Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change To Modify and Consolidate Clearing Fund Rules, 70647-70648 [E5-6410]
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Federal Register / Vol. 70, No. 224 / Tuesday, November 22, 2005 / Notices
system money pool (‘‘Money Pool’’) and
invest surplus funds in the Money Pool
and for the Subsidiaries to invest
surplus funds and make borrowing from
the Money Pool subject to certain
limitations; (vi) NFG and the nonutility
subsidiary companies to organize and
acquire the securities of one or more
entities (‘‘Financing Subsidiary’’)
formed for the purpose of effecting
financing transaction for NFG and its
Subsidiaries and to guarantee the
obligations of such Financing
Subsidiaries; (vii) NFG and the
Subsidiaries to change the terms of any
majority-owned nonutility subsidiary
authorized capitalization; and (viii) NFG
to consolidate or otherwise reorganize
all or any part of its direct and indirect
ownership interest in nonutility
subsidiaries.
Under the Prior Order the
Commission reserved jurisdiction over
(i) the issuance of securities by NFG and
are rated below investment grade, and
(ii) the solicitation of shareholder
approvals in connection with the
adoption of any new stock-based plan or
the extension or amendment of any
existing stock-based plan.
NFG and its Subsidiaries are now
requesting the Commission extend the
Authorization Period from December 31,
2005 to and including February 8, 2006.
NFG and its Subsidiaries (70–10074) are
not requesting any other changes to the
terms, conditions, and limitations
imposed under the Prior Order.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. E5–6411 Filed 11–21–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52772; File No. SR–NSCC–
2005–13]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Approving
Proposed Rule Change To Modify and
Consolidate Clearing Fund Rules
November 14, 2005.
I. Introduction
On September 20, 2005, the National
Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
proposed rule change SR–NSCC–2005–
13 pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
VerDate Aug<31>2005
17:22 Nov 21, 2005
Jkt 208001
(‘‘Act’’).1 Notice of the proposal was
published in the Federal Register on
October 11, 2005.2 On October 21, 2005,
NSCC amended the proposed rule
change.3 The Commission received one
comment letter in response to the
proposed rule change.4 For the reasons
discussed below, the Commission is
approving the proposed rule change.
II. Description
1. Clearing Fund Formula
Enhancements
NSCC’s clearing fund formula consists
of a number of components designed to
calculate NSCC’s exposure to
participants’ unsettled portfolios. For
CNS and Balance Order transactions,
the clearing fund formula includes,
among other components, a mark-tomarket calculation and a volatility
calculation.5
The current mark-to-market
calculation includes trades that have not
yet reached settlement date but excludes
from the calculation trades that have
reached T + 3 and CNS fail positions
(i.e., net positions that did not settle on
settlement date). NSCC is enhancing the
mark-to-market calculation to include
trades that have reached settlement date
and net CNS fail positions. This is
intended to enable NSCC to more
accurately cover its mark-to-market
exposure to participants’ unsettled
portfolios in the event of an intraday
insolvency of a participant. When
making this calculation, NSCC may but
is not required to take into account
securities that a participant has
delivered to CNS in the night cycle.6
The volatility component of the
clearing fund formula rule provides that
NSCC may exclude from volatility
calculations net unsettled positions in
classes of securities whose volatility is
either less amenable to statistical
analysis, such as OTC Pink Sheet issues
trading below $5.00, or amenable to
1 15
U.S.C. 78s(b)(1).
Exchange Act Release No. 52552
(October 3, 2005), 70 FR 59112.
3 The amendment was clarifying in nature and
made no substantive changes to the proposed rule
change as originally filed. Therefore, republication
of notice is not required.
4 Letter from Dennis A. Young, Vice President
and Treasurer, Cosse International Securities, Inc.
(November 1, 2005). The comment letter did not
address the proposed rule change.
5 The other components for CNS and Balance
Order activity are a CNS fail charge, a charge for
market maker domination, and special charges.
