Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change To Amend its Rules and Procedures Wth Respect to Clearing Fund Collateral, 70820-70822 [E6-20623]
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70820
Federal Register / Vol. 71, No. 234 / Wednesday, December 6, 2006 / Notices
proposed rule change would clarify
Nasdaq’s listing requirements related to
Reverse Mergers and thereby provide
additional transparency to the rules.
This proposed clarification is designed
to protect investors and the public
interest by allowing Nasdaq to confirm
that the post-transaction entity will
meet all initial criteria at the time it
begins trading.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq does not believe that the
proposed rule change would result in
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
Written comments were neither
solicited nor received.
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.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
PWALKER on PRODPC60 with NOTICES
• 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–NASDAQ–2006–047 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
VerDate Aug<31>2005
16:56 Dec 05, 2006
Jkt 211001
All submissions should refer to File
Number SR–NASDAQ–2006–047. 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 Nasdaq. 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–NASDAQ–2006–047 and
should be submitted on or before
December 27, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.8
Nancy M. Morris,
Secretary.
[FR Doc. E6–20574 Filed 12–5–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54822; File No. SR–NSCC–
2006–11]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing of
Proposed Rule Change To Amend its
Rules and Procedures Wth Respect to
Clearing Fund Collateral
November 28, 2006.
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 October
3, 2006, the National Securities Clearing
Corporation (‘‘NSCC’’) filed with the
Securities and Exchange Commission
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Frm 00087
Fmt 4703
Sfmt 4703
(‘‘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 proposed rule change seeks to
modify NSCC’s Rules with respect to
Clearing Fund collateral in order to
improve liquidity and to minimize risk
for NSCC and its members. NSCC has
also made certain technical corrections
to the text of Rule 4 to conform the rule
to actual practice.3
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.4
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Under NSCC’s Rules,5 members are
required to make deposits to the
Clearing Fund. The amount of each
member’s required deposit (‘‘Required
Deposit’’) is fixed by NSCC in
accordance with one or more formulas.
A member’s Required Deposit may be
satisfied with a cash deposit, and a
portion of a member’s Required Deposit
may be evidenced by an open account
indebtedness secured by Qualifying
Bonds and/or one or more irrevocable
letters of credit issued under certain
guidelines established within NSCC’s
Rules.6 NSCC haircuts the value that
Qualifying Bonds receive when used to
3 For example, the reference in Rule 4, Section 1
to the ‘‘market value’’ of Qualifying Bonds has been
corrected to accurately reference the ‘‘collateral
value’’ of Eligible Clearing Fund Securities.
4 The Commission has modified the text of the
summaries prepared by NSCC.
5 Rule 4 (Clearing Fund), Procedure XV (Clearing
Fund Formula and Other Matters), and Annex 1
(Version 2 of Procedure XV—Limited
Applicability).
6 Mutual Fund/Insurance Service Members are
not permitted to use Qualifying Bonds or
irrevocable letters of credit to satisfy their Required
Deposits.
E:\FR\FM\06DEN1.SGM
06DEN1
Federal Register / Vol. 71, No. 234 / Wednesday, December 6, 2006 / Notices
meet a member’s Clearing Fund
requirement and will not allow a letter
of credit to be used if by doing so more
than twenty percent of NSCC’s total
Clearing Fund would consist of letters
of credit issued by that approved letter
of credit issuing bank. Each member is
entitled to any Clearing Fund interest
earned or paid on Qualifying Bonds and
cash deposits.
NSCC proposes to modify its Rules to:
(1) Expand the types of instruments
which NSCC may accept as Qualifying
Bonds (‘‘Eligible Clearing Fund
Securities’’) securing a member’s open
account Clearing Fund indebtedness
and establish concentration
requirements with regard to their use;
(2) create a correlating range of haircuts
to be applied to these expanded types of
Eligible Clearing Fund Securities; and
(3) eliminate letters of credit as a
generally acceptable form of collateral
securing the member’s open account
Clearing Fund indebtedness.
