Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change Relating To Buy-Ins in Its Continuous Net Settlement System, 15506-15508 [E6-4433]
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15506
Federal Register / Vol. 71, No. 59 / Tuesday, March 28, 2006 / Notices
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 NASD 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.
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–NASD–2006–035 and
should be submitted on or before April
12, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.6
Nancy M. Morris,
Secretary.
[FR Doc. E6–4434 Filed 3–27–06; 8:45 am]
BILLING CODE 8010–01–P
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53531; File No. SR–NASD–
2006–008]
• 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
No. SR–NASD–2006–035 on the subject
line.
cprice-sewell on PROD1PC66 with NOTICES
Electronic Comments
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Order Approving a
Proposed Rule Change to Re-establish
a Fee Pilot for National Quotation Data
Service
March 21, 2006.
On January 24, 2006, the National
Association of Securities Dealers, Inc.
(‘‘NASD’’), through its subsidiary, The
Nasdaq Stock Market, Inc. (‘‘Nasdaq’’),
Paper Comments
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
• Send paper comments in triplicate
to Section 19(b)(1) of the Securities
to Nancy M. Morris, Secretary,
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
Securities and Exchange Commission,
19b–4 thereunder,2 a proposed rule
Station Place, 100 F Street, NE.,
change to reinstate its pilot program,
Washington, DC 20549–1090.
which reduced the monthly fee that
All submissions should refer to File
non-professional users pay to receive
Number SR–NASD–2006–035. This file
National Quotation Data Service
number should be included on the
(‘‘NQDS’’), retroactively to September 1,
subject line if e-mail is used. To help the 2005.3 The proposed rule change was
Commission process and review your
published for comment in the Federal
comments more efficiently, please use
Register on February 15, 2006.4 The
only one method. The Commission will
post all comments on the Commission’s
6 17 CFR 200.30–3(a)(12).
Internet Web site (https://www.sec.gov/
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
rules/sro.shtml). Copies of the
3 Since August 22, 2000, Nasdaq has operated a
submission, all subsequent
pilot to reduce from $50 to $10 the monthly fee that
amendments, all written statements
non-professional users pay to receive NQDS data.
with respect to the proposed rule
Nasdaq inadvertently let the pilot lapse on
change that are filed with the
September 1, 2005, until January 24, 2006. This
filing reinstates the pilot retroactively to September
Commission, and all written
1, 2005, thereby reflecting the fact that the pilot was
communications relating to the
in place at that time. See Securities Exchange Act
proposed rule change between the
Release Nos. 43190 (August 22, 2000), 65 FR 52460
Commission and any person, other than (August 29, 2000) (notice of filing and order
granting accelerated approval of NASD–00–47);
those that may be withheld from the
44788 (September 13, 2001), 66 FR 48303
public in accordance with the
(September 19, 2001); 46446 (August 30, 2002), 67
provisions of 5 U.S.C. 552, will be
FR 57260 (September 9, 2002); 48386 (August 21,
2003), 68 FR 51618 (August 27, 2003); and 50318
available for inspection and copying in
(September 3, 2004), 69 FR 54821 (September 10,
the Commission’s Public Reference
2004).
Room. Copies of such filing also will be
4 See Securities Exchange Act Release No. 53254
available for inspection and copying at
(February 8, 2006), 70 FR 8027 (SR–NASD–2006–
008).
the principal office of NASD. All
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Commission received no comments on
the proposal. This order approves the
proposed rule change.
The Commission finds that the
proposed rule change is consistent with
Section 15A of the Act 5 and the rules
and regulations thereunder.6
Specifically, the Commission finds the
proposal to be consistent with Section
15A(b)(5) of the Act,7 in that it provides
for the equitable allocation of reasonable
dues, fees and other charges among
members. The pilot lowers the monthly
fee for non-professionals to receive
NQDS from $50 to $10 a month. The
Commission notes that the NQDS
feature provides a mechanism to allow
access to market data that is relevant to
investors when they make financial
decisions and that it does not unfairly
discriminate between customers,
issuers, brokers or dealers.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,8 that the
proposed rule change (SR–NASD–2006–
008), be, and it hereby is, approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.9
Nancy M. Morris,
Secretary.
