[Federal Register Volume 73, Number 46 (Friday, March 7, 2008)]
[Notices]
[Pages 12491-12492]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-4400]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57391; File No. SR-NSCC-2007-15]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of a Proposed Rule Change Relating to the
Admission of Foreign Entities
February 27, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on November 16, 2007,
National Securities Clearing Corporation (``NSCC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II, and III below, which items have
been prepared primarily by NSCC. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change would establish a policy statement
regarding the admission of entities that are organized in a foreign
country and are not subject to U.S. federal or state regulation
(``foreign entities'') as members of NSCC.\2\
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\2\ The Depository Trust Company (``DTC'') has filed a similar
proposed rule change that would permit DTC to adopt a similar policy
statement with respect to the admission of foreign entities as
participants. Securities Exchange Act Release No. 57392 (February
27, 2008) (File No. SR-DTC-2007-16).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NSCC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. NSCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such
statements.\3\
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\3\ The Commission has modified parts of these statements.
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A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
NSCC Rule 2 and Addendum B to NSCC's Rules address the admission of
applicants as NSCC members. NSCC's Rules provide that admission as a
member is subject to an applicant's demonstration that it meets NSCC's
standards of financial responsibility, operational capability, and
character. Additionally, each member must continue to be in a position
to demonstrate to NSCC that it meets these standards. The purpose of
the proposed rule change is to establish admission criteria that will
permit a well-qualified foreign entity to become an NSCC member and
thereby obtain direct access to NSCC's services while assuring that the
unique risks associated with the admission of foreign entities are
adequately addressed.
The admission of foreign entities as members raises a number of
unique risks and issues, including that (1) the entity is not subject
to U.S. federal or state regulation, (2) the operation of the laws of
the entity's home country and time zone differences \4\ may impede the
successful exercise of NSCC's rights and remedies particularly in the
event of the entity's failure to settle, and (3) financial information
about the foreign entity made available to NSCC for monitoring purposes
may be less adequate than information about U.S.-based entities.
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\4\ Time zone differences could complicate communications
between the foreign member and its U.S. Settling Bank with respect
to the timely payment of the member's net debit to NSCC, including
intraday demands for payment. These differences could also delay
NSCC's receipt of information available in the member's home country
to others (including its other creditors) about the member's
financial condition on the basis of which NSCC would have taken
steps to protect the interests of NSCC and its members.
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The proposed rule change would add a new Policy Statement \5\ to
NSCC's Rules that in addition to requiring execution of the standard
NSCC Membership Agreement would require a foreign entity to enter into
a series of undertakings and agreements that are designed to address
jurisdictional concerns and to assure that NSCC is provided with
audited financial information that is acceptable to NSCC.\6\
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\5\ NSCC's proposed ``Policy Statement on the Admission of Non-
U.S. Entities as Direct Clearing Corporation Members'' is attached
as Exhibit 5 to its filing, which can be found at http://www.dtcc.com/downloads/legal/rule_filings/2007/nscc/2007-15.pdf.
\6\ In the Policy Statement, NSCC has reserved the right to
waive certain of the criteria where such criteria are inappropriate
to a particular applicant or class of applicants (e.g., a foreign
government or international securities clearing corporation).
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The new Policy Statement would also require that a foreign entity
(1) be subject to regulation in its home country and (2) be in good
standing with its home country regulator.
The proposed rule change is consistent with the requirements of
Section 17A(b)(3)(F) of the Act. The proposed rule change does not
unfairly discriminate against foreign entities seeking admission as
members because it appropriately takes into account the unique risks to
NSCC raised by their admission.
B. Self-Regulatory Organization's Statement on Burden on Competition
NSCC perceives no impact on competition by reason of the proposed
rule change.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments from NSCC Participants or others have not been
solicited or received on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which the self-regulatory organization consents,
the Commission will:
(A) By order approve the proposed rule change or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
[[Page 12492]]
Send an e-mail to [email protected]. Please include
File Number SR-NSCC-2007-15 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NSCC-2007-15. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room, 100 F Street, NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of NSCC. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-NSCC-2007-15 and should be
submitted on or before March 28, 2008.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-4400 Filed 3-6-08; 8:45 am]
BILLING CODE 8011-01-P