Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change To Accommodate Shorter Standard Settlement Cycle and Make Other Changes, 85299-85302 [2016-28312]
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Federal Register / Vol. 81, No. 227 / Friday, November 25, 2016 / Notices
submitted on or before December 16,
2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Brent J. Fields,
Secretary.
[FR Doc. 2016–28310 Filed 11–23–16; 8:45 am]
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79356; File No. SR–NSCC–
2016–007]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing of
Proposed Rule Change To
Accommodate Shorter Standard
Settlement Cycle and Make Other
Changes
November 18, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
7, 2016, 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
by the clearing agency. The Commission
is publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
amendments to NSCC’s Rules &
Procedures (‘‘Rules’’) 3 in order to
ensure that the Rules are consistent with
the anticipated industry-wide move to a
shorter standard settlement cycle for
certain securities 4 from the third
business day after the trade date (‘‘T+3’’)
to the second business day after the
trade date (‘‘T+2’’), as described below.
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Capitalized terms not defined herein are defined
in the Rules, available at https://dtcc.com/∼/media/
Files/Downloads/legal/rules/nscc_rules.pdf.
4 The financial services industry, in coordination
with its regulators, is planning to shorten the
standard settlement cycle for equities, corporate
and municipal bonds, unit investment trusts and
financial instruments comprised of the foregoing
products traded on the secondary market from T+3
to T+2 (the ‘‘Shortened Settlement Cycle’’). See
Securities Exchange Act Release No. 78962
(September 28, 2016), 81 FR 69240 (October 5,
2016) (S7–22–16) (Amendment to Securities
Transaction Settlement Cycle).
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The proposed rule change would not
become effective until NSCC has
submitted a subsequent proposed rule
change under Rule 19b–4.5 Therefore,
NSCC would not implement this version
of the Rules until an effective date is
established by the subsequent proposed
rule change.6
In its filing with the Commission, the
clearing agency 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. The
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
(i) Background
The standard settlement cycle has not
changed since 1993, when the
Commission adopted the current
version of Rule 15c6–1(a) under the
Securities Exchange Act of 1934, as
amended (the ‘‘Act’’), which (subject to
certain exceptions) prohibits any brokerdealer from entering into a contract for
the purchase or sale of a security that
provides for payment and delivery later
than three business days after the trade
date, unless otherwise expressly agreed
to by the parties at the time of the
transaction.7
In an effort to reduce counterparty
risk, decrease clearing capital
requirements, reduce liquidity demands
and harmonize the settlement cycle
globally, the financial services industry
has been working on shortening the
standard settlement cycle from T+3 to
T+2. In connection therewith, the
Commission has proposed a rule change
to shorten the standard settlement cycle
from T+3 to T+2.8
A number of provisions in the Rules
currently define ‘‘regular way’’
settlement as occurring on T+3 and, as
such, would need to be amended in
5 17
CFR 240.19b–4.
will post a version of the relevant sections
of the Rules reflecting the changes as they would
appear upon the effectiveness of the subsequent
proposed rule change mentioned above and will
include a note on the cover page of the Rules to
advise Members of these changes.
7 17 CFR 240.15c6–1.
8 Supra note 4.
6 NSCC
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connection with shortening the standard
settlement cycle to T+2. Further, certain
timeframes or cutoff times in the Rules
key off the current settlement date of
T+3, either expressly or indirectly. In
such cases, these timeframes and cutoff
times would also need to be amended in
connection with the Shortened
Settlement Cycle. Therefore, to facilitate
the anticipated industry-wide move to
the Shortened Settlement Cycle, NSCC
proposes to make certain amendments
to the Rules.
(ii) Proposed Changes to the Rules
The primary purpose of the proposed
rule change is to modify the Rules to
accommodate the anticipated industrywide move to a two-day settlement
cycle.9 While the core functions of
NSCC will continue to operate in the
same way in the Shortened Settlement
Cycle, NSCC has determined that the
move to T+2 would necessitate certain
amendments to the Rules because
currently the Rules are designed to
accommodate a T+3 settlement cycle. In
particular, NSCC has identified and is
proposing to change (i) rules that have
timeframes and/or cutoff times that are
tied to the standard settlement cycle and
(ii) rules affected by process changes
relating to the Shortened Settlement
Cycle. In addition, NSCC is proposing to
make a number of technical changes and
corrections to the Rules.
A. Rules Tied to the Standard
Settlement Cycle
Certain provisions in the Rules are
tied to the standard settlement cycle
because they reference timeframes and/
or cutoff times that are based on the
timing of settlement. These are
provisions that (i) directly track the
timeframe and/or Settlement Date of the
standard settlement cycle, (ii) address
non-standard settlement cycles or (iii)
provide for timeframes and/or cutoff
times that are connected to or are
affected by the timing of the standard
settlement cycle, and they would need
to be changed in order to accommodate
the Shortened Settlement Cycle. As an
example, the Rules contain a number of
provisions that refer to ‘‘three days’’ or
‘‘T+3’’ as the timeframe and Settlement
Date of the standard settlement cycle.