[FR Doc. E6–4436 Filed 3–27–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53528; File No. SR–NSCC–
2005–15]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Approving
Proposed Rule Change Relating To
Buy-Ins in Its Continuous Net
Settlement System
March 21, 2006.
I. Introduction
On December 1, 2005, the National
Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
proposed rule change SR–NSCC–2005–
15 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
5 15
U.S.C. 78o3.
approving this proposed rule change the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
7 15 U.S.C. 78o(b)(5).
8 15 U.S.C. 78s(b)(2).
9 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
6 In
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Federal Register / Vol. 71, No. 59 / Tuesday, March 28, 2006 / Notices
This current process will remain in
effect. Buy-In Notices transmitted by a
member which is the original submitter
will be referred to as ‘‘Original Buy-In
Notices.’’
December 27, 2005.2 No comment
letters were received. For the reasons
discussed below, the Commission is
approving the proposed rule change.
II. Description
The purpose of this filing is to modify
NSCC’s Rules with regard to CNS BuyIns in an effort to harmonize the buy-in
rules of the industry and to assist NSCC
members in reducing their exposure
related to buy-ins. At the request of
participants and after consultation with
the Buy-In Subcommittee of the
Securities Industry Association, NSCC
is modifying its Rules to create a new
buy-in retransmittal procedure that may
be utilized by NSCC members receiving
buy-in notices initiated outside of the
CNS System.3 Existing NSCC fees
related to CNS Buy-Ins will remain
unchanged.
Current Process for CNS Buy-Ins
cprice-sewell on PROD1PC66 with NOTICES
Currently under NSCC’s Rules (except
with respect to securities subject to a
voluntary corporate reorganization), a
member having a long position at the
end of any day (‘‘Originator’’) may
submit to NSCC a Notice of Intention to
Buy-In (‘‘Buy-In Notice’’) specifying the
quantity of securities that it intends to
buy-in (‘‘Buy-In Position’’). The Buy-In
Position is given high priority for
allocation from the CNS night cycle on
N+1 through completion of the CNS day
cycle at approximately 3 p.m. eastern
standard time on N+2.4
If the Buy-In Position (or a portion
thereof) remains unfilled after the
evening allocation on N+1, NSCC issues
CNS Retransmittal Notices on the
following morning allocation (N+1) to a
sufficient number of members with
short positions. NSCC issues CNS
Retransmittal Notices in an aggregate
quantity at least equal to the Buy-In
Position. In no case will the Buy-In
liability of a member exceed the Buy-In
Position or the total short position of the
member. If several members have short
positions with the same age, all such
members are issued CNS Retransmittal
Notices even if the total of their short
position exceeds the Buy-In Position. If
the Buy-In Position is not satisfied by 3
p.m. on N+2, the buy-in may be
executed.
2 Securities Exchange Act Release No. 52976
(December 19, 2005), 70 FR 76485.
3 The specific rules being amended are Rule 11,
‘‘CNS System,’’ and Procedures VII, ‘‘CNS
Accounting Operation,’’ and X, ‘‘Execution of CNS
Buy-Ins.’’
4 The day the Buy-In Notice is submitted to NSCC
is referred to as N with N+1 and N+2 referring to
the succeeding days. Each CNS day begins in the
evening and includes an evening allocation of
securities and a daytime allocation of securities.
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15:19 Mar 27, 2006
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Procedure for CNS Buy-In
Retransmittals
At times, an NSCC member will be in
receipt of a buy-in notice initiated
outside of the CNS system while at the
same time be failing to receive shares
from CNS in the same security.
Recognizing that such externally
initiated buy-ins may expire before the
time the expiration period that NSCC’s
Rules currently provide as the
expiration for CNS buy-ins (i.e., the
current N+2 expiration), NSCC will
utilize a new procedure to permit
retransmittals of such buy-ins with an
appropriately shortened execution time
frame.
