Self-Regulatory Organizations; National Securities Clearing Corporation; Order Granting Approval of a Proposed Rule Change To Amend the Membership Standards Required of Insurance Companies, 13059-13060 [E5-1163]
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Federal Register / Vol. 70, No. 51 / Thursday, March 17, 2005 / Notices
removing the explanatory information
relating to ‘‘membership capacity
statuses.’’ The membership capacity
statuses in Rules 3.2(b) and 3.3(b)
delineate the membership
classifications that member individuals
and firms may have on the Exchange. In
addition, asterisks are attached to
certain membership capacity statuses in
Rules 3.2(b) and 3.3(b). Rules 3.2(b) and
3.3(b) explain that the membership
statuses noted with an asterisk are
referred to in the Exchange rules as
membership capacity statuses. In
practice, this simply means that a
membership applicant must elect on the
Exchange’s membership application
form one of the statuses designated with
an asterisk. Since the material related to
the asterisks, and the asterisks
themselves, only reflect internal
Exchange procedures for categorizing its
members, the proposed deletions reflect
technical changes that are intended to
simplify Exchange rules.
The Exchange proposes to revise
Exchange Rule 3.8(a)(iii) to provide that
a nominee of a member organization
approved solely as a Clearing Member is
not required to have an authorized
trading function. The effect of the
proposed rule is to eliminate the
requirement that a nominee of a
Clearing Member be required to attend
the Exchange’s Member Orientation
Program and to pass the Exchange’s
Trading Member Qualification Exam.
Nominees of Clearing Members
originally were required to attend the
Exchange’s Member Orientation
Program and pass the Member
Qualification Exam because Exchange
Clearing Members generally engaged in
both clearing and trading activities. A
Clearing Member conducting trading
activities would have been required to
have a nominee on the Exchange trading
floor acting as a Floor Broker and/or
Market-Maker. Certain Exchange
Clearing Members have disposed of
their trading activities and currently
only engage in clearing activities on the
Exchange. The proposed rule is
intended to accommodate Clearing
Members that only engage in clearing
activities and do not otherwise engage
in trading activities. Clearing Members
that wish to engage in trading activities
on the Exchange would still be required
to designate a nominee who has an
authorized trading function, and
therefore would have to attend the
Exchange’s Member Orientation
Program and to pass the Exchange’s
Trading Member Qualification Exam.
2. Statutory Basis
CBOE believes that the proposed rule
change is consistent with the provisions
VerDate jul<14>2003
14:51 Mar 16, 2005
Jkt 205001
of Section 6(b) of the Act,3 in general,
and with Section 6(b)(5) of the Act,4 in
particular, which requires that CBOE
rules be designed to promote just and
equitable principles of trade, to prevent
fraudulent and manipulative acts and,
to protect investors and the public
interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition that is 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
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 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 such proposed
rule change, or
B. Institute proceedings to determine
whether the proposed rule change
should be disapproved.
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. 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 e-mail to rulecomments@sec.gov. Please include File
Number SR–CBOE–2005–10 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
PO 00000
4 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00053
Fmt 4703
450 Fifth Street, NW., Washington, DC
20549–0609.
All submissions should refer to File
Number SR–CBOE–2005–10. 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 (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 inspection and copying in
the Commission’s Public Reference
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of the CBOE. 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–CBOE–2005–10 and should
be submitted on or before April 7, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.5
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5–1165 Filed 3–16–05; 8:45 am]
BILLING CODE 8010–01–P
IV. Solicitation of Comments
3 15
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51359; File No. SR–NSCC–
2004–07]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Granting Approval
of a Proposed Rule Change To Amend
the Membership Standards Required of
Insurance Companies
March 11, 2005.
I. Introduction
On October 26, 2004, the National
Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
proposed rule change File No. SR–
NSCC–2004–07 pursuant to Section
5 17
Sfmt 4703
13059
E:\FR\FM\17MRN1.SGM
CFR 200.30–3(a)(12).
17MRN1
13060
Federal Register / Vol. 70, No. 51 / Thursday, March 17, 2005 / Notices
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’).1 Notice of the proposed
rule change was published in the
Federal Register on January 24, 2005.2
No comment letters were received. For
the reasons discussed below, the
Commission is now granting approval of
the proposed rule change.