6 The October 21, 2005, amendment clarified that
while NSCC generally intends to take such
deliveries into account when making this
calculation, it will not do so if it would otherwise
cause operational or administrative problems, and
it reserves the right not to do so based upon the
financial or operational condition of a particular
participant at the time such calculation is made.
2 Securities
PO 00000
Frm 00070
Fmt 4703
Sfmt 4703
70647
such analysis only in a complex
manner, such as municipal or corporate
bonds. The amount of clearing fund
required to satisfy the volatility
component for these positions is
determined as a percentage haircut
(currently 2% for municipal and
corporate bonds).
NSCC is enhancing its volatility
component and is replacing the 2%
haircut for corporate and municipal
bonds with a fixed income volatility
calculation. NSCC will continue to use
a haircut for fixed income securities in
circumstances it deems appropriate,
such as where sufficient market or
security information is not available.
2. Technical Clarifications
When NSCC revised its clearing fund
formula in 2001 to move to a risk-based
calculation,7 it applied the revised
formula to participants on a rolling
basis. To accommodate this transition,
NSCC’s rules retained two versions of
Addendum B (Standards of Financial
Responsibility and Operational
Capability) and two versions of
Procedure XV (Clearing Fund Formula
and Other Matters). Version 1 of both
Addendum B and Procedure XV was
non-risk-based and Version 2 was riskbased. Version 2 is currently located in
Appendix 1.
With limited exception, all
participants are now subject to the
clearing fund provisions of Version 2 of
Procedure XV and Version 2 of
Addendum B. Accordingly, in order to
simplify the rules and enable
participants to locate provisions
applicable to them more readily, NSCC
is restructuring its Addendums,
Procedures, and Rules.
As Version 1 of Procedure XV now
has limited applicability, NSCC is
redesignating it as Version 2 of
Procedure XV and moving it to
Appendix 1. NSCC will retain only
those provisions thereof (and of Version
1 of Addendum B 8) that remain
applicable. Because Version I of
Procedure XV always contained a markto-market component, it is also being
revised to include in the mark-to-market
calculation trades that have reached T +
7 Securities Exchange Act Release No. 44431
(June 15, 2001), 66 FR 33280.
8 Both versions of Addendum B are substantially
identical with the exception of certain provisions of
current Version 1 relating to the timing for
calculating and collecting clearing fund. The
substance of those provisions of Version 1 of
Addendum B are added as a note to Version 1 of
Procedure XV that will be moved to Appendix 1
and will be renamed Version 2. The rest of Version
1 of Addendum B will be deleted. All participants
remain subject to the provisions of Version 2 of
Addendum B, which NSCC is moving to the body
of its rules from Appendix 1 and redesignating
Version 1.
E:\FR\FM\22NON1.SGM
22NON1
70648
Federal Register / Vol. 70, No. 224 / Tuesday, November 22, 2005 / Notices
3 and CNS fail positions. The provisions
of Appendix 1 (Version 2 of Procedure
XV and Version 2 of Addendum B) will
be moved into the body of the rules in
place of Version 1 of Procedure XV and
Version 1 of Addendum B where they
will appear in numerical order.
As part of these clarifications, Rule 4
(Clearing Fund) is also being corrected
to make clear that participants may
request a return of any excess clearing
fund on any day that NSCC has
determined that the participant’s actual
deposit exceeds its required deposit.
Finally, certain technical corrections are
being made to Rule 4 and to the clearing
fund formula to provide consistent
terminology and delete obsolete
references.
