record

per calendar year

(ii) The next 1,000,000 records $0.09 per record

per calendar year 10

9 Higher volume Eligible AIP Products are identified in subsection 3.

10 i.e., the 3,000,000th to 3,999,999th records submitted in a calendar year.

377
 (ADDENDUM A)

(iii) The next 1,000,000 records $0.08 per record

per calendar year 11

(iv) All additional records 12 $0.07 per record

b. Trades (other than capital calls)

(i) The first 10,000 trades per $5.00 per trade

calendar year

(ii) The next 10,000 trades per $4.75 per trade

calendar year13

(iii) The next 10,000 trades per $4.50 per trade

calendar year14

(iv) All additional trades15 $4.00 per trade

c. Capital calls $2.00 per trade

d. Transfers $0.50 per transfer

2. Lower Volume 16 Eligible AIP Product Fees

a. Records

(i) AIP Manufacturers $2.00 per record

(ii) AIP Distributors $1.00 per record

b. Trades (other than capital calls) $10.00 per trade

c. Capital calls $2.00 per trade

d. Transfers $2.00 per transfer

11 i.e., the 4,000,000th to 4,999,999th records submitted in a calendar year.

12 i.e., the 5,000,000th and higher records submitted in a calendar year.
13 i.e., the 10,001st to 20,000th trades submitted in a calendar year.
14 i.e., the 20,001st to 30,000th trades submitted in a calendar year.
15 i.e., the 30,001st and higher trades submitted in a calendar year.
16 Lower volume Eligible AIP Products are identified in subsection 3.

378
 (ADDENDUM A)

3.
HIGHER LOWER
Eligible AIP Product
VOLUME VOLUME
Hedge Fund √
Fund of Funds √
Private Equity Fund √
Managed Debt Fund √
Private Debt Fund √
Managed Currency Fund √
Commodity Pool Fund √
REIT √
Managed Future Fund √
Business Development Corporation (BDC) √
Registered Hedge Fund 17 √
Oil & Gas Public √
Oil & Gas Private √
Equipment Leasing Public √
Equipment Leasing Private √
Futures Public √
Futures Private √
Notes Public √
Notes Private √
Real Estate Public √
Real Estate Private √
Closed End Management Investment Company √
All Other √

4. Document Transfers $1.00 per item, per side

17 For purposes of the Alternative Investment Products fee structure, “Registered Hedge Fund” shall
mean hedge funds that are registered under the Investment Company Act of 1940, as amended.

379
 (ADDENDUM A)

V. PASS-THROUGH AND OTHER FEES

A. Participant Fees - represents the monthly fee for each number assigned to a
Member or Municipal Comparison Only Member for participation by each
Member or Municipal Comparison Only Member under such number in one or
more of the specified services provided by the Corporation. The services and
their related base fees are:

1. Trade Processing System

For Members $300.00 per month, per account

B. Special Service Fees:

1. Output Fees

a. Machine Readable Output $10.00 per tape

b. Service Bureau Tapes $2.50 per tape

c. Magnetic Tape not returned $20.00 per tape

d. Printed Output Reports:

For Members with less than No charge

20,000 lines per month

For Members with 20,000 or $4.00 per each 1000 lines

more lines per month

2. Microfiche Reports $3.00 per fiche

3. Special Research $25.00 per hour

4. Domestic Portfolio Composition File $125.00 per month per file

5. Foreign Portfolio Composition File $125.00 per month per file

380
 (ADDENDUM A)

6. Subscription-based Portfolio $4.00 per unit per month for the

Composition File Reporting first zero to 200 average daily
units 18

$3.00 per unit per month for the

next 300 average daily units
(201st to 500th units)

$2.00 per unit per month for all

average daily units above 500
(501st and above)

$800 minimum; $1,800 maximum

per month

C. Pass-Through Expenses:

1. Communications

a. Communications Access Cost

b. Telephone toll calls Cost

c. Failure to migrate from Cost 19

legacy networks to SMART
and/or SFTI

2. Forms Cost

3. Miscellaneous Expenses: Cost

Any other expense not specified
above, whether one-time or
recurring, which the Corporation may
incur on behalf of a Member at a
Member’s request

18 “Units” refers to the number of portfolio subscriptions for each billing month.
Unit charges are calculated by applying the tiered fee structure to the average daily number of units
subscribed for by the Member in the billing month.
19 The entire cost of supporting the legacy network connections will be allocated among the remaining
users pro rata.

381
 (ADDENDUM A)

D. (1) Each item submitted in paper form $.50 per item

(except Envelope Settlement
Service, Funds Only Settlement
Service, Dividend Settlement
Service, Correspondent Delivery and
Collection Service, and Automated
Customer Account Transfer Service
Transfer Initiation Form)

(2) Each ACAT Transfer Initiation Form $1.00 per item

submitted in paper form

E. Line of Credit Commitment Fee Current month’s cost -- pro rata

monthly among Letter of Credit
users based upon previous
month’s utilization

F. Clearing Fund Maintenance Fee A monthly fee calculated, in

arrears, as the product of
(A) 0.25% and (B) the average
of each Member’s (or Limited
Member’s, if applicable) cash
deposit balance in the Clearing
Fund, as of the end of each day,
for the month, multiplied by the
number of days for that month
and divided by 360.

VI. COLLECTION CHARGE

The Corporation may also bill Members and Mutual Fund/Insurance Services
Members for, and include on Members’ and Mutual Fund/Insurance Services Members’
(referred to in this section collectively as “participants”) settlement statements, fees and
charges which may be imposed on such participants by third parties such as: (a) other
subsidiaries of The Depository Trust & Clearing Corporation (b) self-regulatory
organizations and other security industry organizations or entities, where such third
party has represented to the Corporation that it has an agreement with the participant
allowing the participant’s payment of such fees and charges; and (c) other
organizations and entities which provide services or equipment to participants which are
integral to services provided by the Corporation. Any amounts so collected will be
remitted to the appropriate organization or entity imposing such fee or charge.

Such fees and charges may include those of companies that identify themselves
as being an affiliate of the participant. Participants should check their settlement
statements, which shall reflect all such charges, and report any problems to the
Corporation immediately.

382
 (ADDENDUM A)

VII. APPLICATION OF FEES

With the exception of certain Registered Clearing Agencies, all fees will be
charged uniformly to all participants and collected through the settlement system if
possible. Fees for other standard services provided to Registered Clearing Agencies
will be the same as those charged to other participants. Special services performed for
Registered Clearing Agencies will be contracted on an individual basis.

VIII. NSCC REBATE POLICY

The Corporation may, in its discretion, provide Members with a rebate of its
excess net income, where “excess net income” shall mean either income of the
Corporation or income related to one business line of the Corporation, after application
of expenses, capitalization costs, and applicable regulatory requirements.

All rebates shall be approved by the Board of Directors. In determining whether

a rebate is appropriate, the Board of Directors would consider one or more of the
following, as appropriate: the Corporation’s regulatory capital requirements, anticipated
expenses, investment needs, anticipated future expenses with respect to improvement
or maintenance of the Corporation’s operations, cash balances, financial projections,
and appropriate level of shareholders’ equity.

In the event the Board of Directors determines a rebate is appropriate, it shall

determine a rebate period and a rebate payment date. Members maintaining
membership during all or a portion of the applicable rebate period and on the rebate
payment date shall be eligible for the rebate.

Rebates shall be applied to all eligible Members on a pro-rata basis based on

such Members’ gross fees paid to the Corporation within the applicable rebate period,
excluding pass-through fees and interest earned on Required Fund Deposits. Rebates
shall be applied to eligible Members’ invoices on the rebate payment date as either a
reduction in fees owed or, if fees owed are lower than the allocated rebate amount, a
payment of such difference. Rebate amounts may be adjusted for miscellaneous
charges and discounts.

IX. SPONSORING MEMBERS

A Sponsoring Member shall be liable for fees and charges arising from
Sponsored Member Transactions, the data on which it, or its Sponsored Member(s),
has submitted to the Corporation.