These provisions would need to be
updated to reflect ‘‘two days’’ or ‘‘T+2’’
to be in conformance with the
Shortened Settlement Cycle. Similarly, a
number of provisions in the Rules refer
to timeframes and Settlement Dates that
are intended to be shorter or earlier, as
applicable, than the timeframe and/or
Settlement Date of the standard
9 Id.
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settlement cycle. These provisions
would also need to be changed in order
to accommodate the Shortened
Settlement Cycle. Likewise, the length
and timing of certain cutoff times are
based on either a standard settlement
cycle or a non-standard settlement
cycle. Therefore, when the timeframe
and Settlement Date of the standard
settlement cycle and non-standard
settlement cycle are changed, these
cutoff times would also need to be
revised accordingly.
NSCC is proposing changes to the
following Rules because they contain
provisions that are tied to the standard
settlement cycle and would need to be
changed to facilitate the move to
Shortened Settlement Cycle:
1. Rule 4A (Supplemental Liquidity
Deposits)
In Section 2, delete references to the
‘‘third Settlement Day’’ and replace
them with references to the ‘‘second
Settlement Day’’ in the definition of
‘‘Options Expiration Activity Period.’’
2. Procedure II (Trade Comparison and
Recording Service)
In Section C.1.(p), with regards to
trade input and comparison of debt
securities transactions submitted for
non-standard settlement, delete the
reference to ‘‘T+2 and T+1 settlement’’
and replace it with ‘‘T+1 settlement.’’
In Section D.2.(A)(1)(b), with regards
to municipal and corporate debt
securities, delete the reference to ‘‘two
days’’ and replace it with ‘‘one day.’’
In Section F.2, with regards to the
Settlement Date for the Index Receipts,
delete the reference to ‘‘T+1, T+2 or
T+3’’ and replace it with ‘‘T+1 or T+2.’’
In Section G, with regards to the
eligibility of trades to be settled in the
normal settlement cycle and the cutoff
time for updating the totals reported for
such trades, delete references to ‘‘T+3’’
and replace them with ‘‘T+2.’’
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3. Procedure III (Trade Recording
Service (Interface With Qualified
Clearing Agencies))
In Section B, with regards to the
Settlement Date for the exercise or
assignment of options at OCC, delete the
reference to ‘‘three days’’ and replace it
with ‘‘two days.’’
4. Procedure V (Balance Order
Accounting Operation)
In Section C, (i) with regards to the
timing for the netting of trades in
Balance Order Securities, delete
references to ‘‘T and T+1’’ and replace
them with ‘‘T’’ and (ii) with regards to
the listing of the Clearance Cash
Adjustment amount for all Balance
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Orders on the Consolidated Trade
Summary, delete the reference to the
Consolidated Trade Summary being
available on T+2.
5. Procedure VII (CNS Accounting
Operation)
In Section B, (i) with regards to the
timing of the comparison or recording of
trades in CNS Securities for inclusion
on the Consolidated Trade Summary,
delete the words ‘‘T+1 up to’’ and (ii)
with regards to the timing of as-of trades
in CNS Securities that are reported on
the Consolidated Trade Summary,
delete references to ‘‘T+2’’ and ‘‘T+3’’
and replace them with ‘‘T+1’’ and
‘‘T+2,’’ respectively.
In Section G.3, with regards to the
time period for determining the rate of
the split for adjustments to Current
Market Price in the case of stock splits,
delete the reference to ‘‘last two days’’
and replace it with ‘‘one day.’’
In Section H.4(b), (i) with regards to
timing related to securities subject to
voluntary reorganizations, delete
references to protect periods of ‘‘two
days’’, ‘‘three days’’ and ‘‘greater than
three days’’ and replace them with ‘‘one
day’’, ‘‘two days’’ and ‘‘greater than two
days’’, respectively and delete
references to ‘‘E+2’’, ‘‘E+3’’ and ‘‘E+4’’
and replace them with ‘‘E+1’’, ‘‘E+2’’
and ‘‘E+3,’’ respectively, (ii) in the table
listing the time frames for the
processing of securities subject to
voluntary reorganizations with a protect
period, delete the reference to ‘‘two days
or less’’ and replace it with ‘‘one day or
less’’ as well as delete the entries for the
2 day protect period and (iii) with
regards to the timing for the recording
of ID Net Service eligible transactions
on the Miscellaneous Activity Report,
delete the words ‘‘on the night of T+2.’’
In Section K, with regards to the
timing for advising a Member about its
potential liability with respect to a short
position or a short Settling Trade
position in a security to which an
exercise privilege attaches, delete the
reference to ‘‘T+2’’ and replace it with
‘‘T+1.’’
6. Procedure XIII (Definitions)
In the definition for ‘‘T,’’ delete the
reference to ‘‘T+3’’ and replace it with
‘‘T+2.’’
