NSCC Alert! Proposed Rule Change to Make Certain Enhancements to the Gap Risk Measure and the VaR Charge. These proposed enhancements developed 'in response to recent market events that led to a reconsideration of the idiosyncratic risks that the Gap Risk
Source: https://www.sec.gov/rules/sro/nscc/2022/34-96511.pdf
Notice of Filing a Proposed Rule Change to Make Certain Enhancements to the Gap Risk Measure and the VaR ChargeComments due: 21 days after publication in the Federal RegisterAdditional Materials: Exhibit 3a, Exhibit 3b, Exhibit 5
When applicable, NSCC calculates the Gap Risk Measure by multiplying the gross market value of the largest non-index Net Unsettled Position in the portfolio by a percent of not less than 10 percent (โgap risk haircutโ).15 Currently, NSCC determines the gap risk haircut empirically as no less than the larger of the 1st and 99th percentiles of three-day returns of a set of CUSIPs that are subject to the VaR Charge pursuant to the Rules, giving equal rank to each to determine which has the highest movement over that three-day period. NSCC uses a look-back period of not less than ten years that includes a one-year stress period. If the one-year stress period overlaps with the look-back period, only the non-overlapping period would be combined with the look-back period. The result is then rounded up to the nearest whole percentage.