383
 (ADDENDUM B)

ADDENDUM B

QUALIFICATIONS AND STANDARDS OF FINANCIAL RESPONSIBILITY,

OPERATIONAL CAPABILITY AND BUSINESS HISTORY

[Changes to this Addendum, as amended by File No. SR-NSCC-2021-016, are

available at [Link] These changes have been
approved by the SEC but have not yet been implemented. On August 26, 2023,
these changes will be implemented and this legend will automatically be removed
from this Rule.]

MEMBERS (Section 1);

MUTUAL FUND/INSURANCE SERVICES MEMBERS (Section 2);

FUND MEMBERS (Section 3);

INSURANCE CARRIER/RETIREMENT SERVICES MEMBERS (Section 4);

MUNICIPAL COMPARISON ONLY MEMBERS (Section 5);

DATA SERVICES ONLY MEMBERS (Section 6);

SETTLING BANK ONLY MEMBERS (Section 7);

THIRD PARTY ADMINISTRATOR MEMBERS (Section 8);

INVESTMENT MANAGER/AGENT MEMBERS (Section 9);

AIP MEMBERS (Section 10); and

THIRD PARTY PROVIDER MEMBERS (Section 11)

SPONSORED MEMBERS (Section 12)

Each applicant for membership in the Corporation shall meet the qualifications,
financial responsibility, operational capability and business history as applicable to its
membership type.

An applicant must demonstrate (i) that it has sufficient financial ability to meet all
of its anticipated obligations to the Corporation and, (ii) if applicable to its membership
type, that it has sufficient financial ability to make anticipated contributions to the
Clearing Fund.

In addition to the above, the applicant must satisfy the following requirements:

384
 (ADDENDUM B)

SEC. 1. MEMBERS

A. Qualification

To qualify for membership, a Member shall be:

(i) a Registered Broker-Dealer; or

(ii) a bank or trust company, including a trust company having limited

power, which is a member of the Federal Reserve System or is
supervised and examined by state or federal authorities having
supervision over banks; or

(iii) a Registered Clearing Agency; or

(iv) an Insurance Company or an Insurance Entity; or

(v) an investment company registered under Section 8 of the

Investment Company Act of 1940, as amended; or

(vi) if it does not qualify under paragraphs (i) through (v) above, an
entity that has demonstrated to the Board of Directors that its
business and capabilities are such that it could reasonably expect
material benefit from direct access to the Corporation’s services.

B. Financial Responsibility

The applicant shall satisfy the following minimum financial requirements:

1. Registered Broker-Dealers:

have excess net capital over the minimum net capital requirement
imposed by the SEC or such higher minimum capital requirement imposed
by the brokers/ dealer’s designated examining authority in the amount of
(i) $500,000, or (ii) $100,000, if such applicant is a Municipal Securities
Brokers’ Brokers (as defined in Rule 15c3-1(a)(8) of the Exchange Act) or
(iii) $1,000,000 if such applicant clears for other broker/dealers; and

Members that are Municipal Securities Brokers’ Broker sponsored account

applicants shall be in compliance with Rule 15c3-1(a)(8) of the Exchange
Act.

385
 (ADDENDUM B)

2. Bank or trust companies:

(a) Banks:

(i) have at least $50 million in equity capital; 1 or

(ii) have furnished to the Corporation a guarantee 2 of its

parent bank holding company respecting the payment of any
and all obligations of the bank applicant, and such parent
bank holding company shall have total consolidated capital
of at least $50 million; or

(b) Trust Companies:

in the case of a trust company that is not a bank, but is a member

of the Federal Reserve System or is an institution insured under the
Federal Deposit Insurance Act, have consolidated capital of at least
$10 million and that is adequate in the judgment of the Corporation
to the scope and character of the business conducted by such trust
company.

3. Others:

be required to satisfy such minimum standards of financial responsibility

as determined by the Corporation.

C. Operational Capability 3

An applicant shall be qualified for membership if it is able to satisfactorily

communicate with the Corporation and fulfill anticipated commitments to and meet the
operational requirements of the Corporation with necessary promptness and accuracy
and to conform to any condition and requirement that the Corporation reasonably
deems necessary for its protection.

1 For the purpose of the membership standards and surveillance status rules applicable to banks,”
equity capital” is defined as defined on the Consolidated Report of Condition and Income (“Call
Report”).
2 See also Rule 2B, Section 4 (Ongoing Monitoring).
3 An applicant must have the operational capability for membership or have an agreement, concerning
the provision of operational support services to such applicant, with an entity acceptable to the
Corporation and which may not be replaced without prior approval by the Corporation.

386
 (ADDENDUM B)

D. Business History

An applicant must have an established business history of a minimum of six

months or personnel with sufficient operational background and experience to ensure
the ability of the firm to conduct such a business.

SEC. 2. MUTUAL FUND/INSURANCE SERVICES MEMBERS

A. Qualification

To qualify for membership, a Mutual Fund/Insurance Services Member shall be:

(i) a Registered Broker-Dealer; or

(ii) a bank or trust company, including a trust company having limited

power, which is a member of the Federal Reserve System or is
supervised and examined by state or federal authorities having
supervision over banks; or

(iii) a Registered Clearing Agency; or

(iv) an Insurance Company or an Insurance Entity; or

(v) an investment company registered under Section 8 of the

Investment Company Act of 1940, as amended; or

(vi) if it does not qualify under paragraphs (i) through (v) above, an
entity that has demonstrated to the Board of Directors that its
business and capabilities are such that it could reasonably expect
material benefit from direct access to the Corporation’s services.

B. Financial Responsibility

The applicant shall satisfy the following minimum financial requirements:

1. Registered Broker-Dealers:

have $50,000 in excess net capital over the minimum net capital
requirement imposed by the SEC or such higher minimum capital
requirement imposed by the broker-dealer’s designated examining
authority.

2. Banks and trust companies:

have a Tier 1 Risk Based Capital (“RBC”) ratio of 6% or greater or, with
respect to trust companies which do not calculate a Tier 1 RBC ratio, have
at least $2 million in equity capital.

387
 (ADDENDUM B)

3. Insurance Companies:

have a Risk Based Capital (“RBC”) Ratio, as derived from annual statutory
financial statements filed by it with its supervisory or regulatory entity (or,
between filings of such annual statutory financial statements, an RBC
Ratio derived in a similar manner from then-current financial data), of
250% or greater.

4. Others shall:

be required to satisfy such minimum standards of financial responsibility

as determined by the Corporation.

C. Operational Capability 4

An applicant shall be qualified for membership if it is able to satisfactorily

communicate with the Corporation and fulfill anticipated commitments to and meet the
operational requirements of the Corporation with necessary promptness and accuracy
and to conform to any condition and requirement that the Corporation reasonably
deems necessary for its protection.

D. Business History

An applicant must have an established business history of a minimum of six

months or personnel with sufficient operational background and experience to ensure
the ability of the firm to conduct such a business.

SEC. 3. FUND MEMBERS

A. Qualification

To qualify for membership, a Fund Member shall be:

(i) a principal underwriter as defined in Section 2(a)(29) of the

Investment Company Act of 1940, as amended, or a co-distributor,
sub-distributor, or is otherwise authorized to process transactions
through the Corporation’s Mutual Fund Services, and is a
Registered Broker-Dealer; or

(ii) an investment company registered under Section 8 of the

Investment Company Act of 1940, as amended; or

4 An applicant must have the operational capability for membership or have an agreement, concerning
the provision of operational support services to such applicant, with an entity acceptable to the
Corporation and which may not be replaced without prior approval by the Corporation.

388
 (ADDENDUM B)

(iii) an investment adviser as defined in Section 202(a)(11) of the

Investment Advisers Act of 1940, as amended; or

(iv) an Insurance Company; or

(v) a bank or trust company, including a trust company having limited

power, which is a member of the Federal Reserve System or is
supervised and examined by state or federal authorities having
supervision over banks; or

(vi) if it does not qualify under paragraphs (i) through (v) above, it is an
entity that has demonstrated to the Board of Directors that its
business and capabilities are such that it could reasonably expect
material benefit from direct access to the Corporation’s services.