Accordingly, the new procedure
provides that an NSCC member which
has a long position in CNS at the end
of any day (i.e., a fail to receive) and
which is in receipt of a buy-in notice for
securities of the same CUSIP that was
initiated outside of the CNS System may
submit a ‘‘Buy-In Retransmittal Notice’’
to NSCC. If the Buy-In Position (or a
portion thereof) that is the subject of the
Buy-In Retransmittal Notice is not
satisfied by 3 p.m. on N+1, the buy-in
can be executed. The Buy-In
Retransmittal Notice will identify the
entity that initiated the buy-in against
the member.
The differences between a Buy-In
Retransmittal Notice and an Original
Buy-In Notice are as follows:
• An Original Buy-In Notice refers to
a Buy-In Notice transmitted by a
member for which the member is the
original submitter. A Buy-In
Retransmittal Notice refers to a Buy-In
Notice submitted by a member where
the member has received a buy-in notice
outside of the CNS system with respect
to securities of the same CUSIP.
• The member submitting a Buy-In
Retransmittal Notice receives an
elevated priority for CNS allocations
upon NSCC’s receipt of the notice. The
member submitting an Original Buy-In
Notice continues to receive elevated
priority on the morning of N+1.
• The member submitting a Buy-In
Retransmittal Notice is provided with
five additional fields to be used to
identify the entity or entities that
initiated the buy-in against the member.
At least one such entity other than the
member must be identified or NSCC
will reject the Buy-In Retransmittal
Notice.
• For Buy-In Retransmittal Notices,
NSCC transmits CNS Retransmittal
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15507
Notices to CNS short members upon
receipt of the Buy-In Retransmittal
Notice on N. The CNS Retransmittal
Notice identifies both the submitting
member and the entity or entities that
initiated the buy-in against the member.
For Original Buy-In Notices, NSCC
continues to transmit CNS Retransmittal
Notices to short members on the
morning of N+1.
• A buy-in based on a Buy-In
Retransmittal Notice may be executed
on N+1 if the Buy-In Position (or a
portion thereof) is not satisfied by 3
p.m. on N+1. The execution of a buy-in
based on an Original Buy-In Notice
continues to be at 3 p.m. on N+2.
Technical Correction
In addition to modifying NSCC’s
Rules and Procedures to reflect the
above changes, NSCC is also making
technical correction to Procedure X,
‘‘Execution of Buy-Ins—CNS System.’’
The procedure states that members that
receive CNS Retransmittal Notices and
do not satisfy them assume liability for
the loss, if any, which occurs as a result
of the buy-in and that those members
with the oldest short positions after the
evening cycle on N+2 will first be held
liable for an executed buy-in. Procedure
X will now reflect that it is the oldest
short positions after the day cycle on
N+2 that will first be held liable for an
executed buy-in.
Implementation
NSCC plans to implement these
changes on a pilot basis open to all
members as soon as possible following
the Commission’s approval of the
proposed rule filing. The pilot will be
limited to buy-ins of CNS eligible NYSE
listed securities. NSCC anticipates that
the pilot phase will be completed
within thirty calendar days of
implementation at which time buy-ins
of all other CNS eligible securities will
be permitted under these proposed
changes. At that time the pilot will
cease. NSCC will notify its members by
an Important Notice of the specific date
on which the pilot will expire and the
proposed buy-in procedures are
available for use with all CNS eligible
securities.
III. Discussion
Section 17A(b)(3)(F) of the Act
requires that the rules of a clearing
agency be designed to promote the
prompt and accurate clearance and
settlement of securities transactions.5
The Commission finds that NSCC’s
proposed rule change is consistent with
this requirement because the buy-in
5 15
U.S.C. 78q–1(b)(3)(F).
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15508
Federal Register / Vol. 71, No. 59 / Tuesday, March 28, 2006 / Notices
retransmittal procedures are designed to
harmonize NSCC’s buy-in rules with the
buy-in rules of other self-regulatory
organizations. Harmonization of buy-in
rules among self-regulatory
organizations should increase the
efficiency of the buy-in execution
process and should help to promote the
prompt and accurate settlement of
securities transactions.
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,6 that the
proposed rule change (File No. SR–
NSCC–2005–15) be and hereby is
approved.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.7
Nancy M. Morris,
Secretary.