II. Description
The proposed rule change amends
NSCC’s Rules regarding the membership
standards required of insurance
companies. As a general matter, the
current membership standards for
insurance companies are based in part
on ratings provided by rating agencies.
The proposed rule replaces these
standards in relevant part with a
measure based on Risk-Based Capital
(‘‘RBC’’) ratios.
The RBC model was developed by the
National Association of Insurance
Commissioners (‘‘NAIC’’), the
organization of insurance regulators
from the 50 States, the District of
Columbia, and the four U.S. territories.
State insurance regulators created the
NAIC in 1871 to address the need to
coordinate regulation of multistate
insurers. The NAIC has developed
uniform financial reporting by
insurance companies and an RBC
model. The NAIC’s RBC model is
designed to calculate the minimum
amount of capital that an insurer needs
to support its overall business
operations based on the degree of risk
taken by the insurer and to protect the
policyholders and business against
adverse developments. Currently
substantially all of the U.S. State
insurance jurisdictions have adopted
laws, regulations, or bulletins that are
considered to be substantially similar to
the NAIC’s RBC for Insurers Model Act.
The calculation of the RBC ratio is
based on an insurer’s Total Adjusted
Capital (‘‘TAC’’). TAC is comprised
primarily of capital plus surplus
divided by a capital level determined by
the RBC formula called the Authorized
Control Level Risk-Based Capital (‘‘ACL
RBC’’). The ACL RBC is comprised of
asset risk, credit risk, underwriting risk,
and business risk.
In general, State regulatory authorities
require no corrective action so long as
an insurance company maintains an
RBC ratio over 200%. NSCC’s
membership requirement would be an
RBC ratio of 250% as derived from
financial data reported by the insurance
company to its State regulatory
authority as part of its annual
statutorily-required financial
statements. All current insurance
company members of NSCC would meet
the proposed 250% requirement.
Insurance companies will be required
to submit the relevant data to NSCC on
an annual basis at which time their
compliance with the minimum standard
will be reviewed by NSCC. In addition,
any insurance company that fell below
the 250% ratio during the course of the
year will be required to notify NSCC
immediately of this fact.
NSCC believes that the RBC standard
is preferable to the existing NSCC
requirements of using third-party ratings
for the following reasons. First, the RBC
standard should accurately represent
the financial strength of an insurer
because the RBC system is based on
statutorily-required financial statements
and it takes into account asset risks,
credit risks, underwriting and pricing
risks and the risk that the return from
assets are not aligned with the
requirements of the company’s
liabilities and general business risk.
Second, the RBC standard is the
industry benchmark. Third, the
information needed to calculate the RBC
ratio is readily available in the
statutorily-required financial
statements, which are to be provided to
NSCC annually.
III. Discussion
Section 17A(b)(3)(F) of the Act
requires among other things that the
rules of a clearing agency be designed to
assure the safeguarding of securities and
funds in its custody or control or for
which it is responsible.3 The
Commission finds that NSCC’s proposed
rule change is consistent with this
requirement because it enhances
NSCC’s standards of financial
responsibility applicable to insurance
companies and therefore should help
NSCC protect itself and its members
from undue risk.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and in
particular Section 17A of the Act and
the rules and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,4 that the
proposed rule change (File No. SR–
NSCC–2004–07) be and hereby is
approved.
1 15
U.S.C. 78s(b)(1).
2 Securities Exchange Act Release No. 34–51035
(January 13, 2005), 70 FR 3413.
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14:51 Mar 16, 2005
Jkt 205001
PO 00000
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.5
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5–1163 Filed 3–16–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51363; File No. SR–NSCC–
2005–01]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing of
Proposed Rule Change To Amend Its
Operational Capability Requirement for
Membership
March 11, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
January 19, 2005, 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.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The purpose of this proposed rule
change is to amend NSCC’s Rules and
Procedures regarding the operational
capability requirement for membership.
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.2
5 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 The Commission has modified the text of the
summaries prepared by NSCC.
1 15
3 15
4 15
U.S.C. 78q–1(b)(3)(F).