B. Financial Responsibility

The applicant shall satisfy the following minimum financial requirements:

1. Registered Broker-Dealers:

have $50,000 in excess net capital over the minimum net capital
requirement imposed by the SEC or such higher requirement imposed by
the broker-dealer’s designated examining authority.

2. Banks or trust companies:

have a Tier 1 Risk Based Capital (“RBC”) ratio of 6% or greater or, with
respect to trust companies that do not calculate a Tier 1 RBC ratio, have
at least $2 million in equity capital.

3. Investment Companies:

have a minimum of $100,000 in assets under management.

4. Investment Advisers:

have a minimum of $25,000,000 in assets under management and

$100,000 in total Net Worth.

5. Insurance Companies:

have a Risk Based Capital Ratio (“RBC”), as derived from annual statutory
financial statements filed by it with its supervisory or regulatory entity (or,
between filings of such annual statutory financial statements, an RBC
Ratio derived in a similar manner from then-current financial data), of
250% or greater.

389
 (ADDENDUM B)

6. Others shall:

be required to satisfy such minimum standards of financial responsibility

as determined by the Corporation.

C. Operational Capability 5

An applicant shall be qualified for membership if it is able to satisfactorily

communicate with the Corporation and fulfill anticipated commitments to and meet the
operational requirements of the Corporation with necessary promptness and accuracy
and to conform to any condition and requirement that the Corporation reasonably
deems necessary for its protection.

D. Business History

An applicant must have an established business history of a minimum of six

months or personnel with sufficient operational background and experience to ensure
the ability of the firm to conduct such a business.

E. Other Considerations:

In addition to the above, the following shall apply:

Fund Members –

(i) if an Insurance Company, be in good standing in those states in

which it is licensed as an insurance company and in its state of
organization.

SEC. 4. INSURANCE CARRIER/RETIREMENT SERVICES MEMBERS

A. Qualification

To qualify for membership, an Insurance Carrier/Retirement Services Member

shall be:

(i) an Insurance Company.

B. Financial Responsibility

The applicant shall satisfy the following minimum financial requirements:

have a Risk Based Capital Ratio (“RBC”), as derived from annual statutory
financial statements filed by it with its supervisory or regulatory entity (or,

5 An applicant must have the operational capability for membership or have an agreement, concerning
the provision of operational support services to such applicant, with an entity acceptable to the
Corporation and which may not be replaced without prior approval by the Corporation.

390
 (ADDENDUM B)

between filings of such annual statutory financial statements, an RBC Ratio

derived in a similar manner from then-current financial data), of 250% or greater.

C. Operational Capability 6

An applicant shall be qualified for membership if it is able to satisfactorily

communicate with the Corporation and fulfill anticipated commitments to and meet the
operational requirements of the Corporation with necessary promptness and accuracy
and to conform to any condition and requirement that the Corporation reasonably
deems necessary for its protection.

D. Business History

An applicant to become an Insurance Carrier/Retirement Services Member must

have an established business history of a minimum of six months or personnel with
sufficient operational background and experience to ensure the ability of the firm to
conduct such a business.

E. Other Considerations:

In addition to the above, the following shall apply:

Insurance Carrier/Retirement Services Members –

shall be in good standing in those states in which it is licensed as an

insurance carrier and in its state of organization.

SEC. 5. MUNICIPAL COMPARISON ONLY MEMBERS

A. Qualification

To qualify for membership, a Municipal Comparison Only Member shall be:

(i) a Registered Broker-Dealer; or

(ii) a bank or trust company, including a trust company having limited

power, which is a member of the Federal Reserve System or is
supervised and examined by state or federal authorities having
supervision over banks; or

(iii) a Registered Clearing Agency; or

(iv) an Insurance Company or an Insurance Entity; or

6 An applicant must have the operational capability for membership or have an agreement, concerning
the provision of operational support services to such applicant, with an entity acceptable to the
Corporation and which may not be replaced without prior approval by the Corporation.

391
 (ADDENDUM B)

(v) an investment company registered under Section 8 of the

Investment Company Act of 1940, as amended; or

(vi) if it does not qualify under paragraphs (i) through (v) above, an
entity that has demonstrated to the Board of Directors that its
business and capabilities are such that it could reasonably expect
material benefit from direct access to the Corporation’s services.

B. Financial Responsibility

The Corporation shall approve an application to become a Municipal Comparison

Only Member only upon a determination by the Corporation that the applicant meets the
standards of financial responsibility as the Corporation may promulgate.

SEC. 6. DATA SERVICES ONLY MEMBERS

A. Qualification

To qualify for membership, a Data Services Only Member shall be:

(i) a Registered Broker-Dealer; or

(ii) a bank or trust company, including a trust company having limited

power, which is a member of the Federal Reserve System or is
supervised and examined by state or federal authorities having
supervision over banks; or

(iii) a Registered Clearing Agency; or

(iv) an Insurance Company or an Insurance Entity; or

(v) an investment company registered under Section 8 of the

Investment Company Act of 1940, as amended; or

(vi) a principal underwriter as defined in Section 2(a)(29) of the

Investment Company Act of 1940, as amended, or a co-distributor,
sub-distributor, or is otherwise authorized to process mutual fund
transactions; or

(vii) an investment adviser as defined in Section 202(a)(11) of the

Investment Advisers Act of 1940, as amended; or

(viii) an organization or entity that acts as a third-party administrator on

behalf of a retirement or other benefit plan; or

(ix) an investment manager to a managed account or similar program

or agent acting on behalf of such an investment manager; or

392
 (ADDENDUM B)

(x) an organization or entity that acts as a routing platform that

manages transactions on behalf of its customers; or

(xi) if it does not qualify under paragraphs (i) through (x) above, an
entity that has demonstrated to the Board of Directors that its
business and capabilities are such that it could reasonably expect
material benefit from direct access to the Corporation’s services.

B. Financial Responsibility

The Corporation shall approve an application to become a Data Services Only

Member only upon a determination by the Corporation that the applicant meets the
standards of financial responsibility as the Corporation may promulgate.

SEC. 7. SETTLING BANK ONLY MEMBERS

A. Qualification

To qualify for membership, a Settling Bank Only Member shall be a bank or trust
company, including a trust company having limited power, which is a member of the
Federal Reserve System or has direct access to the Federal Reserve System.

B. Financial Responsibility

The Corporation shall approve an application to become a Settling Bank Only

Member only upon a determination by the Corporation that the applicant meets the
standards of financial responsibility as the Corporation may promulgate.

C. Operational Capability

The Corporation shall approve an application to become a Settling Bank Only

Member only upon a determination by the Corporation that the applicant meets the
standards of operational capability as the Corporation may promulgate.

SEC. 8. THIRD PARTY ADMINISTRATOR MEMBERS

A. Qualification

To qualify for membership, a Third Party Administrator Member shall be an entity

that demonstrates 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.

393
 (ADDENDUM B)

B. Operational Capability 7

An applicant shall be qualified for membership if it is able to satisfactorily

communicate with the Corporation and fulfill anticipated commitments to and meet the
operational requirements of the Corporation with necessary promptness and accuracy
and to conform to any condition and requirement that the Corporation reasonably
deems necessary for its protection.

C. Business History

An applicant must have an established business history of a minimum of six

months or personnel with sufficient operational background and experience to ensure
the ability of the firm to conduct such a business.

SEC. 9. INVESTMENT MANAGER/AGENT MEMBERS

A. Qualification

To qualify for membership, an Investment Manager/Agent Member shall be an

entity that is or acts on behalf of one or more Investment Managers to a managed
account or similar program.