III. Discussion
Section 19(b) of the Act directs the
Commission to approve a proposed rule
change of a self-regulatory organization
if it finds that such proposed rule
change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
such organization. Section 17A(b)(3)(F)
of the Act requires that the rules of a
clearing agency be designed to assure
the safeguarding of securities and funds
which are in its custody or control or for
which it is responsible.9 The
Commission believes that NSCC’s rule
change is consistent with this Section
because it will permit NSCC to better
assure the safeguarding of funds and
securities which are in its custody or
control or for which it is responsible by
allowing NSCC to more precisely
identify the risks posed by a
participant’s unsettled portfolio and
more quickly adjust and collect
additional needed clearing fund
collateral than it could using the old
formula. As a result NSCC should be
better protected from the risk associated
with a participant’s default because the
clearing fund deposits it collects should
more accurately reflect NSCC’s
exposure.
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, that the
proposed rule change (File No. SR–
NSCC–2005–13) be and hereby is
approved.
9 15
U.S.C. 78q–1(b)(3)(F).
VerDate Aug<31>2005
17:22 Nov 21, 2005
Jkt 208001
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.10
Jonathan G. Katz,
Secretary.
[FR Doc. E5–6410 Filed 11–21–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52774; File No. SR–NSX–
2005–07]
Self-Regulatory Organizations;
National Stock Exchange; Order
Approving Proposed Rule Change, and
Amendment Nos. 1, 2, and 3, Thereto,
Relating to the Creation of a
Regulatory Oversight Committee
November 15, 2005.
I. Introduction
On August 1, 2005, the National Stock
Exchange SM (‘‘NSX’’ SM or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to create a Regulatory Oversight
Committee (‘‘ROC’’). Notice of the
proposed rule change, as amended, was
published for comment in the Federal
Register on October 14, 2005.3 No
comments were received regarding the
proposal. This order approves the
proposed rule change, as amended.
II. Description of the Proposed Rule
Change
NSX proposes to amend the text of
Article VI, Section 1.1 of the Exchange’s
By-Laws to allow it to create, and
specifically identify, a ROC that would
be subject to the control and supervision
of NSX’s Board of Directors (‘‘NSX
Board’’). The NSX also proposes to
establish a Regulatory Oversight
Committee Charter (‘‘ROC Charter’’) that
would set forth the functions, scope of
responsibilities and composition of the
ROC.
NSX filed the proposed rule change in
accordance with undertakings made by
it and as set forth in Section III.F.1. of
the Order Instituting Administrative and
Cease-And-Desist Proceedings Pursuant
to Sections 19(b) and 21C of the
Securities Exchange Act of 1934,
Making Findings, and Imposing
10 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 52573
(October 7, 2005), 70 FR 60113 (‘‘Notice’’).
1 15
PO 00000
Frm 00071
Fmt 4703
Sfmt 4703
Sanctions entered May 19, 2005.4 In its
filing, NSX represented that the ROC
Charter would include provisions that
mirror the terms of its undertaking to
the Commission and certification
procedures that are consistent with the
certification procedures contained in
the Order.5
Pursuant to the ROC Charter, the ROC
shall be responsible for overseeing all of
NSX’s regulatory functions and
responsibilities and to advise regularly
NSX’s Board about NSX’s regulatory
matters.6 Specifically, the ROC shall: 7
(i) Oversee NSX’s regulatory functions
to enforce compliance with the federal
securities laws and NSX rules,
including monitoring the design,
implementation, and effectiveness of
NSX’s regulatory programs; (ii)
recommend to the NSX Board an
adequate operating budget for NSX’s
regulatory functions; (iii) approve the
promulgation, filing, or issuance of new
rules, rule amendments, rule
interpretations, and regulatory circulars;
(iv) take any other action necessary to
fulfill its oversight and advisory
responsibilities; and (v) adopt policies
and procedures to ensure the
independence of NSX’s Chief
Regulatory Officer (the ‘‘CRO’’). The
ROC shall also:
• Be authorized to retain, at NSX’s
expense, outside counsel and
consultants as it deems appropriate to
carry out its responsibilities; 8
• On at least an annual basis, report
to the NSX Board on the state of the
Exchange’s regulatory program; and 9
• Create and maintain complete
minutes of all of its meetings, and create
and maintain records reflecting the
ROC’s recommendations or proposals
made to NSX Board, and NSX Board’s
decision as to each such
recommendation proposal.10
In the event that the ROC’s
recommended operating budget for
NSX’s regulatory functions either: (1) Is
less than the previous year’s budget by
a material amount, (2) is rejected by the
NSX Board, (3) is reduced by the NSX
Board by a material amount, or (4) is
altered by the NSX Board in a manner
that, in the judgment of the ROC,
materially impairs the ability of NSX to
meet its regulatory obligations, then
NSX shall, within fifteen (15) business
4 See In the Matter of National Stock Exchange
and David Colker, Securities Exchange Act Release
No. 51715 (May 19, 2005) (‘‘Administrative Order’’)
at Section III.F.1.