PWALKER on PRODPC60 with NOTICES
1. Revised Clearing Fund Components
(a) Cash. The current Clearing Fund
minimum cash deposit requirement will
remain unchanged: each member must
contribute a minimum of $10,000 with
the first forty percent but no less than
$10,000 of a member’s Required Deposit
being in cash.7
(b) Securities. NSCC proposes to
replace the term Qualifying Bonds 8
with a new set of definitions for Eligible
Clearing Fund Securities. These
securities will be unmatured bonds
which are either an Eligible Clearing
Fund Agency Security, Eligible Clearing
Fund Mortgage-Backed Security, or
Eligible Clearing Fund Treasury
Security. An Eligible Clearing Fund
Agency Security will be defined as a
direct obligation of those U.S. agencies
or government sponsored enterprises as
NSCC may designate from time to time
that satisfies such criteria set forth in
notices issued by NSCC from time to
time. An Eligible Clearing Fund
Mortgage-Backed Security will be
defined as a mortgage-backed pass
through obligation issued by those U.S.
agencies or government sponsored
enterprises as NSCC may designate from
time to time that satisfies such criteria
set forth in notices issued by NSCC from
time to time. An Eligible Clearing Fund
Treasury Security will be defined as a
direct obligation of the U.S. Government
that satisfies the criteria set forth in
7 See
supra note 6.
8 ‘‘Qualifying Bonds’’ is defined in Rule 4 as
unmatured bonds that are either direct obligations
of, or obligations guaranteed as to principal and
interest by, the United States or its agencies.
VerDate Aug<31>2005
16:03 Dec 05, 2006
Jkt 211001
notices issued by NSCC from time to
time.
Initial eligibility criteria for each type
of Eligible Clearing Fund Security will
be announced to members in an
Important Notice prior to the effective
date of these proposed rule changes.
Any future changes to the eligibility
criteria will also be announced to
members in Important Notices in
advance of such changes becoming
effective.
(c) Security Concentration Provisions.
NSCC also proposes to establish security
concentration provisions for Clearing
Fund deposits. As is currently required,
each member must contribute a
minimum of $10,000 with the first forty
percent but no less than $10,000 of a
member’s Required Deposit being in
cash.9 The remainder of a member’s
deposit may be secured by the pledge of
Eligible Clearing Fund Securities in any
combination of Eligible Clearing Fund
Treasury Securities, Eligible Clearing
Fund Agency Securities, and/or Eligible
Clearing Fund Mortgage-Backed
Securities, subject to the following two
limitations. First, any deposits of
Eligible Clearing Fund Agency
Securities or Eligible Clearing Fund
Mortgage-Backed Securities in excess of
twenty-five percent of the member’s
Required Deposit will be subject to an
additional haircut equal to twice the
percentage noted in the haircut
schedule. Second, no more than twenty
percent of a member’s Required Deposit
secured by pledged Eligible Clearing
Fund Agency Securities may be of a
single issuer.10
(d) Letters of Credit and Other
Adequate Assurances. Because letters of
credit will no longer be accepted by
NSCC as a form of Clearing Fund
collateral,11 the current requirements
within NSCC’s Rules that pertain to
Letter of Credit Issuers will be modified
to reflect this. For those members who
currently have letters of credit posted as
collateral (other than members, if any,
that have been required to post letters of
9 See
supra note 6.
member may post as collateral Eligible
Clearing Fund Agency Securities for which it is the
issuer. However, a member may pledge Eligible
Clearing Fund Mortgage-Backed Securities for
which it is the issuer subject to a premium haircut.
That haircut shall be fourteen percent as an initial
matter, and if the member also exceeds the twentyfive percent concentration limit, the haircut shall be
twenty-one percent.
11 NSCC has found that in practice letters of credit
are not as liquid as cash and securities, and
therefore potentially pose more risk to NSCC and
its members when accepted by NSCC as Clearing
Fund collateral. NSCC will, however, reserve the
right to require letters of credit from members in
those instances where a particular member has been
found, by NSCC in its discretion, to present legal
risk.
10 No
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70821
credit for legal risk), effective April 1,
2007, (which date corresponds with the
regular expiration date of letters of
credit) members will be required to
replace that portion of their Clearing
Fund deposit with either cash or
Eligible Clearing Fund Securities.