B. Operational Capability8

An applicant shall be qualified for membership if it is able to satisfactorily

communicate with the Corporation and fulfill anticipated commitments to and meet the
operational requirements of the Corporation with necessary promptness and accuracy
and to conform to any condition and requirement that the Corporation reasonably
deems necessary for its protection.

C. Business History

An applicant must have an established business history of a minimum of six months or

personnel with sufficient operational background and experience to ensure the ability of
the firm to conduct such a business.

7 An applicant must have the operational capability for membership or have an agreement, concerning
the provision of operational support services to such applicant, with an entity acceptable to the
Corporation and which may not be replaced without prior approval by the Corporation.
8 An applicant must have the operational capability for membership or have an agreement, concerning
the provision of operational support services to such applicant, with an entity acceptable to the
Corporation and which may not be replaced without prior approval by the Corporation.

394
 (ADDENDUM B)

SEC. 10. AIP MEMBERS

A. Qualification

To qualify for membership, an AIP Member shall be:

(i) a Registered Broker-Dealer;

(ii) a broker/dealer organized or established under the laws of a

country other than the United States that is subject to the oversight of, and
regulated by, the appropriate financial services regulator in its home jurisdiction;

(iii) a bank or trust company, including a trust company having limited

power, which is a member of the Federal Reserve System or is supervised and
examined by State or Federal authorities having supervision over banks;

(iv) a bank organized or established under the laws of a country other

than the United States that is subject to the oversight of, and regulated by, the
appropriate financial services regulator in its home jurisdiction;

(v) an investment company registered under section 8 of the

Investment Company Act of 1940, as amended;

(vi) an issuer (structured as a fund or other pooled investment vehicle)

that is exempt from the definition of investment company under the Investment
Company Act of 1940, as amended;

(vii) an investment adviser as defined under the Investment Advisers

Act of 1940, as amended (“Advisers Act”), regardless of whether such investment
adviser is registered pursuant to the Advisers Act or is exempt from registration
thereunder;

(viii) a commodity pool operator or a commodity trading advisor as

defined in the Commodity Exchange Act, as amended, regardless of whether
such commodity pool operator or commodity trading advisor is registered
pursuant to Commodity Exchange Act or is exempt from registration thereunder;

(ix) an Insurance Company;

(x) an insurance company organized or established under the laws of a

country other than the United States that is subject to the oversight of, and
regulated by, the appropriate insurance regulator in its home jurisdiction; or

(xi) with respect to an AIP Manufacturer (as defined in Rule 53), an

entity engaged under contract to provide administrative services with respect to
one or more Eligible AIP Products (as defined in Rule 53), including but not
limited to, fund administrators.

395
 (ADDENDUM B)

B. Operational Capability 9

An applicant shall be qualified for membership if it is able to satisfactorily

communicate with the Corporation and fulfill anticipated commitments to and meet the
operational requirements of the Corporation with necessary promptness and accuracy
and to conform to any condition and requirement that the Corporation reasonably
deems necessary for its protection.

C. Business History

An applicant must have an established business history of a minimum of six

months or personnel with sufficient operational background and experience to ensure
the ability of the firm to conduct such a business.

SEC. 11. THIRD PARTY PROVIDER MEMBERS

A. Qualification

To qualify for membership, a Third Party Provider Member shall demonstrate 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. Operational Capability7

An applicant shall be qualified for membership if it is able to satisfactorily

communicate with the Corporation and fulfill anticipated commitments to and meet the
operational requirements of the Corporation with necessary promptness and accuracy
and to conform to any condition and requirement that the Corporation reasonably
deems necessary for its protection.

C. Business History

An applicant must have an established business history of a minimum of six

months or personnel with sufficient operational background and experience to ensure
the ability of the firm to conduct such a business.

9 An applicant must have the operational capability for membership or have an agreement, concerning
the provision of operational support services to such applicant, with an entity acceptable to the
Corporation and which may not be replaced without prior approval by the Corporation.
7 An applicant must have the operational capability for membership or have an agreement, concerning
the provision of operational support services to such applicant, with an entity acceptable to the
Corporation and which may not be replaced without prior approval by the Corporation.

396
 (ADDENDUM B)

SEC. 12. SPONSORED MEMBERS

A. Qualification

To qualify for membership, a Sponsored Member (x) shall be sponsored into

membership by a Sponsoring Member and (y)(1) is a “qualified institutional buyer” as
defined by Rule 144A under the Securities Act of 1933, as amended, or (2) 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.

B. Operational Capability 1

An applicant shall be qualified for membership if it is able to satisfactorily

communicate with the Corporation and fulfill anticipated commitments to and meet the
operational requirements of the Corporation with necessary promptness and accuracy
and to conform to any condition and requirement that the Corporation reasonably
deems necessary for its protection.

1 An applicant must have the operational capability for membership or have arrangement, concerning
the provision of operational support services to such applicant, with an entity acceptable to the
Corporation and which may not be replaced without prior approval by the Corporation.

397
 (ADDENDUM C)

ADDENDUM C

(ADDENDUM LETTER RESERVED FOR FUTURE USE)

398
 (ADDENDUM D)

ADDENDUM D

STATEMENT OF POLICY
ENVELOPE SETTLEMENT SERVICE, MUTUAL FUND SERVICES, INSURANCE &
RETIREMENT SERVICES AND OTHER SERVICES OFFERED BY THE
CORPORATION

As authorized by Rule 9, the Corporation provides at its facilities (at locations as

it determines from time to time) an Envelope Settlement Service (“ESS”) for the delivery
and receipt between Members of envelopes containing securities, money- only
settlement items and dividend and interest settlement items. As provided in Rule 9,
ESS is not a guaranteed service of the Corporation and the Corporation does not and
will not stand behind any credit of any payment amount appearing on any credit list
attached to any envelope delivered by a Member under Rule 9.

Paragraph 2 of Section 1 of Rule 9 further provides that: An envelope delivered

to the Corporation shall contain only such securities as permitted by the Corporation
from time to time; tickets relating to such securities contained in the envelope; or such
other items as the Corporation may from time to time permit, including but not limited to,
documentation by a delivering Member necessary for the receiving Member to identify
the reason for a money-only charge, and notices of intent and claim forms associated
with claims for dividends and interest. Envelopes which contain items other than as
permitted by the Corporation are subject to return by the Corporation to the delivering
Member and the related payment amount debits and credits may be reversed in
accordance with Section 4 of Rule 9.

Paragraph 3 of Section 1 provides that the credit list attached to an envelope

shall show “the total money value, if any, of the items contained in that envelope”.
Since Paragraph 2 of Section 1 of Rule 9 authorizes the Corporation to permit Members
to include “other items” (i.e., items relating to money-only settlement and settlement of
dividends and interest) in envelopes, credit lists may also include charges other than for
securities contained in the envelope. Pursuant to Paragraph 7 of Section 1, the
Corporation credits the delivering Member’s account with the payment amount shown
on the credit list and debits the receiving Member’s account. Under Paragraph 10 of
Section 1, payment amounts so debited and credited are included in the settlement for
that day pursuant to Rule 12, subject to the rights of the Corporation under Section 2 of
Rule 12 and Section 4 of Rule 9.

The Corporation will not stand behind any charges appearing on a credit list
attached to envelopes delivered by a Member pursuant to Rule 9. In the event of the
default of a Member, the Corporation, within such time frame as determined by the
Corporation from time to time, may reverse all ESS debits and credits of that Member
due for settlement.

In the absence of a showing, satisfactory to the Corporation, that the charges

appearing on the credit list are for permitted securities or pertain to other permitted
items actually contained in such envelopes to which such credit lists are attached, the

399
 (ADDENDUM D)

Corporation in its discretion, may promptly reverse credits previously given to delivering
Members. For the purpose of Rule 9 and this Addendum, it shall be presumed that
charges appearing on a credit list attached to an envelope shall not be for permitted
securities contained in such envelope if the charges are not approximately equal to
either the current market price or contract price of the securities so included.