5 See Notice.
6 Proposed ROC Charter.
7 Proposed ROC Charter, Section A.
8 Proposed ROC Charter, Section B.
9 Proposed ROC Charter, Section C.
10 Proposed ROC Charter, Section D.
E:\FR\FM\22NON1.SGM
22NON1
]]>Agencies
[Federal Register Volume 70, Number 224 (Tuesday, November 22, 2005)]
[Notices]
[Pages 70647-70648]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-6410]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52772; File No. SR-NSCC-2005-13]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Approving Proposed Rule Change To Modify and
Consolidate Clearing Fund Rules
November 14, 2005.
I. Introduction
On September 20, 2005, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') proposed rule change SR-NSCC-2005-13 pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'').\1\
Notice of the proposal was published in the Federal Register on October
11, 2005.\2\ On October 21, 2005, NSCC amended the proposed rule
change.\3\ The Commission received one comment letter in response to
the proposed rule change.\4\ For the reasons discussed below, the
Commission is approving the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 52552 (October 3, 2005),
70 FR 59112.
\3\ The amendment was clarifying in nature and made no
substantive changes to the proposed rule change as originally filed.
Therefore, republication of notice is not required.
\4\ Letter from Dennis A. Young, Vice President and Treasurer,
Cosse International Securities, Inc. (November 1, 2005). The comment
letter did not address the proposed rule change.
---------------------------------------------------------------------------
II. Description
1. Clearing Fund Formula Enhancements
NSCC's clearing fund formula consists of a number of components
designed to calculate NSCC's exposure to participants' unsettled
portfolios. For CNS and Balance Order transactions, the clearing fund
formula includes, among other components, a mark-to-market calculation
and a volatility calculation.\5\
---------------------------------------------------------------------------
\5\ The other components for CNS and Balance Order activity are
a CNS fail charge, a charge for market maker domination, and special
charges.
---------------------------------------------------------------------------
The current mark-to-market calculation includes trades that have
not yet reached settlement date but excludes from the calculation
trades that have reached T + 3 and CNS fail positions (i.e., net
positions that did not settle on settlement date). NSCC is enhancing
the mark-to-market calculation to include trades that have reached
settlement date and net CNS fail positions. This is intended to enable
NSCC to more accurately cover its mark-to-market exposure to
participants' unsettled portfolios in the event of an intraday
insolvency of a participant. When making this calculation, NSCC may but
is not required to take into account securities that a participant has
delivered to CNS in the night cycle.\6\
---------------------------------------------------------------------------
\6\ The October 21, 2005, amendment clarified that while NSCC
generally intends to take such deliveries into account when making
this calculation, it will not do so if it would otherwise cause
operational or administrative problems, and it reserves the right
not to do so based upon the financial or operational condition of a
particular participant at the time such calculation is made.
---------------------------------------------------------------------------
The volatility component of the clearing fund formula rule provides
that NSCC may exclude from volatility calculations net unsettled
positions in classes of securities whose volatility is either less
amenable to statistical analysis, such as OTC Pink Sheet issues trading
below $5.00, or amenable to such analysis only in a complex manner,
such as municipal or corporate bonds. The amount of clearing fund
required to satisfy the volatility component for these positions is
determined as a percentage haircut (currently 2% for municipal and
corporate bonds).