(e) Implementation Timeframes. The
foregoing rule changes will become
effective thirty days after an Important
Notice is issued to members informing
them that NSCC’s systems are ready to
accommodate such changes with the
corresponding changes to NSCC’s rules
being made at that time.
NSCC believes that the proposed rule
change is consistent with the
requirements of Section 17A of the
Act 12 and the rules and regulations
thereunder because it will enable NSCC
to diversify Clearing Fund collateral in
order to improve liquidity and to
minimize risk for NSCC and its
members. As such, NSCC believes it
will better enable NSCC to safeguard
securities and funds in its possession or
control or for which it is responsible.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
NSCC does not believe that the
proposed rule change will have any
impact or impose any burden on
competition.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments relating to the
proposed rule change have not yet been
solicited or received. NSCC will notify
the Commission of any written
comments received by NSCC.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within thirty-five 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 ninety 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.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
12 15
E:\FR\FM\06DEN1.SGM
U.S.C. 78q—1.
06DEN1
70822
Federal Register / Vol. 71, No. 234 / Wednesday, December 6, 2006 / Notices
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–NSCC–2006–11 on the
subject line.
Paper Comments
PWALKER on PRODPC60 with NOTICES
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NSCC–2006–11. 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
Section, 100 F Street, NE., Washington,
DC 20549. Copies of such filings also
will be available for inspection and
copying at the principal office of NSCC
and on NSCC’s Web site at https://
www.nscc.com/legal/2006/2006–11.pdf.
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–2006–11 and should
be submitted on or before December 27,
2006.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.13
Nancy M. Morris,
Secretary.
[FR Doc. E6–20623 Filed 12–5–06; 8:45 am]
during the phase-in period of NSX
BLADE are the fees contained in old
Exchange Rule 11.10. Below is the text
of the proposed rule change, as
amended. Proposed new language is in
italics.
BILLING CODE 8011–01–P
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:
NATIONAL STOCK EXCHANGE, INC.
FEE SCHEDULE
SECURITIES AND EXCHANGE
COMMISSION
For Executions via NSX BLADESM as of
October, 2006
[Release No. 34–54829; File No. SR–NSX–
2006–13]
The following reflects the Schedule of
Fees (pursuant to Rule 16.1(a) and Rule
16.1(c)) for all transactions executed via
the National Stock Exchange System
known as NSX BLADESM (the
‘‘System’’):
1. Order Matching. Orders in Tape C
securities that are matched in the
System will be subject to the following
rebates and execution fees (computed
on a monthly basis):
A. Rebate for adding liquidity (per
share executed):
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change and
Amendment No. 1 Thereto To
Implement a Fee Schedule Under NSX
Rule 16.1(a) and 16.1(c) for
Transactions Executed Through NSX
BLADE
November 29, 2006.
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 October
23, 2006, the National Stock Exchange,
Inc. (‘‘NSX’’ 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 substantially prepared by the
Exchange. On November 17, 2006, NSX
submitted Amendment No. 1 to the
proposed rule change. The Exchange
has designated this proposal as one
establishing or changing a due, fee, or
other charge applicable only to a
member imposed by the Exchange
under 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 Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to implement
a fee schedule pursuant to the newly
approved Chapter XVI of the Exchange
Rules. The Fee Schedule would apply to
executions through NSX’s new trading
system, NSX BLADE. The fees for
executions through the Exchange’s
current trading system, National
Securities Trading System (‘‘NSTS’’),
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
Average Daily Shares of Liquidity Provided
Rebate for
Adding Liquidity (Per Share
Executed)
Greater than 30 million .........
30 million or less ..................
........................
$0.0027
B. Execution fee for removing
liquidity: $0.0030 per share executed.
2. Order Routing. Orders that are
routed through the System and executed
in another market center shall be
charged $0.0040 per share executed.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change, as amended,
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 Exchange has prepared summaries,
set forth in Sections A, B, and C below,
of the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
In anticipation of the approval of the
new trading rules,5 the Exchange
1 15
2 17
13 17
CFR 200.30–3(a)(12).
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5 See Securities Exchange Act Release No. 54391
(August 31, 2006), 71 FR 52836 (September 7, 2006)
(order approving File No. SR–NSX–2006–08).
