[Federal Register Volume 76, Number 6 (Monday, January 10, 2011)]
[Notices]
[Pages 1473-1475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-159]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63629; File No. SR-BSECC-2010-002]
Self-Regulatory Organizations; The Boston Stock Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Amend the Articles of Organization and By-Laws
January 3, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on December 20, 2010, The Boston Stock Clearing Corporation
(``BSECC'') 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 BSECC. BSECC
filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of
the Act \3\ and Rule 19b-4(f)(3) \4\ thereunder so that the proposal
was effective upon filing with the Commission. 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).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(3).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
BSECC proposes to amend its Articles of Organization, By-Laws, and
Rules.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, BSECC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed
[[Page 1474]]
rule change. The text of these statements may be examined at the places
specified in Item IV below. BSECC 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 the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this rule filing is to amend BSECC's Articles of
Organization (``Articles''), By-Laws, and Rules to: (i) Change the name
of BSECC; (ii) decrease the authorized share capital of BSECC; (iii)
remove a stockholder; (iv) provide notice that certain amendments to
the formation documents that were previously approved by the Commission
were not implemented; and (v) suspend certain maintenance and reporting
requirements during the period of inactivity of BSECC.
2. Prior Amendments to BSECC's Articles and By-Laws
In 2009, BSECC amended its Articles and By-Laws by, among other
things: (i) Increasing BSECC's authorized shares to 300 shares and to
reflect a planned transfer in ownership of five percent of BSECC's
shares; (ii) changing its name to ``NASDAQ Clearing Corporation;''
(iii) restating its Articles to consolidate prior amendments into a
single document; (iv) amending the Articles and By-Laws to reflect the
change in the name of ``Boston Stock Exchange, Incorporated'' to
``NASDAQ OMX BX, Inc;'' and (v) correcting several typographical errors
in Article X of the By-Laws.\5\
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\5\ Securities Exchange Act Release No. 59839 (Apr. 28, 2008),
74 FR 21031 (May 6, 2009).
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As explained in the Commission's order approving that 2009 proposed
rule change, the purpose of those changes was to make various corporate
and administrative modifications in BSECC's Articles and By-Laws in
order to support the acquisition by The NASDAQ OMX Group, Inc.
(``NASDAQ OMX'') of Boston Stock Exchange, Incorporated, which was
renamed ``NASDAQ OMX BX, Inc.,'' and of several Boston Stock Exchange's
wholly owned subsidiaries, including BSECC, which was effective on
August 29, 2008. As a result of the acquisitions, BSECC became an
indirect, wholly-owned subsidiary of NASDAQ OMX. On January 5, 2009,
OMX AB, which is another indirect, wholly-owned subsidiary of NASDAQ
OMX, entered into agreements with Fortis Bank Global Clearing N.V.
(``Fortis'') and European Multilateral Clearing Facility N.V.
(``EMCF'') \6\ whereby, among other things, OMX AB: (i) Acquired a 22%
equity stake in EMCF and (ii) agreed to acquire a 5% equity stake in
BSECC from NASDAQ OMX BX, Inc., and in turn transfer this stake to
EMCF.
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\6\ EMCF is a central counterparty clearinghouse for European
equity trading on exchanges and multilateral trading facilities,
including NASDAQ OMX Europe Ltd., Chi-X Europe Ltd., and BATS
Trading Europe Ltd. In addition, EMCF provides central counterparty
clearing services to NASDAQ OMX exchanges in Stockholm, Helsinki,
Copenhagen, and Iceland. EMCF clears stocks traded on multiple
European markets, including stocks comprising the AEX, DAX, FTSE100,
CAC40, and SMI20 indexes. Services offered by EMCF include novation,
gross trade netting, settlement, margining, and fails and buy-in
management. EMCF is headquartered in the Netherlands, and is subject
to voluntary supervision by De Nederlandsche Bank and Autoriteit
Financiele Markten. In addition to OMX AB, EMCF's stockholders are
Fortis Bank Nederland (Holding) N.V. and Fortis Bank Global Clearing
N.V.
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While these changes were approved by the Commission in the 2009
proposed rule changes,\7\ the necessary paperwork was never filed with
the Department of Corporations and Taxation of the Commonwealth of
Massachusetts because NASDAQ OMX and its affiliates and EMCF decided
not to complete the transfer of BSECC stock to OMX AB and EMCF.
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\7\ Supra note 5.