Furthermore, to the extent that the Corporation offers or will offer any other
service not covered herein whether to Members or others (e.g., Mutual Fund/Insurance
Services Members, Fund Members or Insurance Carrier/Retirement Services Members
or AIP Members), through or pursuant to which the Corporation permits charges, unless
the Corporation specifically provides otherwise, the Corporation shall also not stand
behind such charges. The Corporation shall stand behind final Cash Amount charges
submitted by an Index Receipt Agent pursuant to Rule 7 and the Procedures. (For the
purposes of this Rule, the Corporation has determined that due bills are not securities.)

Specifically, but not in limitation of the foregoing, Members, Mutual

Fund/Insurance Services Members, Insurance Carrier/Retirement Services Members
and Fund Members are hereby advised that with respect to the Mutual Fund Services
and Insurance & Retirement Services, if at any time the Corporation fails to receive
payment from a Member, Mutual Fund/Insurance Services Member, Insurance
Carrier/Retirement Services Member or Fund Member which payment was to be used
to make payment to the contra side of the Mutual Fund Services or Insurance &
Retirement Services transaction, the Corporation, in its discretion, may reverse in whole
or in part any credit previously given to any Member, Mutual Fund/Insurance Services
Member, Insurance Carrier/Retirement Services Member or Fund Member who is the
contra side to the Mutual Fund Services or Insurance & Retirement Services transaction
within such time frame as determined by the Corporation from time to time.

Notwithstanding the foregoing, the Corporation may, in its discretion, apportion

on a pro rata basis, to delivering Members or any other Member, Mutual
Fund/Insurance Services Member, Insurance Carrier/Retirement Services Member or
Fund Member whose credit positions have been reversed, any excess credit position
remaining, after all liabilities to the Corporation are satisfied, of a receiving Member or
other Member, Mutual Fund/Insurance Services Member, Insurance Carrier/Retirement
Services Member or Fund Member for whom the Corporation has ceased to act.

With respect to the AIP Service, at any time the Corporation fails to receive
payment from an AIP Member (including an AIP Fund Administrator with respect to its
AIP Settling Sub-Accounts) which payment was to be used to make payment to the
contra side AIP Member (including an AIP Fund Administrator with respect to a contra
side AIP Settling Sub-Account), the Corporation will reverse any credit previously given
to any AIP Member (including an AIP Fund Administrator with respect to its AIP Settling

400
 (ADDENDUM D)

Sub-Accounts) who is the contra side to the AIP Member whose payment was not
received by the Corporation.

This statement of policy is not inconsistent with the Corporation’s policy on

Member-to-Member adjustments which, while permitted by the Corporation generally,
are subject to reversal in the Corporation’s discretion.

401
 (ADDENDUM E)

ADDENDUM E

(ADDENDUM LETTER RESERVED FOR FUTURE USE)

402
 (ADDENDUM F)

ADDENDUM F

STATEMENT OF POLICY
IN RELATION TO SAME DAY FUNDS SETTLEMENT

I. Liquidity Contingency Plans

The Corporation recognizes its responsibility to meet its same day funds
settlement obligations. The Corporation fully expects that its short-term funding
resources are adequate and that it has the capability to meet its short-term funding
needs in the event of the insolvency of a major participant. Nevertheless, the
Corporation has determined to adopt the liquidity contingency plans described herein to
cover the extraordinary unlikely event that its short-term funding resources are
inadequate to cover its funding needs in the event of a major member insolvency.

A. Non-Guaranteed Services

In the event that the Corporation has or believes that it will have a liquidity
problem, the Corporation may:

1. Prior to the issuance of the settlement statement, reverse debits and

credits for non-guaranteed services to the extent necessary to eliminate the
liquidity problem, as determined by the Corporation and/or

2. Spread the Corporation’s obligation to make payment or payments over

such period of time as is necessary for the Corporation to eliminate the liquidity
problem.

B. Guaranteed Services

To the extent that the Corporation has a liquidity problem as a result of CNS
securities allocated to the account of an insolvent member and the Corporation has
exhausted all of its liquidity resources, until such time as the Corporation has the
resources to pay the delivering member for such securities, the Corporation may
temporarily return such securities back to the delivering Member. At such time as the
Corporation has the resources to pay for the delivery, the Corporation shall designate
the date upon which such securities are to be redelivered to the Corporation. The
Corporation shall reimburse Members whose securities have been returned for
financing costs incurred as a result of such return during the intervening period.

II. Settling Bank Exceptions

Notwithstanding anything in the Rules to the contrary, the Corporation, in its sole
discretion upon application by an Insurance Carrier/Retirement Services Member, a
Mutual Fund/Insurance Services Member, a Fund Member or an AIP Member, may
waive the requirement that it appoint a Settling Bank for such Insurance
Carrier/Retirement Services Member, Mutual Fund/Insurance Services Member or Fund
Member, (or an AIP Settling Bank in the case of an AIP Member) if the Corporation

403
 (ADDENDUM F)

determines that to require such use would create an undue burden on such Insurance
Carrier/Retirement Services Member, Mutual Fund/Insurance Services Member, Fund
Member or AIP Member, as determined by the Corporation in each instance.

404
 (ADDENDUM G)

ADDENDUM G

FULLY-PAID-FOR ACCOUNT

I. MOVEMENT OF SECURITIES INTO THE FULLY-PAID-FOR ACCOUNT

The expansion of the Fully-Paid-For application will be of benefit to Members

making deliveries during DTC’s evening and daytime processing on settlement date by
permitting deliveries in anticipation of CNS allocation.

On the morning of settlement date and during the day cycle on settlement date,
DTC will indicate to the Member what securities have been delivered out via DTC.
Similarly the CNS Settlement Activity Report will be made available indicating what has
been allocated in the night cycle, and information is also provided regarding allocations
made in the day cycle.

Based on this information, the Member can determine what unallocated CNS
long valued positions must be moved from the CNS General Account A to the CNS
Fully-Paid-For sub account E to maintain compliance with Rule 15c3-3 of the Exchange
Act.

The Corporation will accept instructions to make such movements through such
time on each settlement date as it shall determine, and such instructions will be applied
promptly thereafter during the day cycle through such cutoff time. The amount that will
be moved from the A Account to the E Sub-account will be the lesser of: (i) the number
of shares covered by the instruction that remain in the Member’s A Account at the time
the instruction is received and applied, and (ii) the number of shares subject to the
instruction.

Members should be aware that shares allocated during the day cycle, after
instructions have been received to move a position from the CNS General Account A to
the Fully-Paid- For Account E, will result in a reduction of the amount of shares in the
Fully-Paid-For Account by the amount of the allocation.

At the end of the day, the Corporation will charge the Member’s settlement
account the value of the positions residing in the Fully-Paid-For Account at the close of
the CNS processing cycle.

The value charged to the Member’s settlement account will appear on that day’s
settlement statement.

The following day, the amount debited the previous day (i.e., value of closing
position Fully-Paid-For Account) will be credited to the Member’s settlement. The credit
will appear on the settlement statement.

The process will be repeated daily to the extent a Member has any positions in
its Fully-Paid-For Account.

405
 (ADDENDUM G)

II. MOVEMENTS OUT OF THE FULLY-PAID-FOR ACCOUNT

Positions that have been established in the Fully-Paid-For Account will be

returned to the Member through normal allocation to the Member’s E sub account.

However, in the event a Member which has previously given instructions to move
a position into its Fully-Paid-For Account finds that the position no longer needs to be
segregated, it may issue instructions to return the position to its General Account, thus
reestablishing the position in the General Account and reducing the Fully-Paid-For
Account.

III. MOVEMENT INSTRUCTIONS

Instructions to move positions into or out of the Fully- Paid-For Account are to be
submitted to the Corporation prior to such time as established by the Corporation from
time to time.

IV. FULLY-PAID-FOR ACTIVITY REPORTS

The Corporation will provide Members with the following reports detailing the
movement of security positions between the CNS General Account (A) and the Fully-
Paid-For Sub Account (E).