U.S.C. 78s(b)(2).
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]]>Agencies
[Federal Register Volume 70, Number 51 (Thursday, March 17, 2005)]
[Notices]
[Pages 13059-13060]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-1163]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51359; File No. SR-NSCC-2004-07]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Granting Approval of a Proposed Rule Change To Amend
the Membership Standards Required of Insurance Companies
March 11, 2005.
I. Introduction
On October 26, 2004, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') proposed rule change File No. SR-NSCC-2004-07 pursuant
to Section
[[Page 13060]]
19(b)(1) of the Securities Exchange Act of 1934 (``Act'').\1\ Notice of
the proposed rule change was published in the Federal Register on
January 24, 2005.\2\ No comment letters were received. For the reasons
discussed below, the Commission is now granting approval of the
proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 34-51035 (January 13,
2005), 70 FR 3413.
---------------------------------------------------------------------------
II. Description
The proposed rule change amends NSCC's Rules regarding the
membership standards required of insurance companies. As a general
matter, the current membership standards for insurance companies are
based in part on ratings provided by rating agencies. The proposed rule
replaces these standards in relevant part with a measure based on Risk-
Based Capital (``RBC'') ratios.
The RBC model was developed by the National Association of
Insurance Commissioners (``NAIC''), the organization of insurance
regulators from the 50 States, the District of Columbia, and the four
U.S. territories. State insurance regulators created the NAIC in 1871
to address the need to coordinate regulation of multistate insurers.
The NAIC has developed uniform financial reporting by insurance
companies and an RBC model. The NAIC's RBC model is designed to
calculate the minimum amount of capital that an insurer needs to
support its overall business operations based on the degree of risk
taken by the insurer and to protect the policyholders and business
against adverse developments. Currently substantially all of the U.S.
State insurance jurisdictions have adopted laws, regulations, or
bulletins that are considered to be substantially similar to the NAIC's
RBC for Insurers Model Act.
The calculation of the RBC ratio is based on an insurer's Total
Adjusted Capital (``TAC''). TAC is comprised primarily of capital plus
surplus divided by a capital level determined by the RBC formula called
the Authorized Control Level Risk-Based Capital (``ACL RBC''). The ACL
RBC is comprised of asset risk, credit risk, underwriting risk, and
business risk.
In general, State regulatory authorities require no corrective
action so long as an insurance company maintains an RBC ratio over
200%. NSCC's membership requirement would be an RBC ratio of 250% as
derived from financial data reported by the insurance company to its
State regulatory authority as part of its annual statutorily-required
financial statements. All current insurance company members of NSCC
would meet the proposed 250% requirement.
Insurance companies will be required to submit the relevant data to
NSCC on an annual basis at which time their compliance with the minimum
standard will be reviewed by NSCC. In addition, any insurance company
that fell below the 250% ratio during the course of the year will be
required to notify NSCC immediately of this fact.
NSCC believes that the RBC standard is preferable to the existing
NSCC requirements of using third-party ratings for the following
reasons. First, the RBC standard should accurately represent the
financial strength of an insurer because the RBC system is based on
statutorily-required financial statements and it takes into account
asset risks, credit risks, underwriting and pricing risks and the risk
that the return from assets are not aligned with the requirements of
the company's liabilities and general business risk. Second, the RBC
standard is the industry benchmark. Third, the information needed to
calculate the RBC ratio is readily available in the statutorily-
required financial statements, which are to be provided to NSCC
annually.
III. Discussion
Section 17A(b)(3)(F) of the Act requires among other things that
the rules of a clearing agency be designed to assure the safeguarding
of securities and funds in its custody or control or for which it is
responsible.\3\ The Commission finds that NSCC's proposed rule change
is consistent with this requirement because it enhances NSCC's
standards of financial responsibility applicable to insurance companies
and therefore should help NSCC protect itself and its members from
undue risk.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular Section 17A of the Act and the rules and regulations
thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\4\ that the proposed rule change (File No. SR-NSCC-2004-07) be and
hereby is approved.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(2).
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
---------------------------------------------------------------------------
\5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-1163 Filed 3-16-05; 8:45 am]
BILLING CODE 8010-01-P
