[Federal Register Volume 75, Number 249 (Wednesday, December 29, 2010)]
[Notices]
[Pages 82115-82117]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-32787]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63604; File No. SR-NSCC-2010-18]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change Relating to the
Insurance and Retirement Processing Services To Incorporate a New
Analytics Reporting Service
December 23, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 10, 2010, the
National Securities Clearing Corporation (``NSCC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I and II 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 Terms of Substance of
the Proposed Rule Change
NSCC is proposing to expand its Insurance and Retirement Processing
Service (``IPS'') by providing a new Analytics Reporting Service in
order to provide greater transparency to the insurance market.
II. Self-Regulatory Organization's Statement of 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.
A. Self-Regulatory Organization's Statement of Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Background
Currently, service providers that make insurance information
available to the insurance industry generally utilize a combination of
publicly accessible financial information, responses provided by market
participants to optional surveys, and proprietary analytical tools.
These services also rank the various market participants and products
in the insurance market to provide relative rankings by revenue or
other criteria. Reliance on survey results and the aggregation and
analysis of those results often makes the information several months
old by the time it is distributed to subscribers.
2. Proposed Amendments
NSCC proposes to add a new Section 12 to NSCC Rule 57 to provide an
Analytics Reporting Service.\2\ The Analytics Reporting Service would
use actual transaction information currently used by NSCC in processing
IPS transactions rather than survey results. NSCC believes that this
would allow IPS to provide more efficient, cost-effective, and timely
benchmarking and other market information about the insurance market.
The Analytics Reporting Service would assist NSCC Members and Limited
Members in better understanding their business and the broader market
for insurance products; would help them to better understand investor
needs; would support the efficient development of products that meet
investor needs; and would assist them in making decisions related to
sales, marketing, and product development.
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\2\ The text of proposed new Section 12 to NSCC Rule 57 can be
viewed at http://www.dtcc.com/downloads/legal/rule_filings/2010/nscc/2010-18.pdf.
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3. Overview
The Analytics Reporting Service would provide NSCC Members and
Limited Members with the ability to perform market analysis based on
IPS data. This market analysis (commonly referred to as
``benchmarking'') would allow users of this service to obtain and
compare aggregated data from different perspectives including, but not
limited to, geographic location, type of transaction, and other
criteria that NSCC and the NSCC Members and Limited Members determine
to be most useful. The benchmarking portion of the service would
provide information on an aggregate basis and would not reveal the
confidential or proprietary information of any NSCC Member or Limited
Member. The service would permit NSCC Members and Limited Members to
monitor and to analyze their business through benchmarking relative
performance by comparing their own transactional information against
the overall market's and by conducting market research and analyzing
market trends.
Additionally, NSCC would provide information that attributes
aggregated transaction information to specific NSCC Members and Limited
Members for the purposes of providing a relative ranking of products
and market participants (i.e., league tables). This aspect of the
Analytics Reporting Service would allow NSCC Members and Limited
Members to conduct peer analysis and to understand their performance
relative to other NSCC Members or Limited Members. Although service
providers already provide league tables on the basis of surveys and
other tools, this information may be considered confidential or
proprietary information by NSCC or the individual NSCC Members or
Limited Members to which it pertains.
NSCC would offer the Analytics Reporting Service through a
proprietary online service.
[[Page 82116]]
4. NSCC's Right to Release Clearing Data
``Clearing Data'' as defined in NSCC's Rule 49 includes data
received by NSCC for inclusion in the clearance and settlement process
of NSCC or such data, reports, or summaries produced as a result of
NSCC processing such transaction data. Rule 49 generally prohibits the
release of Clearing Data relating to a transaction to parties other
than the NSCC Members or Limited Members that are involved in the
transaction.
The use of IPS-related Clearing Data as part of the Analytics
Reporting Service for purposes of providing benchmarking data does not
violate this general prohibition of Rule 49. Rule 49 explicitly permits
NSCC to utilize Clearing Data in a form that prevents the disclosure of
proprietary or confidential financial, operational, or trading data of
a particular NSCC Member or Limited Member. Thus, Rule 49 permits the
sharing of cleansed or aggregate reporting of transaction information
or Clearing Data. The Analytics Reporting Service would utilize
Clearing Data for benchmarking purposes in a manner that is consistent
with existing NSCC rules because it would provide only cleansed or
aggregated reporting data that would not reveal the proprietary or
confidential information of any NSCC Member or Limited Member.