• Miscellaneous Activity Reports

• CNS Accounting Summary

406
 (ADDENDUM H)

ADDENDUM H

INTERPRETATION OF THE BOARD OF DIRECTORS

RELEASE OF CLEARING DATA

Pursuant to Rule 33, the Board of Directors is authorized to prescribe Procedures

and other regulations in respect of the business of the Corporation. The Board of
Directors hereby adopts the following interpretation as a regulation of the Corporation:

RELEASE OF CLEARING DATA TO REGULATORY

AND SELF-REGULATORY ORGANIZATIONS

The purpose of this interpretation is to limit the extent to which Clearing Data
pertaining to municipal bond transactions may be obtained by regulatory or self-
regulatory organizations and others pursuant to Rule 49.

Pursuant to Rule 49, the Corporation may release Clearing Data to regulatory
and self-regulatory organizations and others. The Corporation has determined at this
time that, due to the current nature of municipal data within the Corporation’s
possession and control, release without restriction could be susceptible to
misunderstanding and/or misuse. In order to avoid problems that such release, in
general, could cause to the municipal securities industry, the Corporation has
determined that at this time Municipal Clearing Data in general shall only be released to
regulatory organizations and self-regulatory organizations who have demonstrated to
the Corporation the necessity for obtaining such data in furtherance of the regulatory
purpose of such organization.

The Corporation, consistent with this interpretation, has determined to facilitate

the provision of inter-dealer and customer (i.e., institutional and retail) municipal
securities transaction data to the Municipal Securities Rulemaking Board (AMSRB@),
who has advised the Corporation that the provision of this data serves regulatory
purposes, namely to provide transparency in the municipal securities market and to
assist compliance by participants with the MSRB’s Rules.

The Corporation will also permit the release of Municipal Clearing Data to other
responsible entities for non-regulatory purposes but only in the limited format as
described below.

Regulatory and self-regulatory organizations to whom the Corporation has

consented to release data may, in writing, request that Municipal Clearing Data be
provided to a third party in addition to or in lieu of themselves, upon a demonstration
satisfactory to the Corporation, that such release to a third party would further the
regulatory purpose of the regulatory organization or the self-regulatory organization.

With respect to the release of Municipal Clearing Data other than for regulatory
purposes, the Corporation will release only a ranking of a pre-selected group of
municipal bonds compared by the Corporation during a predetermined period of time to
responsible entities. Such ranking shall be based upon the aggregate total of the par

407
 (ADDENDUM H)

value of bonds compared by the Corporation during such period. The Corporation
specifically reserves the right to deny any request where it has determined that with
regard to providing data with respect to the pre-selected group of bonds, the provision
of such data could disclose, whether patently or in easily discernible format, proprietary
and/or confidential financial, operational or trading data of a particular participant.

The foregoing notwithstanding, this interpretation is not intended to, nor shall it
be deemed to be in contravention, or a limitation, of the Corporation’s obligations
pursuant to its Shareholders Agreement.

408
 (ADDENDUM I)

ADDENDUM I

(ADDENDUM LETTER RESERVED FOR FUTURE USE)

409
 (ADDENDUM J)

ADDENDUM J

STATEMENT OF POLICY
LOCKED-IN DATA FROM SERVICE BUREAUS

Rule 7, Section 6 permits the Corporation

to accept, from self-regulatory organizations (either directly or through a

subsidiary or affiliated organizations) and/or service bureaus, initial or
supplemental trade data on behalf of Members for input into the Corporation’s
Comparison Operation (with respect to debt securities) or compared trade data,
which may reflect the netted results of other transactions, on behalf of Members
for input into the Corporation’s Accounting Operation provided that a Member is a
party to the trade or transaction.

Pursuant to the provisions of this Rule, the Corporation presently accepts from
such self- regulatory organizations (“SROs”) as it may determine, in its discretion,
locked-in trade data on a Member’s behalf for input into the Corporation’s trade capture
system. The Corporation has received requests from Members to accept, in addition to
locked-in trade data, two-sided trade data from service bureaus. Two-sided trade data
would encompass the complete details of both sides of a trade.

SROs are regulated by the SEC. Consequently, they operate pursuant to

recognized standards and therefore, the integrity of their operations is subject to
periodic examination and review. Service bureaus, which are not SROs, are not subject
to regulatory control.

Accordingly, in order to assure that the integrity of the Corporation’s systems

would not be jeopardized by the acceptance of two-sided trade data from service
bureaus that are not SRO’s, the Corporation has determined to adopt the following
criteria which such a service bureau must meet in order to be approved to submit two-
sided trade data pursuant to Rule 7, Section 6:

(1) Service bureau would have to have an established business history of at

least two years.

(2) Service bureau would have to be able to submit the following data for
each trade:

(a) buy or sell;

(b) parties to trade;
(c) quantity;
(d) CUSIP number;
(e) executing price;
(f) net money;
(g) trade date;

410
 (ADDENDUM J)

and any additional data the Corporation may be called upon to provide to a regulatory
body in connection with the Corporation’s regulatory responsibilities (e.g., additional
data required by a SRO for audit trail purposes).

(3) Service bureau would be required to have at least ten (10) of the
Corporation’s Members as its subscribers.

(4) Service bureau would be required to furnish to the Corporation such

information and make available such books and records as the
Corporation, in its sole discretion, deems necessary to evaluate service
bureau’s financial responsibility and operational capability.

In addition to the foregoing, service bureau would be required to enter into an

Agreement, in writing, with the Corporation whereby service bureau would agree:

(1) To maintain the following insurance coverage in an appropriate amount,

depending upon the size of the service bureau’s operation: (a) Broker
Blanket Bond or equivalent; (b) Errors and Omissions; and, (c) General
Liability.

(2) To submit detailed plans respecting its automated execution system which
at a minimum would detail: a description of the system; the physical
safeguards of the system; and, the integrity, backup, recovery ability, and
contingency plans of the service bureau in the event of an emergency or
disaster.

(3) (a) To obtain, on a yearly basis, an independent audit of its financial

statements and an opinion prepared by its independent auditors as
to service bureau’s internal controls for its automated system and to
submit such audit and opinion annually to the Corporation; and

(b) to perform internal interim six month reviews of the internal controls
of the automated execution system, and to submit the results of this
internal review to the service bureau’s independent auditors.

(4) To have the Member submit monthly financial statements to the

Corporation.

(5) To notify the Corporation upon any material change in any of the criteria
required for acceptance as an approved service bureau or of the
management or operation of the service bureau (e.g. cancellation of
insurance, changes in the automated execution system, major change in
stock ownership or management, outstanding law suits).

(6) To indemnify and hold harmless the Corporation, its Clearing Fund,
Shareholders, Directors, Officers, Employees, and Agents from and
against any and all claims, losses, costs, damages, or liabilities, including
reasonable attorney’s fees, which may be asserted against, suffered, or

411
 (ADDENDUM J)

incurred by the Corporation arising from entering into such Agreement

and/or providing or failing to provide trade data to the Corporation, except
that the foregoing indemnification shall not be required to cover any
claims, losses, costs, damages, or liabilities which may be asserted
against, suffered, or incurred by the Corporation arising from the
Corporation’s willful misconduct or gross negligence.

(7) That in the event of a disagreement between subscribers of the service

bureau and/or non-subscribers concerning the trade data submitted or
failed to be submitted by the service bureau to the Corporation, the
Member of the Corporation will interpose itself in the trade and take
responsibility for the trade.

(8) To pay to the Corporation the costs, if any, of the Corporation’s changing
any of its systems to be able to receive trade data from service bureau.

(9) To submit to the Corporation, for each subscriber of the service bureau
which is a Member of the Corporation on whose behalf the service bureau
may submit trade data, evidence of the service bureau’s authority to
submit to the Corporation trade data on behalf of such subscriber.

The Corporation may waive one or more of the foregoing criteria if the
Corporation determines that it is in the best interests of the Corporation and its
Members to approve a service bureau so as to assure the prompt, accurate, and orderly
processing and settlement of securities transactions or to otherwise carry out the
functions of the Corporation.