NSCC is enhancing its volatility component and is replacing the 2%
haircut for corporate and municipal bonds with a fixed income
volatility calculation. NSCC will continue to use a haircut for fixed
income securities in circumstances it deems appropriate, such as where
sufficient market or security information is not available.
2. Technical Clarifications
When NSCC revised its clearing fund formula in 2001 to move to a
risk-based calculation,\7\ it applied the revised formula to
participants on a rolling basis. To accommodate this transition, NSCC's
rules retained two versions of Addendum B (Standards of Financial
Responsibility and Operational Capability) and two versions of
Procedure XV (Clearing Fund Formula and Other Matters). Version 1 of
both Addendum B and Procedure XV was non-risk-based and Version 2 was
risk-based. Version 2 is currently located in Appendix 1.
---------------------------------------------------------------------------
\7\ Securities Exchange Act Release No. 44431 (June 15, 2001),
66 FR 33280.
---------------------------------------------------------------------------
With limited exception, all participants are now subject to the
clearing fund provisions of Version 2 of Procedure XV and Version 2 of
Addendum B. Accordingly, in order to simplify the rules and enable
participants to locate provisions applicable to them more readily, NSCC
is restructuring its Addendums, Procedures, and Rules.
As Version 1 of Procedure XV now has limited applicability, NSCC is
redesignating it as Version 2 of Procedure XV and moving it to Appendix
1. NSCC will retain only those provisions thereof (and of Version 1 of
Addendum B \8\) that remain applicable. Because Version I of Procedure
XV always contained a mark-to-market component, it is also being
revised to include in the mark-to-market calculation trades that have
reached T +
[[Page 70648]]
3 and CNS fail positions. The provisions of Appendix 1 (Version 2 of
Procedure XV and Version 2 of Addendum B) will be moved into the body
of the rules in place of Version 1 of Procedure XV and Version 1 of
Addendum B where they will appear in numerical order.
---------------------------------------------------------------------------
\8\ Both versions of Addendum B are substantially identical with
the exception of certain provisions of current Version 1 relating to
the timing for calculating and collecting clearing fund. The
substance of those provisions of Version 1 of Addendum B are added
as a note to Version 1 of Procedure XV that will be moved to
Appendix 1 and will be renamed Version 2. The rest of Version 1 of
Addendum B will be deleted. All participants remain subject to the
provisions of Version 2 of Addendum B, which NSCC is moving to the
body of its rules from Appendix 1 and redesignating Version 1.
---------------------------------------------------------------------------
As part of these clarifications, Rule 4 (Clearing Fund) is also
being corrected to make clear that participants may request a return of
any excess clearing fund on any day that NSCC has determined that the
participant's actual deposit exceeds its required deposit. Finally,
certain technical corrections are being made to Rule 4 and to the
clearing fund formula to provide consistent terminology and delete
obsolete references.
III. Discussion
Section 19(b) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization. Section 17A(b)(3)(F) of the Act requires that the rules
of a clearing agency be designed to assure the safeguarding of
securities and funds which are in its custody or control or for which
it is responsible.\9\ The Commission believes that NSCC's rule change
is consistent with this Section because it will permit NSCC to better
assure the safeguarding of funds and securities which are in its
custody or control or for which it is responsible by allowing NSCC to
more precisely identify the risks posed by a participant's unsettled
portfolio and more quickly adjust and collect additional needed
clearing fund collateral than it could using the old formula. As a
result NSCC should be better protected from the risk associated with a
participant's default because the clearing fund deposits it collects
should more accurately reflect NSCC's exposure.
---------------------------------------------------------------------------
\9\ 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,
that the proposed rule change (File No. SR-NSCC-2005-13) be and hereby
is approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jonathan G. Katz,
Secretary.
[FR Doc. E5-6410 Filed 11-21-05; 8:45 am]
BILLING CODE 8010-01-P