[FR Doc. E6–4433 Filed 3–27–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53529; File No. SR–Phlx–
2006–16]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change Relating to its Dividend
Spread and Merger Spread Program
cprice-sewell on PROD1PC66 with NOTICES
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 February
24, 2006, the Philadelphia Stock
Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’)
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 Phlx. Phlx has
designated the proposed rule change as
one establishing or changing a due, fee,
or other charge, pursuant to Section
19(b)(3)(A)(ii) of the Act 3 and Rule 19b–
4(f)(2) thereunder,4 which renders the
proposal effective upon filing with the
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
7 17
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15:19 Mar 27, 2006
Jkt 208001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
1. Purpose
Currently, the Exchange imposes a fee
cap on equity option transaction and
comparison charges on merger spread
strategy and dividend spread strategy
transactions executed on the same
trading day in the same options class.
Specifically, Registered Options
Traders’ (ROTs) and specialists’ equity
option transaction and comparison
charges are capped at $1,750 for
transactions effected pursuant to a
merger spread strategy or pursuant to a
dividend spread strategy when the
dividend is $0.25 or greater. However,
for dividend spread transactions for a
security with a declared dividend or
distribution of less than $0.25, the
ROTs’ and specialists’ equity option
transaction and comparison charges are
capped at $1,000 for transactions
effected pursuant to a dividend spread
strategy executed on the same trading
day in the same options class. The fee
caps are implemented after any
applicable rebates are applied to ROT
and specialist equity option transaction
and comparison charges.7
In addition, the Exchange assesses a
license fee of $0.05 per contract side for
dividend spread strategy transactions in
options in connection with certain
products that carry license fees.8 The
license fee of $0.05 per contract side: (i)
Is not subject to the $1,750 or $1,000
caps described above; (ii) is assessed in
addition to any other transaction and
comparison charges associated with
dividend spread strategy transactions;
and (iii) does not count towards
reaching the $1,750 or $1,000 caps. The
Exchange proposes to extend the pilot
program for the current fee caps and
$0.05 per contract side license fee for a
six-month period until September 1,
2006.9
Phlx proposes to: (1) Amend its
dividend spread strategy program to
assess a $0.05 per contract side license
fee on additional equity option products
in connection with dividend spread
strategies to recapture license fees
associated with the trading of these
products; and (2) extend for a period of
six months its fee caps on equity option
transaction and comparison charges on
dividend spread transactions 5 and
merger spread transactions,6 and its
$0.05 per contract side license fee
imposed for dividend spread
transactions. The current fee caps and
$0.05 per contract side license fee are in
effect as a pilot program that expired on
March 1, 2006. The Exchange proposes
to extend the pilot program for a sixmonth period until September 1, 2006.
The Exchange also proposes to make a
minor technical change to delete
unnecessary text from its fee schedule
and to correct a typographical error.
The text of the proposed rule change
is available on Phlx’s Web site at https://
www.phlx.com, at the Office of the
Secretary at Phlx, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
March 21, 2006.
6 15
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
In its filing with the Commission, the
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
proposal. The text of these statements
may be examined at the places specified
in Item IV below. The Exchange has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
5 For purposes of this proposal, a ‘‘dividend
spread’’ transaction is any trade done within a
defined time frame pursuant to a strategy in which
a dividend arbitrage can be achieved between any
two deep-in-the-money options.
6 For purposes of this proposal, the Exchange
defines a ‘‘merger spread’’ transaction as a
transaction executed pursuant to a merger spread
strategy involving the simultaneous purchase and
sale of options of the same class and expiration
date, but different strike prices, followed by the
exercise of the resulting long options position, each
executed prior to the date on which shareholders
of record are required to elect their respective form
of consideration, i.e., cash or stock.
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Fmt 4703
Sfmt 4703
7 Currently, the Exchange provides a rebate for
certain contracts executed in connection with
transactions occurring as part of a dividend spread
or merger spread strategy. Specifically, for those
options contracts executed pursuant to a dividend
spread or merger spread strategy, the Exchange
rebates $0.08 per contract side for ROT executions
and $0.07 per contract side for specialist executions
on the business day before the underlying stock’s
ex-date. (The ‘‘ex-date’’ is the date on or after which
a security is traded without a previously declared
dividend or distribution. After the ex-date a stock
is said to trade ex-dividend.) See Securities
Exchange Act Release No. 51596 (April 21, 2005),
70 FR 22381 (April 29, 2005) (SR–Phlx–2005–19).
8 These products are listed on the Exchange’s fee
schedule under the section entitled ‘‘$60,000 ‘‘Firm
Related’’ Equity Option and Index Option Cap.’’
