NSCC VaR + ECP Margin Model
Idea
The formula the US stock-clearing system uses to demand collateral from brokers, combining risk on unsettled trades with an extra charge on firms whose exposure outruns their capital. On January 28 2021 at 5:11am EST it hit Robinhood with a $3B demand ($1.4B core + $2.2B extra); Robinhood restricted customer buying in exchange for the extra charge being waived — showing, per the entry, that the mechanism protects the clearinghouse, not ordinary traders.
The engine's definition — word for word
National Securities Clearing Corporation's margin calculation formula combining Value-at-Risk (VaR) on open settlement positions + Excess Capital Premium (ECP) charge for brokers whose clearing exposure exceeds their net capital threshold. January 28 2021 5:11am EST: Robinhood hit with $3B call = $1.4B core VaR + $2.2B ECP charge. Robinhood preemptively implemented PCO (position-close-only) restrictions in exchange for the ECP being waived entirely, net requirement ~$700M-$1B. Documented in DTCC rule filings and Tenev Congressional testimony. Structural function: the Settlement Layer's primary defense mechanism against retail-volatility threats to counterparty integrity. The algorithm protects the clearinghouse, not retail price discovery. [Seam: Aligned-To-Whom? codified-exemption instance of the perception/reality seam (Aligned-To-Whom?). (b)+(c).]
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