412
 (ADDENDUM K)

ADDENDUM K

THE CORPORATION’S GUARANTY

The Corporation guarantees the completion of compared and locked-in CNS and
balance order transactions from a fixed point in the clearance and settlement process. 1
CNS transactions are guaranteed as of the point they have: (i) for bilateral submissions
by Members, been validated and compared by the Corporation pursuant to these Rules
and Procedures, and (ii) for locked-in submissions, been validated by the Corporation
pursuant to these Rules and Procedures. Balance order transactions are guaranteed
as of the point they have: (i) for bilateral submissions by Members, been validated and
compared by the Corporation pursuant to these Rules and Procedures, and (ii) for
locked-in submissions, been validated by the Corporation pursuant to these Rules and
Procedures, and, in either case, through the close of business on T+2. If the contra
party to a same day or one day settling trade is a member of an interfacing clearing
corporation, such guaranty shall not be applicable unless an agreement to guarantee
such trade exists between the Corporation and the interfacing clearing corporation. The
Corporation has also adopted a policy of guaranteeing the completion of when-issued
and when-distributed trades, as of the point they have: (i) for bilateral submissions by
Members, been validated and compared by the Corporation pursuant to these Rules
and Procedures, and (ii) for locked-in submissions, been validated by the Corporation
pursuant to these Rules and Procedures and will consider all when-issued and when-
distributed trades of Members as if they were CNS transactions for surveillance
purposes regardless of the accounting operation in which they ultimately settle.

1 The trade guaranty of obligations arising out of the exercise or assignment of options that are settled
at the Corporation is addressed in a separate arrangement between the Corporation and The Options
Clearing Corporation, as referred to in Procedure III of the Rules and Procedures, and is not
addressed in these Rules and Procedures.

413
 (ADDENDUM L)

ADDENDUM L

STATEMENT OF POLICY
PERTAINING TO INFORMATION SHARING

Rule 49 recognizes the obligation of the Corporation to share clearing data with
other SEC regulated self-regulatory organizations for regulatory purposes. Rule 15
provides the Corporation with the authority to examine the financial and operational
conditions of its participants, and to receive information relevant to such examination
from any other SEC regulated self-regulatory organization. Rule 15 also requires the
Corporation to hold information furnished to the Corporation pursuant to Rule 15 in
confidence as may be required under the laws, rules and regulations applicable to the
Corporation that relate to the confidentiality of records. Section 17A(b)(3) of the
Exchange Act, provides among other things, that rules of clearing agency self-
regulatory organizations must be designed to foster cooperation and coordination with
persons engaged in the clearance and settlement of securities transactions and to
protect investors and the public interest. Section 19(g)(1) of the Exchange Act requires
clearing agencies to enforce compliance by their members with their rules.

In accordance with its responsibilities under its rules, and consistent with the
requirements of a clearing agency under the Exchange Act, the Board of Directors has
approved the entering into of an agreement by the Corporation with other Registered
Clearing Agencies to share, for regulatory purposes, with such other Registered
Clearing Agencies financial and operational information relating to participants who are
also participants of such other Registered Clearing Agencies. The Board of Directors
has also approved the filing of such agreement with the SEC, pursuant to Rule 19(b) of
the Exchange Act. Such agreement is not intended to limit the ability under the
Exchange Act of Registered Clearing Agencies, for regulatory purposes, to share data
on dual or sole participants when such is deemed appropriate. It is, however, a first step
in formalizing certain minimum levels of information sharing, with the intent to
standardize such reporting.

414
 (ADDENDUM M)

ADDENDUM M

(ADDENDUM LETTER RESERVED FOR FUTURE USE)

415
 (ADDENDUM N)

ADDENDUM N

(ADDENDUM HEADER RESERVED FOR FUTURE USE)

416
 (ADDENDUM O)

ADDENDUM O

ADMISSION OF NON-U.S. ENTITIES AS DIRECT NSCC MEMBERS

[Changes to this Addendum, as amended by File No. SR-NSCC-2021-016, are

available at [Link] These changes have been
approved by the SEC but have not yet been implemented. On August 26, 2023,
these changes will be implemented and this legend will automatically be removed
from this Addendum.]

Admission of Non-U.S. Entities1

Policy Statement on the Admission of Non-U.S. Entities as Direct Clearing

Corporation Members, Mutual Fund/Insurance Services Members, Fund Members or
Insurance Carrier/Retirement Services Members: The policy permits entities that are
organized in a country other than the United States and that are not otherwise subject to
U.S. federal or state regulation (“non-U.S. entities”) to be eligible to become direct
NSCC Members, Mutual Fund/Insurance Services Members, Fund Members or
Insurance Carrier/Retirement Services Members. Under the policy, NSCC will require
that the non-U.S. entity execute the standard NSCC membership agreement and enter
into an additional series of undertakings and agreements and provide additional
certifications and other assurances that are designed to address jurisdictional and
certain tax concerns, and to assure that NSCC is provided with audited financial
information that is acceptable to NSCC.

Certain of these criteria may be waived where inappropriate to a particular

applicant or class of applicants (e.g., a foreign government, international or national
central securities depositories).

Requirements in addition to standard requirements for U.S. entities:

• Undertakings and Agreements –

At a minimum such non-U.S. entity would have to agree to:

(a) in respect of any action brought by NSCC to enforce the entity’s

obligations under the membership agreement:

(i) irrevocably waive all immunity from NSCC’s attachment of the

entity’s own assets in the U.S.;

(ii) irrevocably submit to the jurisdiction of a court in the U.S.;

1 This policy statement excludes non-U.S. entities that are insurance companies.

417
 (ADDENDUM O)

(iii) irrevocably waive any objection to the laying of venue in a court in

the U.S.; and

(iv) state that any judgment obtained against the foreign entity by
NSCC may be enforced in the courts of any jurisdiction where the
foreign entity or its property may be located, and that the foreign
entity will irrevocably submit to the jurisdiction of each such court.

(b) designate a person in New York as its agent to receive service of process;

(c) provide to NSCC, for financial monitoring purposes, audited financial

statements prepared in accordance with either U.S. generally accepted
accounting principles or other generally accepted accounting principles
that are satisfactory to NSCC. In order to address the risk presented by
the acceptance of financial statements prepared in non-U.S. GAAP, the
existing minimum financial requirements for non-U.S. GAAP standards will
each have a specific premium applied as follows:

(i) for financial statements prepared in accordance with International

Financial Reporting Standards (“IFRS”), the Companies Act of 1985
(“UK GAAP”), or Canadian GAAP – a premium of 1 ½ times the
existing requirement;

(ii) for financial statements prepared in accordance with a European

Union (“EU”) country GAAP other than UK GAAP – a premium of 5
times the existing requirement; and

(iii) for financial statements prepared in accordance with any other type
of GAAP a premium of 7 times the existing requirement.

(d) provide all financial reports or other information requested by NSCC in

English, with monetary amounts stated in U.S. dollar equivalents
indicating the conversion rate and date used.

(e) not conduct any transaction or activity through NSCC if the non-U.S. entity
is not FATCA Compliant and/or is not a Section 1446(f) Withholding
Agent, as applicable, unless such requirement has been explicitly waived
in writing by NSCC with respect to the specific non-U.S. entity, provided,
however, that no such waiver will be issued if it shall cause NSCC to be
obligated to withhold under FATCA on gross proceeds from the sale or
other disposition of any property.

(f) indemnify NSCC for any loss, liability or expense sustained by NSCC as a
result of the non-U.S. entity failing to be FATCA Compliant or a Section
1446(f) Withholding Agent.