7. Procedure XVI (ID Net Service)
In Procedure XVI, with regards to the
timing for processing by NSCC of ID Net
Service transactions, delete references to
‘‘the evening of T+2’’ and ‘‘the night of
T+2’’ and replace them with ‘‘the
evening prior to Settlement Date’’ and
‘‘the night prior to Settlement Date,’’
respectively.
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8. Addendum A (Fee Structure)
In Section E.1, with regards to the fee
for Index Creation and Redemption
instructions submitted for regular way
settlement, delete the explanatory
parenthetical ‘‘(T+3)’’ and replace it
with ‘‘(T+2).’’
9. Addendum K (Interpretation of the
Board of Directors Application of
Clearing Fund
In Section I.2, with regards to the
endpoint of NSCC’s guaranty for balance
order transactions, delete the reference
to ‘‘T+3’’ and replace it with ‘‘T+2.’’
B. Rules Covering Processes Affected by
a Shortened Settlement Cycle
NSCC conducted an in-depth review
of its internal operational processes to
identify those processes that would
require changes in order to
accommodate the Shortened Settlement
Cycle. In connection with that review,
NSCC has identified the following
provisions in the Rules that would need
to be updated in connection with such
process changes:
1. Procedure V (Balance Order
Accounting Operation)
In Section B, with regards to trades
that are to be processed on a trade-fortrade basis, clarify that such processing
occurs for trades that are compared or
otherwise entered into the Balance
Order Accounting Operation on SD–1,
‘‘after the cutoff time established by the
Corporation.’’ This is because under the
Shortened Settlement Cycle, trades that
are compared or otherwise entered into
the Balance Order Accounting
Operation on SD–1 would be processed
as multilaterally netted balance orders
when reported on the Consolidated
Trade Summary issued at approximately
12:00 p.m. ET on SD–1. Trades
compared and reported thereafter would
continue to be processed on a trade-fortrade basis.
Similarly, in Section B, with regards
to trades that are to be processed on a
trade-for-trade basis, clarify that such
process occurs for securities that are
subject to a voluntary corporate
reorganization which have a trade date
on or before the expiration of the
voluntary corporate reorganization and
which are compared or received ‘‘on
SD–1, after the cutoff time established
by the Corporation’’ and not ‘‘after SD–
1.’’ This shift in cutoff time is because
‘‘as of’’ regular way trades compared
and received prior to 11:30 a.m. on SD–
1 would be processed as multilaterally
netted balance orders when reported on
the Consolidated Trade Summary issued
at approximately 12:00 p.m. ET on SD–
1. ‘‘As of’’ regular way trades compared
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and reported thereafter would continue
to be processed on a trade-for-trade
basis.
2. Procedure VII (CNS Accounting
Operation)
In Section D.1, with regards to the
timing of the distribution of Projection
Reports, delete the reference to ‘‘[e]ach
morning’’ and replace it with ‘‘[t]wice a
day’’ because currently NSCC
distributes the Projection Report only
once a day; however, after the
implementation of the Shortened
Settlement Cycle, NSCC would be
distributing the Projection Reports twice
a day to enable Members to view their
updated positions on a more timely
basis.
C. Other Technical Changes and
Corrections
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During its review of the Rules in
connection with the Shortened
Settlement Cycle, NSCC has identified
the following technical changes and/or
corrections that it proposes to make to
the Rules in order to ensure that the
Rules remain consistent and accurate.
1. In Rule 3, Section 1(c), add a
footnote that identifies the term
‘‘CUSIP’’ as a registered trademark of
the American Bankers Association.
2. In Procedure II, Section G, correct
a grammatical error.
3. In Procedure VII, Sections B and D,
correct grammatical errors.
4. In Procedure X, Section B, delete
the reference to the timeframe for the
delivery of Liability Notices to the
contra party by Members holding the
receive balance orders for warrants,
rights, convertible securities or certain
other securities so the Members would
remain solely subject to the schedules of
the relevant exchanges.
5. In Procedure XIII, delete the
incorrect reference to ‘‘Settlement Day’’
and replace it with ‘‘Settlement Date’’ in
the definition for ‘‘T’’ to clarify that T+2
would normally be the Settlement Date
after the implementation of the
Shortened Settlement Cycle.
6. In Procedure XVI, correct a
grammatical error.
Implementation Timeframe
The proposed rule change would not
become effective until NSCC has
submitted a subsequent proposed rule
change under Rule 19b–4.10 Therefore,
NSCC would not implement this version
of the Rules until an effective date is
established by the subsequent proposed
rule change. NSCC anticipates that the
implementation date would correspond
with the industry’s transition to a T+2
settlement cycle, which is currently
anticipated to be in September 2017.
2. Statutory Basis
NSCC believes the proposed rule
change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
NSCC.
