Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change To Reorganize Membership Rules and Procedures, 3661-3666 [E9-1022]
Download as PDF
<![CDATA[
Federal Register / Vol. 74, No. 12 / Wednesday, January 21, 2009 / Notices
amendment can become effective. The
Amendments are so executed.
7. Description of Operation of Facility
Contemplated by the Proposed
Amendment
a. Terms and Conditions of Access:
Not applicable.
b. Method of Determination and
Imposition, and Amount of, Fees and
Charges: Not applicable.
c. Method of Frequency of Processor
Evaluation: Not applicable.
d. Dispute Resolution: Not applicable.
II. Rule 601(a)
A. Equity Securities for Which
Transaction Reports Shall be Required
by the Plan.
Not applicable.
B. Reporting Requirements
Not applicable.
C. Manner of Collecting, Processing,
Sequencing, Making Available and
Disseminating Last Sale Information
Not applicable.
D. Manner of Consolidation
Not applicable.
E. Standards and Methods Ensuring
Promptness, Accuracy and
Completeness of Transaction Reports
Not applicable.
F. Rules and Procedures Addressed to
Fraudulent or Manipulative
Dissemination
Not applicable.
G. Terms of Access to Transaction
Reports
Not applicable.
H. Identification of Marketplace
Execution
Not applicable.
mstockstill on PROD1PC66 with NOTICES
III. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed
Thirteenth Substantive Amendment to
the CTA Plan and the Ninth
Amendment to the CQ Plan are
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–CTA–2008–05 on the
subject line.
VerDate Nov<24>2008
18:54 Jan 16, 2009
Jkt 217001
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–CTA–2008–05. 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 Plan amendment that
are filed with the Commission, and all
written communications relating to the
Plan amendment 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 on official business days between
the hours of 10 a.m. and 3 p.m. Copies
of the Amendments also will be
available for inspection and copying at
the principal office of the CTA. 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–CTA–2008–05 and should
be submitted on or before February 11,
2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–1021 Filed 1–16–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59238; File No. SR–NSCC–
2006–17]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Approving
Proposed Rule Change To Reorganize
Membership Rules and Procedures
January 13, 2009.
I. Introduction
On December 13, 2006, the National
Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
and on January 31, 2008, amended
proposed rule change SR–NSCC–2006–
17 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
July 10, 2008.2 On August 4, 2008,
NSCC again amended the proposed rule
change.3 The Commission received no
comment letters. For the reasons
discussed below, the Commission is
approving the proposed rule change, as
amended.
II. Description
NSCC is reorganizing its Rules and
Procedures (‘‘Rules’’) related to
membership standards and membership
requirements to conform them to its
current practices and to harmonize them
with similar rules of NSCC’s affiliate,
the Fixed Income Clearing Corporation
(‘‘FICC’’).4
Over the years, NSCC has created a
variety of membership classes, each
with different initial and continuing
membership requirements. These
requirements are currently scattered
throughout NSCC’s Rules. With the
objective of promoting greater
transparency, NSCC is reorganizing and
restructuring its Rules related to
member types, the membership
application process, and the ongoing
requirements of NSCC members in a
form that it believes will make them
more readily located and understood by
applicants and members alike.
1 U.S.C.
78s(b)(1).
Exchange Act Release No. 58100 (July
3, 2008), 73 FR 39759.
3 The August 4, 2008, amendment was technical
in nature and did not require the proposed rule
change to be noticed, again.
4 Both NSCC and FICC’s Government Securities
Division (‘‘GSD’’) share a number of common
members, and both act as central counterparties
with respect to certain transactions submitted by
members. Harmonization of NSCC and FICC Rules
is an ongoing process, and additional NSCC and
FICC ‘‘harmonizing’’ rule filings will follow.
2 Securities
6 17
PO 00000
CFR 200.30–3(a)(27).
Frm 00121
Fmt 4703
3661
Sfmt 4703
E:\FR\FM\21JAN1.SGM
21JAN1
3662
Federal Register / Vol. 74, No. 12 / Wednesday, January 21, 2009 / Notices
To accomplish this, NSCC is
restructuring Rule 2 (previously,
‘‘Members’’) into a revised Rule 2
(‘‘Members and Limited Members’’) and
is creating a new Rule 2A (‘‘Initial
Membership Requirements’’) and a new
Rule 2B (‘‘Ongoing Membership
Requirements and Monitoring’’).