Because the league tables that provide a relative ranking of NSCC
Members and Limited Members and their products may be considered by
some NSCC Members and Limited Members to be the release of confidential
or proprietary information, NSCC is providing notice of its intent to
release this data in accordance with NSCC Rule 49(c). NSCC Rule 49(c)
provides that an NSCC Member or Limited Member may request the release
of any Clearing Data whose release is not otherwise permitted under
Rule 49 either in writing or by written agreement. NSCC intends this
proposed rule change and the addition of the Analytics Reporting
Service to serve as the written agreement providing for the release of
the Clearing Data under Rule 49(c). NSCC believes that this proposed
rule change, the amendment to its rules, and NSCC's Important Notice to
NSCC Members and Limited Members \3\ (a notice issued to NSCC Members
and Limited Members in relation to every rule filing submitted to the
Commission by NSCC) provides NSCC Members and Limited Members with
reasonable and sufficient notice of its intent to distribute cleansed
and aggregated IPS related Clearing Data.
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\3\ NSCC Important Notices are notices issued to NSCC Members
and Limited Members in relation to, among other things, every rule
filing submitted to the Commission by NSCC.
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5. Right to Opt-Out
Due to potential concerns that the attribution of aggregated
transactions to specific NSCC Members and Limited Members within league
tables may potentially reveal confidential data, NSCC Members and
Limited Members that utilize IPS (``IPS Members'') would be able to
request that NSCC not attribute and not include their respective
transaction information with respect to league tables in the Analytics
Reporting Service. That is, they may ``opt-out.'' By opting-out, the
IPS Member would prohibit NSCC from associating their transactions in
any discernible manner (e.g., listing the IPS Member in a league
table). However, opting-out would not prohibit NSCC from including the
information for purposes of describing the market in a particular
geographic location or in accordance with other criteria that does not
identify a specific IPS Member for purposes of benchmarking. This opt-
out provision would provide an IPS Member with the ability to prevent
disclosure of potentially confidential or proprietary information
attributable to its activity, just as it may prevent the disclosure of
its individual transactions. Yet, it would not prevent NSCC from
providing the marketplace with useful information regarding the overall
insurance market.
In order to opt-out of the Analytics Reporting Service prior to the
service becoming available, IPS Members would have to notify NSCC in
writing during the initial ninety (90) day opt-out period. NSCC would
announce the beginning of this ninety (90) day period through an
Important Notice. A new IPS Member would be allowed to opt-out by
providing NSCC with written notice of their election to opt-out at any
time prior to account activation. Once the Analytics Reporting Service
commences to include the information of an IPS Member, the IPS Member
would be allowed to opt-out by providing NSCC with thirty (30) days'
written notice.
By opting-out, the IPS Member would authorize NSCC to disclose that
the league tables and other information that compares IPS Members and
their insurance products do not include information from that IPS
Member. This would clarify the content of the benchmarking data that
NSCC would provide.
Finally, an IPS Member that opts-out would forfeit any portion of
NSCC's annual refund, if any, that is directly attributable to the
revenue generated by the Analytics Reporting Service.
6. Prohibiting Disclosures Prior to Earnings Reports
The Analytics Reporting Service would allow IPS Members to prevent
the disclosure or attribution of transactions to a specific IPS Member
in order to permit compliance with the laws and regulations governing
disclosure of such information prior to earnings reporting. Based on
discussions with IPS Members, NSCC has established a policy that
applies an embargo period of sixty (60) days after the end of the
first, second, and third calendar quarters and ninety (90) days after
the end of the calendar year.
7. Fees
NSCC intends to propose fees for the Analytics Reporting Service in
a subsequent proposed rule filing. Until then, NSCC Members and Limited
Members would be able to use the Analytics Reporting Service without
any additional charge to the current Financial Activity Reporting fees.
Parties that are not NSCC Members or Limited Members would not be able
to use the Analytics Reporting Service until appropriate fees for non-
members have become effective.
NSCC states that the proposed change will permit NSCC Members and
Limited Members to enhance their monitoring and analysis of their
respective businesses. NSCC further states that the proposed rule
change is consistent with the requirements set forth under Section 17A
of the Act \4\ that require the rules of a clearing agency be designed
to foster cooperation and coordination with persons engaged in the
clearance and settlement of securities transactions, to remove
impediments to and perfect the mechanism of a national system for the
prompt and accurate clearance and settlement of securities
transactions, and, in general, to protect investors and the public
interest.
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\4\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change will have any
impact or impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
[[Page 82117]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
NSCC has not solicited and does not intend to solicit comments
regarding this proposed rule change. NSCC has not received any
unsolicited written comments from members or other interested parties.
However, NSCC has worked with NSCC Members and Limited Members in
designing this service.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 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 90 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 or disapprove such 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 may be submitted by using the
Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml), or send an e-mail to [email protected]. Please include
File No. SR-NSCC-2010-18 on the subject line.
Paper comments should be sent in triplicate to Elizabeth
M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington DC 20549-1090.
All submissions should refer to File No. SR-NSCC-2010-18. 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 Web site viewing and
printing 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 NSCC's principal office and NSCC's Web site
(http://www.dtcc.com/legal/rule_filings/nscc/2010.php). 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 No. SR-NSCC-2010-18 and should be
submitted by January 19, 2011.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-32787 Filed 12-28-10; 8:45 am]
BILLING CODE 8011-01-P