In particular, Section 17A(b)(3)(F) of
the Act requires, in part, that NSCC’s
Rules be designed to promote the
prompt and accurate clearance and
settlement of securities transactions and
to protect investors and the public
interest.11 NSCC believes that the
proposed changes are consistent with
the requirements of Section 17A(b)(3)(F)
because by changing the timeframes
and/or cutoff times that are based on
timing of settlement to accommodate
the Shortened Settlement Cycle, the
proposal would ensure that securities
transactions would be promptly and
accurately cleared and settled within
the industry standard settlement cycle.
Similarly, the related process changes
proposed are designed to update NSCC’s
operations in order to facilitate the
move to the Shortened Settlement Cycle
and, by extension, facilitate the prompt
and accurate clearance and settlement of
securities transactions submitted to
NSCC for clearing and settlement.
Therefore, NSCC believes the proposed
rule change promotes the prompt and
accurate clearance and settlement of
securities transactions, consistent with
Section 17A(b)(3)(F) of the Act.12
In addition, the proposed changes to
(i) update the Rules to remove
references to the settlement timeframes
or Settlement Dates that would be
rendered incorrect by the Shortened
Settlement Cycle and (ii) make other
technical changes and corrections as
described in detail above would provide
additional clarity to Members of their
rights and obligations under the Rules
and ensure technical accuracy of the
Rules. Therefore, NSCC believes these
proposed changes would protect
investors and the public interest,
consistent with the requirements of
Section 17A(b)(3)(F) of the Act.13
For the reasons noted above, NSCC
believes that the proposed rule change
is consistent with the requirements of
the Act and the rules and regulations
thereunder applicable to NSCC.
(B) Clearing Agency’s Statement on
Burden on Competition
NSCC does not believe that the
proposed rule changes would impose
11 15
U.S.C. 78q–1(b)(3)(F).
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.14 While the
anticipated industry-wide move to the
Shortened Settlement Cycle would
likely have an impact on competition
because the cost of required system
changes for individual firms to shift
from a T+3 to T+2 settlement may have
a disproportionate impact on those
firms with relatively smaller revenue
bases, NSCC does not believe that the
proposed rule changes themselves
would have a significant impact on
competition because they are
operational in nature and consist of
changes to processing timeframes and
cutoff times for NSCC’s services.
Moreover, NSCC believes that the
proposed rule changes are necessary
because they are required to facilitate
and accommodate the anticipated move
to the Shortened Settlement Cycle and
are appropriate in that they have been
specifically tailored to be in
conformance with the requirements of
the Shortened Settlement Cycle.
Therefore, NSCC does not believe that
the proposed rule changes would
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule Change
Received from Members, Participants, or
Others
NSCC has not received any written
comments relating to this proposal.
NSCC will notify the Commission of any
written comments received.
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
up to 90 days (i) as the Commission may
designate 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.
12 Id.
10 17
CFR 240.19b–4.
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Comments may be submitted by any of
the following methods:
DEPARTMENT OF STATE
[Public Notice: 9797]
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NSCC–2016–007 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549.
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All submissions should refer to File
Number SR–NSCC–2016–007. This file
number should be included on the
subject line if email 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 (https://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
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of NSCC and on DTCC’s Web site
(https://dtcc.com/legal/sec-rulefilings.aspx). 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–
2016–007 and should be submitted on
or before December 16, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Brent J. Fields,
Secretary.
[FR Doc. 2016–28312 Filed 11–23–16; 8:45 am]
BILLING CODE 8011–01–P
15 17
CFR 200.30–3(a)(12).
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Notice of Meeting of Advisory
Committee on International Law
A meeting of the Department of
State’s Advisory Committee on
International Law will take place on
Tuesday, December 13, from 9:30 a.m.
to 5:00 p.m. at the George Washington
University Law School, Michael K.
Young Faculty Conference Center, 716
20th Street NW., 5th Floor, Washington,
DC. Legal Adviser Brian Egan will chair
the meeting, which will be open to the
public up to the capacity of the
conference room. It is anticipated that
the meeting will include discussions on
the Foreign Sovereign Immunities Act,
state and individual responsibility for
arms sales, ‘‘Brexit,’’ and effective
international lawyering during
transitions.
Members of the public who wish to
attend should contact the Office of the
Legal Adviser by December 9 at
simcockjc@state.gov or (202) 776–8477
and provide their name, professional
affiliation, address, and phone number.
A valid photo ID is required for
admission to the meeting. Attendees
who require reasonable accommodation
should make their requests by December
7. Late requests will be considered but
might not be possible to accommodate.
Dated: November 17, 2016.
Julian C. Simcock, Office of the Legal
Adviser,
Executive Director, Advisory Committee on
International Law, United States Department
of State.
[FR Doc. 2016–28398 Filed 11–23–16; 8:45 am]
BILLING CODE 4710–08–P
DEPARTMENT OF STATE
[Public Notice: 9798]
E.O. 13224 Designation of Basil
Hassan as a Specially Designated
Global Terrorist
Acting under the authority of and in
accordance with section 1(b) of E.O.