E:\FR\FM\06DEN1.SGM
06DEN1
]]>Agencies
[Federal Register Volume 71, Number 234 (Wednesday, December 6, 2006)]
[Notices]
[Pages 70820-70822]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-20623]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54822; File No. SR-NSCC-2006-11]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change To Amend its
Rules and Procedures Wth Respect to Clearing Fund Collateral
November 28, 2006.
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 October 3, 2006, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change seeks to modify NSCC's Rules with respect
to Clearing Fund collateral in order to improve liquidity and to
minimize risk for NSCC and its members. NSCC has also made certain
technical corrections to the text of Rule 4 to conform the rule to
actual practice.\3\
---------------------------------------------------------------------------
\3\ For example, the reference in Rule 4, Section 1 to the
``market value'' of Qualifying Bonds has been corrected to
accurately reference the ``collateral value'' of Eligible Clearing
Fund Securities.
---------------------------------------------------------------------------
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.\4\
---------------------------------------------------------------------------
\4\ The Commission has modified the text of the summaries
prepared by NSCC.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
Under NSCC's Rules,\5\ members are required to make deposits to the
Clearing Fund. The amount of each member's required deposit (``Required
Deposit'') is fixed by NSCC in accordance with one or more formulas. A
member's Required Deposit may be satisfied with a cash deposit, and a
portion of a member's Required Deposit may be evidenced by an open
account indebtedness secured by Qualifying Bonds and/or one or more
irrevocable letters of credit issued under certain guidelines
established within NSCC's Rules.\6\ NSCC haircuts the value that
Qualifying Bonds receive when used to
[[Page 70821]]
meet a member's Clearing Fund requirement and will not allow a letter
of credit to be used if by doing so more than twenty percent of NSCC's
total Clearing Fund would consist of letters of credit issued by that
approved letter of credit issuing bank. Each member is entitled to any
Clearing Fund interest earned or paid on Qualifying Bonds and cash
deposits.
---------------------------------------------------------------------------
\5\ Rule 4 (Clearing Fund), Procedure XV (Clearing Fund Formula
and Other Matters), and Annex 1 (Version 2 of Procedure XV--Limited
Applicability).
\6\ Mutual Fund/Insurance Service Members are not permitted to
use Qualifying Bonds or irrevocable letters of credit to satisfy
their Required Deposits.
---------------------------------------------------------------------------
NSCC proposes to modify its Rules to: (1) Expand the types of
instruments which NSCC may accept as Qualifying Bonds (``Eligible
Clearing Fund Securities'') securing a member's open account Clearing
Fund indebtedness and establish concentration requirements with regard
to their use; (2) create a correlating range of haircuts to be applied
to these expanded types of Eligible Clearing Fund Securities; and (3)
eliminate letters of credit as a generally acceptable form of
collateral securing the member's open account Clearing Fund
indebtedness.
1. Revised Clearing Fund Components
(a) Cash. The current Clearing Fund minimum cash deposit
requirement will remain unchanged: each member must contribute a
minimum of $10,000 with the first forty percent but no less than
$10,000 of a member's Required Deposit being in cash.\7\
---------------------------------------------------------------------------
\7\ See supra note 6.
---------------------------------------------------------------------------
(b) Securities. NSCC proposes to replace the term Qualifying Bonds
\8\ with a new set of definitions for Eligible Clearing Fund
Securities. These securities will be unmatured bonds which are either
an Eligible Clearing Fund Agency Security, Eligible Clearing Fund
Mortgage-Backed Security, or Eligible Clearing Fund Treasury Security.
An Eligible Clearing Fund Agency Security will be defined as a direct
obligation of those U.S. agencies or government sponsored enterprises
as NSCC may designate from time to time that satisfies such criteria
set forth in notices issued by NSCC from time to time. An Eligible
Clearing Fund Mortgage-Backed Security will be defined as a mortgage-
backed pass through obligation issued by those U.S. agencies or
government sponsored enterprises as NSCC may designate from time to
time that satisfies such criteria set forth in notices issued by NSCC
from time to time. An Eligible Clearing Fund Treasury Security will be
defined as a direct obligation of the U.S. Government that satisfies
the criteria set forth in notices issued by NSCC from time to time.
