[Federal Register Volume 75, Number 61 (Wednesday, March 31, 2010)]
[Notices]
[Pages 16214-16215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-7204]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61783; File No. SR-NSCC-2010-03]
Self-Regulatory Organizations; The National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Expand the Eligibility of Securities Processed Through
the ID Net Service
March 25, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on March 5, 2010, the
National Securities Clearing Corporation (``NSCC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change described in Items I, II, and III below, which items have been
prepared primarily by NSCC. NSCC filed the proposal pursuant to Section
19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-4(f)(4) \3\ thereunder so
that the proposal was effective upon filing with the Commission. The
Commission is publishing this notice to solicit comments on the rule
change from interested parties.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78s(b)(3)(A)(iii).
\3\ 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change amends NSCC's rules regarding the
eligibility of securities processed through the ID Net Service (``ID
Net'').
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 these
statements.\4\
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\4\ The Commission has modified the text of the summaries
prepared by NSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
On June 2, 2008, the Commission approved a rule change that
provided for the settlement of institutional transactions through a
joint service of NSCC and The Depository Trust Company (``DTC'') called
ID Net. ID Net enables subscribers to the service to net all eligible
affirmed institutional transactions at DTC against Continuous Net
Settlement (``CNS'') transactions \5\ at NSCC. ID Net accepts affirmed
institutional transactions that are eligible for ID Net from clearing
agencies,\6\ entities exempt from clearing agency registration with the
Commission, and ``qualified vendors'' \7\ and nets the broker-dealer's
affirmed institutional transactions side of such transaction with the
broker-dealer's CNS obligations.
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\5\ NSCC's Continuous Net Settlement System (CNS) is an
automated accounting and securities settlement system that
centralizes and nets the settlement of compared and recorded
security transactions and maintains an orderly flow of security and
money balances. CNS provides clearance for equities, corporate
bonds, unit investment trusts, and municipal bonds that are eligible
for book-entry transfer at DTC.
\6\ The clearing agency must be registered pursuant to Section
17A of the Act or obtain an exemption.
\7\ The term ``qualified vendor'' is defined in the rules of the
New York Stock Exchange, the National Association of Securities
Dealers, and other self-regulatory organizations.
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Participation in ID Net is voluntary. Eligibility for ID Net
requires that a
[[Page 16215]]
broker-dealer be a DTC participant and an NSCC member eligible for CNS
processing. The custodian bank must be a DTC participant. In addition,
eligibility for ID Net processing is based on the underlying security
being processed, the type of transaction submitted for processing, and
the timing of affirmation. Most equity securities that are eligible for
CNS are eligible for ID Net processing. However, the following
securities were initially excluded from ID Net eligibility: (1)
Corporate and municipal bonds and unit investment trust issues; (2) new
issue securities; (3) securities that are IPO tracked (because the use
of omnibus accounts will bypass the tracking system); (4) trades in
issues that are currently undergoing a mandatory or voluntary
reorganization; (5) trades in CUSIPs with a CNS buy-in; and (6) trades
in securities appearing on the SEC's Regulation SHO list. At its
inception, NSCC noted that because ID Net was a new service, it was
excluding certain securities that could potentially have a relatively
high rate of delivery failure or disrupt normal processing of
transactions in ID Net in order to ensure that the system ran smoothly.
NSCC also noted that as its experience with ID Net grew, it would
revaluate the exclusion of certain issues.
Since the implementation of ID Net, the service has operated with
minimal disruption, thus allaying the concerns regarding the addition
of certain securities previously excluded from the service. In order to
enhance processing efficiency and at the request of its members, NSCC
is expanding ID Net to allow NSCC at its discretion from time to time
to make eligible for ID Net any security that is eligible for CNS
processing.
NSCC will announce by ``Important Notice'' particular securities or
classes of securities are made eligible for processing through ID Net.
The proposed rule change is consistent with Section 17A of the
Act,\8\ as amended, and the rules and regulations thereunder applicable
to NSCC. The proposed rule change will promote the prompt and accurate
clearance and settlement of securities transactions by leveraging the
capabilities of the NSCC system to provide for more streamlined
securities deliveries and to extend netting benefits and efficiencies
to more ID Net transactions.
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\8\ 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.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments relating to the proposed rule change were not and
are not intended to be solicited or received. NSCC will notify the
Commission of any written comments received by NSCC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change has become effective upon filing
pursuant to Section 19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-
4(f)(4) \10\ thereunder because the proposed rule change effects a
change in an existing service of NSCC that: (i) Does not adversely
affect the safeguarding of securities or funds in the custody or
control of NSCC or for which it is responsible and (ii) does not
significantly affect the respective rights or obligations of NSCC or
persons using the service. At any time within sixty days of the filing
of the proposed rule change, the Commission may summarily abrogate such
rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(4).
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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
Send an e-mail to [email protected]. Please include
File Number SR-NSCC-2010-03 on the subject line.
Paper Comments
Send paper comments 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 Number SR-NSCC-2010-03. 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 filings also will be available for
inspection and copying at the principal office of NSCC and on NSCC's
Web site at http://www.dtcc.com/downloads/legal/rule_filings/2010/nscc/2010-03.pdf. 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-2010-03 and should be submitted on or before April 21, 2010.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7204 Filed 3-30-10; 8:45 am]
BILLING CODE 8011-01-P