13224 of September 23, 2001, as
amended by E.O. 13268 of July 2, 2002,
and E.O. 13284 of January 23, 2003, I
hereby determine that the person known
as Basil Hassan committed, or poses a
significant risk of committing, acts of
terrorism that threaten the security of
U.S. nationals or the national security,
foreign policy, or economy of the United
States.
Consistent with the determination in
section 10 of E.O. 13224 that prior
notice to persons determined to be
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subject to the Order who might have a
constitutional presence in the United
States would render ineffectual the
blocking and other measures authorized
in the Order because of the ability to
transfer funds instantaneously, I
determine that no prior notice needs to
be provided to any person subject to this
determination who might have a
constitutional presence in the United
States, because to do so would render
ineffectual the measures authorized in
the Order.
This notice shall be published in the
Federal Register.
Dated: October 6, 2016.
John F. Kerry,
Secretary of State.
[FR Doc. 2016–28404 Filed 11–23–16; 8:45 am]
BILLING CODE 4710–AD–P
DEPARTMENT OF STATE
[Public Notice: 9800]
E.O. 13224 Designation of Abdelilah
Himich, aka Abu Suleyman al-Faransi,
aka Abu Suleyman al-Firansi, aka Abu
Sulaiyman al Fransi, aka Abu
Sulaiyman, aka Abu Suleyman, aka
Abou Souleiman Al-Firansi, aka Abu
Sulayman al-Faransi, aka Abu
Souleymane, aka Abu Souleymane alFaransi, aka Abu Souleymane the
Frenchman, aka Abu Suleiman as a
Specially Designated Global Terrorist
Acting under the authority of and in
accordance with section 1(b) of E.O.
13224 of September 23, 2001, as
amended by E.O. 13268 of July 2, 2002,
and E.O. 13284 of January 23, 2003, I
hereby determine that the person known
as Abdelilah Himich, also known as
Abu Suleyman al-Faransi, also known
as Abu Suleyman al-Firansi, also known
as Abu Sulaiyman al Fransi, also known
as Abu Sulaiyman, also known as Abu
Suleyman, also known as Abou
Souleiman Al-Firansi, also known as
Abu Sulayman al-Faransi, also known
as Abu Souleymane, also known as Abu
Souleymane al-Faransi, also known as
Abu Souleymane the Frenchman, also
known as Abu Suleiman, committed, or
poses a significant risk of committing,
acts of terrorism that threaten the
security of U.S. nationals or the national
security, foreign policy, or economy of
the United States.
Consistent with the determination in
section 10 of E.O. 13224 that prior
notice to persons determined to be
subject to the Order who might have a
constitutional presence in the United
States would render ineffectual the
blocking and other measures authorized
in the Order because of the ability to
E:\FR\FM\25NON1.SGM
25NON1
]]>Agencies
[Federal Register Volume 81, Number 227 (Friday, November 25, 2016)]
[Notices]
[Pages 85299-85302]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28312]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-79356; File No. SR-NSCC-2016-007]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change To Accommodate
Shorter Standard Settlement Cycle and Make Other Changes
November 18, 2016.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 7, 2016, 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 by the clearing agency.
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.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of amendments to NSCC's Rules &
Procedures (``Rules'') \3\ in order to ensure that the Rules are
consistent with the anticipated industry-wide move to a shorter
standard settlement cycle for certain securities \4\ from the third
business day after the trade date (``T+3'') to the second business day
after the trade date (``T+2''), as described below. The proposed rule
change would not become effective until NSCC has submitted a subsequent
proposed rule change under Rule 19b-4.\5\ Therefore, NSCC would not
implement this version of the Rules until an effective date is
established by the subsequent proposed rule change.\6\
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\3\ Capitalized terms not defined herein are defined in the
Rules, available at https://dtcc.com/~/media/Files/Downloads/legal/
rules/nscc_rules.pdf.
\4\ The financial services industry, in coordination with its
regulators, is planning to shorten the standard settlement cycle for
equities, corporate and municipal bonds, unit investment trusts and
financial instruments comprised of the foregoing products traded on
the secondary market from T+3 to T+2 (the ``Shortened Settlement
Cycle''). See Securities Exchange Act Release No. 78962 (September
28, 2016), 81 FR 69240 (October 5, 2016) (S7-22-16) (Amendment to
Securities Transaction Settlement Cycle).
\5\ 17 CFR 240.19b-4.
\6\ NSCC will post a version of the relevant sections of the
Rules reflecting the changes as they would appear upon the
effectiveness of the subsequent proposed rule change mentioned above
and will include a note on the cover page of the Rules to advise
Members of these changes.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the clearing agency 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. The clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
(i) Background
The standard settlement cycle has not changed since 1993, when the
Commission adopted the current version of Rule 15c6-1(a) under the
Securities Exchange Act of 1934, as amended (the ``Act''), which
(subject to certain exceptions) prohibits any broker-dealer from
entering into a contract for the purchase or sale of a security that
provides for payment and delivery later than three business days after
the trade date, unless otherwise expressly agreed to by the parties at
the time of the transaction.\7\
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\7\ 17 CFR 240.15c6-1.
