National Securities Clearing Corp.

The stable outlook on NSCC reflects S&P Global Ratings' expectation that the company's financial safeguards will continue to provide substantial protection against member default, from both a loss-absorbing and liquidity standpoint, in extreme but plausible market conditions. We expect the company will keep strengthening its liquid resources by increasing the average maturity of the CP (to reduce rollover risk in a stress scenario). We could lower the ratings on NSCC if its financial safeguards materially weaken. This could be the case if liquidity uses in a stress scenario (whereby one or several clearing members default) materially increase without a corresponding increase in liquid resources. We are unlikely to raise the ratings in the next two years. Our current base-case forecast

...National Securities Clearing Corp. (NSCC) is an effective monopoly in clearing cash equities, ETF, municipal and corporate bonds in the U.S. This supports the strength of the business risk profile. NSCC has material clearing risks. Considerable losses for the clearinghouse could arise if resources within the waterfall (margins, assessment powers) are insufficient to absorb losses stemming from the liquidation of a defaulting clearing member's portfolio. We believe, however, that NSCC benefits from strong risk-management controls and robust financial safeguards. NSCC is also exposed to liquidity risk should one or several clearing members default. Potential liquidity uses in a stress scenario whereby one or several clearing members default jointly are the highest at a time close to the expiration of single-name options (third Friday of the month). We view NSCC as operating with no leverage. NSCC does issue commercial paper (CP; $7.4 billion at the end of 2018). However, proceeds are held...

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