---------------------------------------------------------------------------
\8\ ``Qualifying Bonds'' is defined in Rule 4 as unmatured bonds
that are either direct obligations of, or obligations guaranteed as
to principal and interest by, the United States or its agencies.
---------------------------------------------------------------------------
Initial eligibility criteria for each type of Eligible Clearing
Fund Security will be announced to members in an Important Notice prior
to the effective date of these proposed rule changes. Any future
changes to the eligibility criteria will also be announced to members
in Important Notices in advance of such changes becoming effective.
(c) Security Concentration Provisions. NSCC also proposes to
establish security concentration provisions for Clearing Fund deposits.
As is currently required, each member must contribute a minimum of
$10,000 with the first forty percent but no less than $10,000 of a
member's Required Deposit being in cash.\9\ The remainder of a member's
deposit may be secured by the pledge of Eligible Clearing Fund
Securities in any combination of Eligible Clearing Fund Treasury
Securities, Eligible Clearing Fund Agency Securities, and/or Eligible
Clearing Fund Mortgage-Backed Securities, subject to the following two
limitations. First, any deposits of Eligible Clearing Fund Agency
Securities or Eligible Clearing Fund Mortgage-Backed Securities in
excess of twenty-five percent of the member's Required Deposit will be
subject to an additional haircut equal to twice the percentage noted in
the haircut schedule. Second, no more than twenty percent of a member's
Required Deposit secured by pledged Eligible Clearing Fund Agency
Securities may be of a single issuer.\10\
---------------------------------------------------------------------------
\9\ See supra note 6.
\10\ No member may post as collateral Eligible Clearing Fund
Agency Securities for which it is the issuer. However, a member may
pledge Eligible Clearing Fund Mortgage-Backed Securities for which
it is the issuer subject to a premium haircut. That haircut shall be
fourteen percent as an initial matter, and if the member also
exceeds the twenty-five percent concentration limit, the haircut
shall be twenty-one percent.
---------------------------------------------------------------------------
(d) Letters of Credit and Other Adequate Assurances. Because
letters of credit will no longer be accepted by NSCC as a form of
Clearing Fund collateral,\11\ the current requirements within NSCC's
Rules that pertain to Letter of Credit Issuers will be modified to
reflect this. For those members who currently have letters of credit
posted as collateral (other than members, if any, that have been
required to post letters of credit for legal risk), effective April 1,
2007, (which date corresponds with the regular expiration date of
letters of credit) members will be required to replace that portion of
their Clearing Fund deposit with either cash or Eligible Clearing Fund
Securities.
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\11\ NSCC has found that in practice letters of credit are not
as liquid as cash and securities, and therefore potentially pose
more risk to NSCC and its members when accepted by NSCC as Clearing
Fund collateral. NSCC will, however, reserve the right to require
letters of credit from members in those instances where a particular
member has been found, by NSCC in its discretion, to present legal
risk.
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(e) Implementation Timeframes. The foregoing rule changes will
become effective thirty days after an Important Notice is issued to
members informing them that NSCC's systems are ready to accommodate
such changes with the corresponding changes to NSCC's rules being made
at that time.
NSCC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \12\ and the rules and
regulations thereunder because it will enable NSCC to diversify
Clearing Fund collateral in order to improve liquidity and to minimize
risk for NSCC and its members. As such, NSCC believes it will better
enable NSCC to safeguard securities and funds in its possession or
control or for which it is responsible.
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\12\ 15 U.S.C. 78q--1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change will have any
impact or impose any burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments relating to the proposed rule change have not yet
been solicited or received. NSCC will notify the Commission of any
written comments received by NSCC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within thirty-five 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 ninety 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.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
[[Page 70822]]
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml) or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NSCC-2006-11 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NSCC-2006-11. 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 Section, 100 F Street,
NE., Washington, DC 20549. Copies of such filings also will be
available for inspection and copying at the principal office of NSCC
and on NSCC's Web site at https://www.nscc.com/legal/2006/2006-11.pdf.
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-2006-11
and should be submitted on or before December 27, 2006.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\13\
Nancy M. Morris,
Secretary.
[FR Doc. E6-20623 Filed 12-5-06; 8:45 am]
BILLING CODE 8011-01-P