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In an effort to reduce counterparty risk, decrease clearing capital
requirements, reduce liquidity demands and harmonize the settlement
cycle globally, the financial services industry has been working on
shortening the standard settlement cycle from T+3 to T+2. In connection
therewith, the Commission has proposed a rule change to shorten the
standard settlement cycle from T+3 to T+2.\8\
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\8\ Supra note 4.
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A number of provisions in the Rules currently define ``regular
way'' settlement as occurring on T+3 and, as such, would need to be
amended in connection with shortening the standard settlement cycle to
T+2. Further, certain timeframes or cutoff times in the Rules key off
the current settlement date of T+3, either expressly or indirectly. In
such cases, these timeframes and cutoff times would also need to be
amended in connection with the Shortened Settlement Cycle. Therefore,
to facilitate the anticipated industry-wide move to the Shortened
Settlement Cycle, NSCC proposes to make certain amendments to the
Rules.
(ii) Proposed Changes to the Rules
The primary purpose of the proposed rule change is to modify the
Rules to accommodate the anticipated industry-wide move to a two-day
settlement cycle.\9\ While the core functions of NSCC will continue to
operate in the same way in the Shortened Settlement Cycle, NSCC has
determined that the move to T+2 would necessitate certain amendments to
the Rules because currently the Rules are designed to accommodate a T+3
settlement cycle. In particular, NSCC has identified and is proposing
to change (i) rules that have timeframes and/or cutoff times that are
tied to the standard settlement cycle and (ii) rules affected by
process changes relating to the Shortened Settlement Cycle. In
addition, NSCC is proposing to make a number of technical changes and
corrections to the Rules.
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\9\ Id.
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A. Rules Tied to the Standard Settlement Cycle
Certain provisions in the Rules are tied to the standard settlement
cycle because they reference timeframes and/or cutoff times that are
based on the timing of settlement. These are provisions that (i)
directly track the timeframe and/or Settlement Date of the standard
settlement cycle, (ii) address non-standard settlement cycles or (iii)
provide for timeframes and/or cutoff times that are connected to or are
affected by the timing of the standard settlement cycle, and they would
need to be changed in order to accommodate the Shortened Settlement
Cycle. As an example, the Rules contain a number of provisions that
refer to ``three days'' or ``T+3'' as the timeframe and Settlement Date
of the standard settlement cycle. These provisions would need to be
updated to reflect ``two days'' or ``T+2'' to be in conformance with
the Shortened Settlement Cycle. Similarly, a number of provisions in
the Rules refer to timeframes and Settlement Dates that are intended to
be shorter or earlier, as applicable, than the timeframe and/or
Settlement Date of the standard
[[Page 85300]]
settlement cycle. These provisions would also need to be changed in
order to accommodate the Shortened Settlement Cycle. Likewise, the
length and timing of certain cutoff times are based on either a
standard settlement cycle or a non-standard settlement cycle.
Therefore, when the timeframe and Settlement Date of the standard
settlement cycle and non-standard settlement cycle are changed, these
cutoff times would also need to be revised accordingly.
NSCC is proposing changes to the following Rules because they
contain provisions that are tied to the standard settlement cycle and
would need to be changed to facilitate the move to Shortened Settlement
Cycle:
1. Rule 4A (Supplemental Liquidity Deposits)
In Section 2, delete references to the ``third Settlement Day'' and
replace them with references to the ``second Settlement Day'' in the
definition of ``Options Expiration Activity Period.''
2. Procedure II (Trade Comparison and Recording Service)
In Section C.1.(p), with regards to trade input and comparison of
debt securities transactions submitted for non-standard settlement,
delete the reference to ``T+2 and T+1 settlement'' and replace it with
``T+1 settlement.''
In Section D.2.(A)(1)(b), with regards to municipal and corporate
debt securities, delete the reference to ``two days'' and replace it
with ``one day.''
In Section F.2, with regards to the Settlement Date for the Index
Receipts, delete the reference to ``T+1, T+2 or T+3'' and replace it
with ``T+1 or T+2.''
In Section G, with regards to the eligibility of trades to be
settled in the normal settlement cycle and the cutoff time for updating
the totals reported for such trades, delete references to ``T+3'' and
replace them with ``T+2.''
3. Procedure III (Trade Recording Service (Interface With Qualified
Clearing Agencies))
In Section B, with regards to the Settlement Date for the exercise
or assignment of options at OCC, delete the reference to ``three days''
and replace it with ``two days.''