9 Telephone conversation between Leah Mesfin,
Special Counsel, Commission, and Cynthia
Hoekstra, Director, Phlx, on March 21, 2006.
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]]>Agencies
[Federal Register Volume 71, Number 59 (Tuesday, March 28, 2006)]
[Notices]
[Pages 15506-15508]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-4433]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53528; File No. SR-NSCC-2005-15]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Approving Proposed Rule Change Relating To Buy-Ins
in Its Continuous Net Settlement System
March 21, 2006.
I. Introduction
On December 1, 2005, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') proposed rule change SR-NSCC-2005-15 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
[[Page 15507]]
December 27, 2005.\2\ No comment letters were received. 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. 52976 (December 19,
2005), 70 FR 76485.
---------------------------------------------------------------------------
II. Description
The purpose of this filing is to modify NSCC's Rules with regard to
CNS Buy-Ins in an effort to harmonize the buy-in rules of the industry
and to assist NSCC members in reducing their exposure related to buy-
ins. At the request of participants and after consultation with the
Buy-In Subcommittee of the Securities Industry Association, NSCC is
modifying its Rules to create a new buy-in retransmittal procedure that
may be utilized by NSCC members receiving buy-in notices initiated
outside of the CNS System.\3\ Existing NSCC fees related to CNS Buy-Ins
will remain unchanged.
---------------------------------------------------------------------------
\3\ The specific rules being amended are Rule 11, ``CNS
System,'' and Procedures VII, ``CNS Accounting Operation,'' and X,
``Execution of CNS Buy-Ins.''
---------------------------------------------------------------------------
Current Process for CNS Buy-Ins
Currently under NSCC's Rules (except with respect to securities
subject to a voluntary corporate reorganization), a member having a
long position at the end of any day (``Originator'') may submit to NSCC
a Notice of Intention to Buy-In (``Buy-In Notice'') specifying the
quantity of securities that it intends to buy-in (``Buy-In Position'').
The Buy-In Position is given high priority for allocation from the CNS
night cycle on N+1 through completion of the CNS day cycle at
approximately 3 p.m. eastern standard time on N+2.\4\
---------------------------------------------------------------------------
\4\ The day the Buy-In Notice is submitted to NSCC is referred
to as N with N+1 and N+2 referring to the succeeding days. Each CNS
day begins in the evening and includes an evening allocation of
securities and a daytime allocation of securities.
---------------------------------------------------------------------------
If the Buy-In Position (or a portion thereof) remains unfilled
after the evening allocation on N+1, NSCC issues CNS Retransmittal
Notices on the following morning allocation (N+1) to a sufficient
number of members with short positions. NSCC issues CNS Retransmittal
Notices in an aggregate quantity at least equal to the Buy-In Position.
In no case will the Buy-In liability of a member exceed the Buy-In
Position or the total short position of the member. If several members
have short positions with the same age, all such members are issued CNS
Retransmittal Notices even if the total of their short position exceeds
the Buy-In Position. If the Buy-In Position is not satisfied by 3 p.m.
on N+2, the buy-in may be executed.
This current process will remain in effect. Buy-In Notices
transmitted by a member which is the original submitter will be
referred to as ``Original Buy-In Notices.''
Procedure for CNS Buy-In Retransmittals
At times, an NSCC member will be in receipt of a buy-in notice
initiated outside of the CNS system while at the same time be failing
to receive shares from CNS in the same security. Recognizing that such
externally initiated buy-ins may expire before the time the expiration
period that NSCC's Rules currently provide as the expiration for CNS
buy-ins (i.e., the current N+2 expiration), NSCC will utilize a new
procedure to permit retransmittals of such buy-ins with an
appropriately shortened execution time frame.