• FATCA Compliance, Section 1446(f) Withholding, and Tax Certification – The

non-U.S. entity must be at all times FATCA Compliant and, beginning on the

418
 (ADDENDUM O)

Section 1446(f) Withholding Compliance Date, be a Section 1446(f) Withholding

Agent, if applicable, and must certify and periodically recertify to NSCC that it is
FATCA Compliant and/or a Section 1446(f) Withholding Agent, as applicable, by
providing to NSCC a Tax Certification, unless such requirements have been
explicitly waived in writing by NSCC, provided, however, that no such waiver will
be issued if it shall cause NSCC to be obligated to withhold under FATCA on
gross proceeds from the sale or other disposition of any property.

• Foreign Legal Opinion – obtain an opinion of reputable foreign counsel

satisfactory to NSCC providing, among other things, that the agreements
described above may be enforced against the foreign entity in the courts of its
home country or other jurisdictions where the entity or its property may be
found. 2

• Regulatory Status of Foreign Entity

(a) The non-U.S. entity would have to be subject to regulation in its home
country and its home country regulator must have entered into a Bilateral
Information Sharing Arrangement or Memoranda of Understanding with
the SEC regarding the sharing or exchange of information.

(b) The non-U.S. entity must be in compliance with the financial reporting and
responsibility standards of its home country regulator.

• Anti-Money Laundering (“AML”) Review – The non-U.S. entity must provide

sufficient information to NSCC in order to evaluate AML risk, including whether
the non-U.S. entity is subject to comparable AML requirements (to those
imposed in the U.S.) in its home country jurisdiction.

2 NSCC reserves the right to require the entity to deposit additional amounts to the Clearing Fund and
to post an Eligible Letter of Credit in an instance where NSCC, in its sole discretion, believes the
entity presents legal risk.

419
 (ADDENDUM P)

ADDENDUM P

FINE SCHEDULE

1) SDFS Failure-to-Settle and Late Acknowledgment Fines

NET DEBIT FOR APPLICABLE

MEMBER, MUTUAL/FUND
FIRST SECOND THIRD FOURTH
INSURANCE SERVICES MEMBER,
OCCASION OCCASION OCCASION OCCASION
FUND MEMBER OR SETTLING
BANK ONLY MEMBER
$0 - 100,000 $ 100 $ 200 $ 500 $ 1,000
Greater than $100,000 - 900,000 300 600 1,500 3,000
Greater than $900,000 - 1,700,000 600 1,200 3,000 6,000
Greater than $1,700,000 - 2,500,000 900 1,800 4,500 9,000
Greater than $2,500,000 - UP 1,000 2,000 5,000 10,000

NOTES: a) In addition to the fine, interest is charged to the Member, Mutual

Fund/Insurance Services Member, Fund Member or the Settling Bank Only
Member, that failed to settle for the cost of borrowing to complete settlement.

b) The number of occasions will be determined over a moving three-month

period.

c) If the Corporation determines that it had significantly affected a Member’s,

Mutual Fund/Insurance Services Member, Fund Member or a Settling Bank
Only Member’s, ability to settle (because of a Corporation system delay, for
example), the Corporation may determine to waive failure-to-settle fines for
that occurrence.

d) If the number of occasions within the rolling period exceeds four, the
Corporation shall obtain the concurrence of the Board of Directors as to the
fine amount.

e) A lateness of more than one hour will result in a fine equal to the amount
applicable to the next highest occasion for the specific deficiency amount. If a
member is late for more than one hour and it is the member’s fourth occasion,
the Corporation shall obtain the concurrence of the Board of Directors as to
the fine amount.

2) General Continuance Standards-Fine for failure to notify pursuant to Section

2(B)(a)(i) of Rule 2B, Section 2(i) of Rule 2C, Section 3(d) of Rule 2C, or Section 2(i) of
Rule 2D: Each single offense, $1,000 fine. If the Member’s failure to notify applies to
more than one DTCC clearing agency subsidiary DTC, NSCC and/or FICC), the fine

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 (ADDENDUM P)

amount will be divided equally among the clearing agencies. Where the Member is a
participant of DTC and is a common member of one or more of the other clearing
agencies, the fine would be collected by DTC and allocated equally among other
clearing agencies, as appropriate. If the member is not a DTC participant, but is a
common member between NSCC and FICC, NSCC will collect the fine and allocate the
appropriate portion to FICC.

3) Failure to notify and supply required data as provided for under these Rules &
Procedures or to perform the upgrade to their network technology, or communications
technology or protocols as required under these Rules in the time specified (other than
as provided in items one, two, four, five and six of this addendum): Each single offense,
$5,000.00 fine. If the Member’s failure to notify applies to more than one DTCC clearing
agency subsidiary (DTC, NSCC and/or FICC), the fine amount will be divided equally
among the clearing agencies. Where the Member is a participant of DTC and is a
common member of one or more of the other clearing agencies, the fine would be
collected by DTC and allocated equally among other clearing agencies, as appropriate.
If the member is not a DTC participant, but is a common member between NSCC and
FICC, NSCC will collect the fine and allocate the appropriate portion to FICC.

4) Late Satisfaction of Clearing Fund Deficiency Call 1

Fourth
First Second Third
Amount Occasion
Occasion Occasion Occasion
(or greater)
Up to $100 M * $100 $200 $500
Greater than $100 M to $900 M * 300 600 1,500
Greater than $900 M to $1.7 MM * 600 1,200 3,000
Greater than $1.7 MM to $2.5 MM * 900 1,800 4,500
Greater than $2.5 MM * 1,000 2,000 5,000

* First occasions result in a warning letter issued to the Member.

If the number of occasions within the rolling period exceeds four, the Corporation shall
obtain the concurrence of the Board of Directors as to the amount of the fine.

A lateness of more than one hour will result in a fine equal to the amount applicable to
the next highest occasion for the specific deficiency amount. If a member is late for
more than one hour and it is the member’s fourth occasion, the Corporation shall obtain
the concurrence of the Board of Directors as to the amount of the fine.

1 The number of occasions is determined over a moving three-month period beginning with the first
occasion.

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 (ADDENDUM P)

5) Failure to Timely Provide Financial and Related Information

First Second Third Fourth

Request For Information*
Occasion Occasion Occasion Occasion

Reports/Information** $300 $600 $1,500 ***

* Fines to be levied for offenses within a moving twelve-month period beginning with the first occasion.
** For purposes of this Fine Schedule, “Reports/Information” shall mean the financial, regulatory and
other information required to be submitted within a specified deadline to the Corporation.
*** Fourth or more occasion fines will be determined by the Corporation with the concurrence of the
Board of Directors.

If the Member’s late submission applies to more than one DTCC clearing agency
subsidiary (DTC, NSCC and/or FICC), the fine amount will be divided equally among
the clearing agencies. Where the Member is a participant of DTC and is a common
member of one or more of the other clearing agencies, the fine would be collected by
DTC and allocated equally among other clearing agencies, as appropriate. If the
member is not a DTC participant, but is a common member between NSCC and FICC,
NSCC will collect the fine and allocate the appropriate portion to FICC.

6) Business Continuity Testing for Top Tier Firms - Fines for Failure to Test

Fine for failure to complete testing by December 31st: $10,000

Fine for failure to complete testing for two successive years: $20,000

NOTES: 1) Failure to complete testing for more than two successive years will
result in disciplinary action taken by NSCC, up to and including
termination of membership.

422
 (ADDENDUM Q)

ADDENDUM Q

(ADDENDUM LETTER RESERVED FOR FUTURE USE)

423
 (ADDENDUM R)

ADDENDUM R

(ADDENDUM LETTER RESERVED FOR FUTURE USE)

424
 (ADDENDUM S)

ADDENDUM S

(ADDENDUM LETTER RESERVED FOR FUTURE USE)

425
 (ADDENDUM T)

ADDENDUM T

(ADDENDUM LETTER RESERVED FOR FUTURE USE)

426
 (ADDENDUM U)

ADDENDUM U

(ADDENDUM LETTER RESERVED FOR FUTURE USE)

427
 (ADDENDUM V)

ADDENDUM V

BY-LAWS AND CERTIFICATE OF INCORPORATION

The By-Laws of the Corporation and the Certificate of Incorporation of the

Corporation are incorporated by reference.

428