4. Procedure V (Balance Order Accounting Operation)
In Section C, (i) with regards to the timing for the netting of
trades in Balance Order Securities, delete references to ``T and T+1''
and replace them with ``T'' and (ii) with regards to the listing of the
Clearance Cash Adjustment amount for all Balance Orders on the
Consolidated Trade Summary, delete the reference to the Consolidated
Trade Summary being available on T+2.
5. Procedure VII (CNS Accounting Operation)
In Section B, (i) with regards to the timing of the comparison or
recording of trades in CNS Securities for inclusion on the Consolidated
Trade Summary, delete the words ``T+1 up to'' and (ii) with regards to
the timing of as-of trades in CNS Securities that are reported on the
Consolidated Trade Summary, delete references to ``T+2'' and ``T+3''
and replace them with ``T+1'' and ``T+2,'' respectively.
In Section G.3, with regards to the time period for determining the
rate of the split for adjustments to Current Market Price in the case
of stock splits, delete the reference to ``last two days'' and replace
it with ``one day.''
In Section H.4(b), (i) with regards to timing related to securities
subject to voluntary reorganizations, delete references to protect
periods of ``two days'', ``three days'' and ``greater than three days''
and replace them with ``one day'', ``two days'' and ``greater than two
days'', respectively and delete references to ``E+2'', ``E+3'' and
``E+4'' and replace them with ``E+1'', ``E+2'' and ``E+3,''
respectively, (ii) in the table listing the time frames for the
processing of securities subject to voluntary reorganizations with a
protect period, delete the reference to ``two days or less'' and
replace it with ``one day or less'' as well as delete the entries for
the 2 day protect period and (iii) with regards to the timing for the
recording of ID Net Service eligible transactions on the Miscellaneous
Activity Report, delete the words ``on the night of T+2.''
In Section K, with regards to the timing for advising a Member
about its potential liability with respect to a short position or a
short Settling Trade position in a security to which an exercise
privilege attaches, delete the reference to ``T+2'' and replace it with
``T+1.''
6. Procedure XIII (Definitions)
In the definition for ``T,'' delete the reference to ``T+3'' and
replace it with ``T+2.''
7. Procedure XVI (ID Net Service)
In Procedure XVI, with regards to the timing for processing by NSCC
of ID Net Service transactions, delete references to ``the evening of
T+2'' and ``the night of T+2'' and replace them with ``the evening
prior to Settlement Date'' and ``the night prior to Settlement Date,''
respectively.
8. Addendum A (Fee Structure)
In Section E.1, with regards to the fee for Index Creation and
Redemption instructions submitted for regular way settlement, delete
the explanatory parenthetical ``(T+3)'' and replace it with ``(T+2).''
9. Addendum K (Interpretation of the Board of Directors Application of
Clearing Fund
In Section I.2, with regards to the endpoint of NSCC's guaranty for
balance order transactions, delete the reference to ``T+3'' and replace
it with ``T+2.''
B. Rules Covering Processes Affected by a Shortened Settlement Cycle
NSCC conducted an in-depth review of its internal operational
processes to identify those processes that would require changes in
order to accommodate the Shortened Settlement Cycle. In connection with
that review, NSCC has identified the following provisions in the Rules
that would need to be updated in connection with such process changes:
1. Procedure V (Balance Order Accounting Operation)
In Section B, with regards to trades that are to be processed on a
trade-for-trade basis, clarify that such processing occurs for trades
that are compared or otherwise entered into the Balance Order
Accounting Operation on SD-1, ``after the cutoff time established by
the Corporation.'' This is because under the Shortened Settlement
Cycle, trades that are compared or otherwise entered into the Balance
Order Accounting Operation on SD-1 would be processed as multilaterally
netted balance orders when reported on the Consolidated Trade Summary
issued at approximately 12:00 p.m. ET on SD-1. Trades compared and
reported thereafter would continue to be processed on a trade-for-trade
basis.
Similarly, in Section B, with regards to trades that are to be
processed on a trade-for-trade basis, clarify that such process occurs
for securities that are subject to a voluntary corporate reorganization
which have a trade date on or before the expiration of the voluntary
corporate reorganization and which are compared or received ``on SD-1,
after the cutoff time established by the Corporation'' and not ``after
SD-1.'' This shift in cutoff time is because ``as of'' regular way
trades compared and received prior to 11:30 a.m. on SD-1 would be
processed as multilaterally netted balance orders when reported on the
Consolidated Trade Summary issued at approximately 12:00 p.m. ET on SD-
1. ``As of'' regular way trades compared
[[Page 85301]]
and reported thereafter would continue to be processed on a trade-for-
trade basis.
2. Procedure VII (CNS Accounting Operation)
In Section D.1, with regards to the timing of the distribution of
Projection Reports, delete the reference to ``[e]ach morning'' and
replace it with ``[t]wice a day'' because currently NSCC distributes
the Projection Report only once a day; however, after the
implementation of the Shortened Settlement Cycle, NSCC would be
distributing the Projection Reports twice a day to enable Members to
view their updated positions on a more timely basis.