Accordingly, the new procedure provides that an NSCC member which
has a long position in CNS at the end of any day (i.e., a fail to
receive) and which is in receipt of a buy-in notice for securities of
the same CUSIP that was initiated outside of the CNS System may submit
a ``Buy-In Retransmittal Notice'' to NSCC. If the Buy-In Position (or a
portion thereof) that is the subject of the Buy-In Retransmittal Notice
is not satisfied by 3 p.m. on N+1, the buy-in can be executed. The Buy-
In Retransmittal Notice will identify the entity that initiated the
buy-in against the member.
The differences between a Buy-In Retransmittal Notice and an
Original Buy-In Notice are as follows:
An Original Buy-In Notice refers to a Buy-In Notice
transmitted by a member for which the member is the original submitter.
A Buy-In Retransmittal Notice refers to a Buy-In Notice submitted by a
member where the member has received a buy-in notice outside of the CNS
system with respect to securities of the same CUSIP.
The member submitting a Buy-In Retransmittal Notice
receives an elevated priority for CNS allocations upon NSCC's receipt
of the notice. The member submitting an Original Buy-In Notice
continues to receive elevated priority on the morning of N+1.
The member submitting a Buy-In Retransmittal Notice is
provided with five additional fields to be used to identify the entity
or entities that initiated the buy-in against the member. At least one
such entity other than the member must be identified or NSCC will
reject the Buy-In Retransmittal Notice.
For Buy-In Retransmittal Notices, NSCC transmits CNS
Retransmittal Notices to CNS short members upon receipt of the Buy-In
Retransmittal Notice on N. The CNS Retransmittal Notice identifies both
the submitting member and the entity or entities that initiated the
buy-in against the member. For Original Buy-In Notices, NSCC continues
to transmit CNS Retransmittal Notices to short members on the morning
of N+1.
A buy-in based on a Buy-In Retransmittal Notice may be
executed on N+1 if the Buy-In Position (or a portion thereof) is not
satisfied by 3 p.m. on N+1. The execution of a buy-in based on an
Original Buy-In Notice continues to be at 3 p.m. on N+2.
Technical Correction
In addition to modifying NSCC's Rules and Procedures to reflect the
above changes, NSCC is also making technical correction to Procedure X,
``Execution of Buy-Ins--CNS System.'' The procedure states that members
that receive CNS Retransmittal Notices and do not satisfy them assume
liability for the loss, if any, which occurs as a result of the buy-in
and that those members with the oldest short positions after the
evening cycle on N+2 will first be held liable for an executed buy-in.
Procedure X will now reflect that it is the oldest short positions
after the day cycle on N+2 that will first be held liable for an
executed buy-in.
Implementation
NSCC plans to implement these changes on a pilot basis open to all
members as soon as possible following the Commission's approval of the
proposed rule filing. The pilot will be limited to buy-ins of CNS
eligible NYSE listed securities. NSCC anticipates that the pilot phase
will be completed within thirty calendar days of implementation at
which time buy-ins of all other CNS eligible securities will be
permitted under these proposed changes. At that time the pilot will
cease. NSCC will notify its members by an Important Notice of the
specific date on which the pilot will expire and the proposed buy-in
procedures are available for use with all CNS eligible securities.
III. Discussion
Section 17A(b)(3)(F) of the Act requires that the rules of a
clearing agency be designed to promote the prompt and accurate
clearance and settlement of securities transactions.\5\ The Commission
finds that NSCC's proposed rule change is consistent with this
requirement because the buy-in
[[Page 15508]]
retransmittal procedures are designed to harmonize NSCC's buy-in rules
with the buy-in rules of other self-regulatory organizations.
Harmonization of buy-in rules among self-regulatory organizations
should increase the efficiency of the buy-in execution process and
should help to promote the prompt and accurate settlement of securities
transactions.
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\5\ 15 U.S.C. 78q-1(b)(3)(F).
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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,\6\ that the proposed rule change (File No. SR-NSCC-2005-15) be and
hereby is approved.
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\6\ 15 U.S.C. 78s(b)(2).
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-4433 Filed 3-27-06; 8:45 am]
BILLING CODE 8010-01-P