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3. Proposed Amendments to Articles and By-Laws
Under this proposed rule change, BSECC will amend its Articles and
By-Laws to essentially reverse the 2009 amendments to its Articles and
By-Laws thereby clarifying that the corporate changes were never fully
effectuated. Thus, BSECC will, among other things, amend Article I to
change the name from ``NASDAQ Clearing Corporation'' back to ``Boston
Stock Exchange Clearing Corporation;'' amend Article III of its
Articles to decrease the authorized share capital of BSECC back to 150
shares because the additional authorized shares are not necessary at
this time; and amend Article V to remove OMX AB and European
Multilateral Clearing Facility, N.V. because BSECC will not be adding
such shareholders at this time.
4. Suspension of Provisions During Inactivity
Because BSECC is currently not conducting any business operations,
BSECC will suspend certain maintenance and reporting requirements
during such period of inactivity.
As background, BSECC determined in October 2009 that it would fully
cease all operations and return the clearing fund deposits that were
provided to BSECC by its members for the purpose of offsetting BSECC's
financial risk while operating a clearing agency for the member. BSECC
returned all clearing funds to its members by September 30, 2010, and
BSECC no longer maintains clearing members or has any other clearing
operations as of that date. However, BSECC desires to maintain its
registration as a clearing agency with the Commission for possible
active operations in the future.
Currently, BSECC only conducts the administrative operations that
are required to maintain its registration, which generally consist of
tax and record maintenance obligations and various maintenance and
reporting requirements of a clearing agency. Since BSECC no longer
maintains members or conducts clearing business operations, BSECC will
suspend certain maintenance and reporting requirements of its By-Laws
and Rules during any period in which BSECC is in an inactive status:
(a) BSECC Article II Section 3: BSECC will suspend the requirement
that the Board of Directors contain BSECC members or persons affiliated
with the BSECC members.
(b) BSECC Rule II, Section 1: BSECC will suspend the requirement to
maintain a clearing fund and defines the term ``inactive'' as when it
suspends clearing of security purchases or sales; has provided written
notice to its Members of the suspension of its operations; and does not
hold any deposits in the Clearing Fund.
(c) BSECC Rule VI, Section 1: BSECC will suspend the requirement of
furnishing annual audited financial statements prepared in accordance
with generally accepted accounting standards during the inactive
status. Since the only activity that BSECC conducted during the wind
down of operations is the return of the clearing funds, BSECC also
proposes to provide a review of business operations in lieu of an audit
during the year in which all clearing funds were returned to the
members.
(d) BSECC Rule VI, Section 2: BSECC will suspend the requirement
for the review of internal accounting controls during the inactive
status. Additionally, since the only activity conducted by BSECC during
the wind down of operations was the return of the clearing funds, BSECC
proposes to suspend the same requirement for the review of internal
accounting controls during the year in which all clearing funds were
returned to the members.
(e) BSECC Rule VI, Section 3: BSECC will suspend the requirements
for providing annual audited financial
[[Page 1475]]
statements and quarterly unaudited financial during the period of
inactivity.
5. Statutory Basis
BSECC believes that the proposed rule change is consistent with the
provisions of Section 17A of the Act,\8\ in general, and furthers the
objectives of Section 17A(b)(3)(F) of the Act \9\ in particular, in
that it is designed to remove impediments to and perfect the mechanism
of the national market system for the clearance and settlement of
securities transactions. The proposed rules seek to suspend maintenance
and reporting requirements during the time when BSECC has suspended its
business operations. None of these changes affect the investing public
and rather are concerned solely with the administration of BSECC.
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\8\ 15 U.S.C. 78q-1.
\9\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Self-Regulatory Organization's Statement on Burden on Competition
BSECC does not believe that the proposed rule change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
BSECC has not solicited or received written comments relating to
the proposed rule change. BSECC will notify the Commission of any
written comments it receives.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(3) \11\ thereunder
because the proposed rule change is concerned solely with the
administration of BSECC. At any time within 60 days of the filing of
the proposed rule change, the Commission summarily may temporarily
suspend 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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\10\ Supra note 3.
\11\ Supra note 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 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-BSECC-2010-002 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-BSECC-2010-002. 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 BSECC's principal office and BSECC's Web site
(http://www.nasdaqtrader.com/Trader.aspx?id=BSECCiE2009). 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
submission should refer to File No. SR-BSECC-2010-002 and should be
submitted within January 31, 2011 days after the date of publication.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-159 Filed 1-7-11; 8:45 am]
BILLING CODE 8011-01-P