C. Other Technical Changes and Corrections
During its review of the Rules in connection with the Shortened
Settlement Cycle, NSCC has identified the following technical changes
and/or corrections that it proposes to make to the Rules in order to
ensure that the Rules remain consistent and accurate.
1. In Rule 3, Section 1(c), add a footnote that identifies the term
``CUSIP'' as a registered trademark of the American Bankers
Association.
2. In Procedure II, Section G, correct a grammatical error.
3. In Procedure VII, Sections B and D, correct grammatical errors.
4. In Procedure X, Section B, delete the reference to the timeframe
for the delivery of Liability Notices to the contra party by Members
holding the receive balance orders for warrants, rights, convertible
securities or certain other securities so the Members would remain
solely subject to the schedules of the relevant exchanges.
5. In Procedure XIII, delete the incorrect reference to
``Settlement Day'' and replace it with ``Settlement Date'' in the
definition for ``T'' to clarify that T+2 would normally be the
Settlement Date after the implementation of the Shortened Settlement
Cycle.
6. In Procedure XVI, correct a grammatical error.
Implementation Timeframe
The proposed rule change would not become effective until NSCC has
submitted a subsequent proposed rule change under Rule 19b-4.\10\
Therefore, NSCC would not implement this version of the Rules until an
effective date is established by the subsequent proposed rule change.
NSCC anticipates that the implementation date would correspond with the
industry's transition to a T+2 settlement cycle, which is currently
anticipated to be in September 2017.
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\10\ 17 CFR 240.19b-4.
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2. Statutory Basis
NSCC believes the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to NSCC.
In particular, Section 17A(b)(3)(F) of the Act requires, in part,
that NSCC's Rules be designed to promote the prompt and accurate
clearance and settlement of securities transactions and to protect
investors and the public interest.\11\ NSCC believes that the proposed
changes are consistent with the requirements of Section 17A(b)(3)(F)
because by changing the timeframes and/or cutoff times that are based
on timing of settlement to accommodate the Shortened Settlement Cycle,
the proposal would ensure that securities transactions would be
promptly and accurately cleared and settled within the industry
standard settlement cycle. Similarly, the related process changes
proposed are designed to update NSCC's operations in order to
facilitate the move to the Shortened Settlement Cycle and, by
extension, facilitate the prompt and accurate clearance and settlement
of securities transactions submitted to NSCC for clearing and
settlement. Therefore, NSCC believes the proposed rule change promotes
the prompt and accurate clearance and settlement of securities
transactions, consistent with Section 17A(b)(3)(F) of the Act.\12\
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\11\ 15 U.S.C. 78q-1(b)(3)(F).
\12\ Id.
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In addition, the proposed changes to (i) update the Rules to remove
references to the settlement timeframes or Settlement Dates that would
be rendered incorrect by the Shortened Settlement Cycle and (ii) make
other technical changes and corrections as described in detail above
would provide additional clarity to Members of their rights and
obligations under the Rules and ensure technical accuracy of the Rules.
Therefore, NSCC believes these proposed changes would protect investors
and the public interest, consistent with the requirements of Section
17A(b)(3)(F) of the Act.\13\
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\13\ Id.
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For the reasons noted above, NSCC believes that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to NSCC.
(B) Clearing Agency's Statement on Burden on Competition
NSCC does not believe that the proposed rule changes would impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.\14\ While the anticipated
industry-wide move to the Shortened Settlement Cycle would likely have
an impact on competition because the cost of required system changes
for individual firms to shift from a T+3 to T+2 settlement may have a
disproportionate impact on those firms with relatively smaller revenue
bases, NSCC does not believe that the proposed rule changes themselves
would have a significant impact on competition because they are
operational in nature and consist of changes to processing timeframes
and cutoff times for NSCC's services. Moreover, NSCC believes that the
proposed rule changes are necessary because they are required to
facilitate and accommodate the anticipated move to the Shortened
Settlement Cycle and are appropriate in that they have been
specifically tailored to be in conformance with the requirements of the
Shortened Settlement Cycle. Therefore, NSCC does not believe that the
proposed rule changes would impose any burden on competition that is
not necessary or appropriate in furtherance of the purposes of the Act.
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\14\ 15 U.S.C. 78q-1(b)(3)(I).
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received from Members, Participants, or Others
NSCC has not received any written comments relating to this
proposal. NSCC will notify the Commission of any written comments
received.
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 up to 90 days (i) as the
Commission may designate 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.
[[Page 85302]]
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NSCC-2016-007 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549.
All submissions should refer to File Number SR-NSCC-2016-007. This file
number should be included on the subject line if email 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 (https://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
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of NSCC and on
DTCC's Web site (https://dtcc.com/legal/sec-rule-filings.aspx). 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-2016-007 and should be
submitted on or before December 16, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-28312 Filed 11-23-16; 8:45 am]
BILLING CODE 8011-01-P