Current provisions and rule text will be
moved from existing rules and addenda
and will be relocated within these
newly structured rules. Certain
provisions will be modified where
necessary and, where possible,
harmonized with analogous provisions
of GSD’s rules. Additionally, NSCC
proposes to add descriptive text to its
Rules with regard to the membership
application process and with regard to
the voluntary membership retirement
process (i.e., text which codifies NSCC’s
current process of evaluating applicants
and the current process by which an
existing member may voluntarily retire
from membership in NSCC).
mstockstill on PROD1PC66 with NOTICES
1. Membership Types—Members and
Limited Members
NSCC’s previous Rule 2 (currently
titled ‘‘Members’’) provided that an
applicant may apply to become a
member that uses all of NSCC’s services
or to become a member that uses certain
limited services.
In restructuring and revising Rule 2,
NSCC seeks to clearly, concisely, and in
one location, set forth each membership
type differentiating between member
types that may generally, unless
otherwise limited by NSCC access all
services made available by NSCC (often
referred to as ‘‘full service Members’’)
and those member types that may utilize
NSCC’s systems and services only on a
limited basis (‘‘Limited Members’’).
Limited Members will include the
following: Fund Members, Insurance
Carrier/Retirement Services Members,
Municipal Comparison Only Members,
Mutual Fund/Insurance Services
Members, Data Services Only Members,
Commission Billing Members
(previously ‘‘Non-Clearing Members’’),
Settling Bank Only Members, and Third
Party Administrator Members. This
change is cosmetic only, logically
grouping member types, and will not
alter in any way each member’s existing
rights and obligations.
Additionally, NSCC is adding text to
Rule 2 making it clear that no full
service Member or Limited Member may
submit or confirm any transaction,
charge, request, instruction, or
transmission through NSCC’s services,
or otherwise utilize NSCC’s services, in
contravention of any law, rule,
regulation, or statute.
VerDate Nov<24>2008
18:54 Jan 16, 2009
Jkt 217001
2. Consolidation of Membership
Standards and Requirements Within the
Rules
The membership qualifications,
financial standards, and operational
requirements for each member type
previously were set forth in separate
rules and addenda, which were spread
throughout NSCC’s Rules.4
To consolidate this information,
NSCC is creating two new rules, Rule
2A and Rule 2B, which will contain the
content moved from membership Rules
3, 31, 51, 54, 56, and 60. Rule 2A
(‘‘Initial Membership Requirements’’)
provides information regarding initial
membership eligibility requirements for
all member types and addresses the
membership application and evaluation
process. Rule 2B (‘‘Ongoing
Membership Requirements and
Monitoring’’) contains provisions
regarding the continuing requirements
of members. For ease of reference, NSCC
is also relocating and consolidating the
detailed membership qualifications,
financial standards, and operational
requirements for all member types into
Addendum B (renamed ‘‘Qualifications
and Standards of Financial
Responsibility, Operational Capability
and Business History’’). The content
NSCC is reorganizing into Addendum B
is currently spread throughout Addenda
B, I, Q, and R.
Accordingly, NSCC is deleting current
membership related Rules 3
(specifically, Sections 2, 5, and 6), 31,
51, 54, 56, and 60. In addition, NSCC
will delete Addenda I, Q, and R.
3. Use of the Terms ‘‘Members’’ and
‘‘Settling Members’’ Throughout the
Rules
Currently, an applicant that agrees to
limit its use of NSCC’s services to those
specified by NSCC (i.e., Mutual Fund
Services and/or Insurance and
4 ‘‘Members’’ qualifications, standards, and
requirements were located in Rule 2 and in
Addendum B. ‘‘Mutual Fund/Insurance Services
Members,’’ also defined to be ‘‘Members,’’
qualifications, standards, and requirements were
located in Rule 2 and in Addendum B. ‘‘Fund
Members’’ qualifications, standards, and
requirements were located in Rule 51 and
Addendum I. ‘‘Insurance Carrier/Retirement
Services Members’’ qualifications, standards, and
requirements are located in Rule 56 and in
Addendum Q. ‘‘Third Party Administrator
Members’’ qualifications, standards, and
requirements were located in Rule 60 and in
Addendum R. ‘‘Data Services Only Members’’
qualifications, standards, and requirements were
located in Rule 31. ‘‘Municipal Comparison Only
Members’’ qualifications, standards, and
requirements were located in Rule 3, Section 2.
‘‘Non-Clearing Members’’ qualifications, standards,
and requirements were located in Rule 3, Section
2. ‘‘Settling Bank Only Members’’ qualifications,
standards, and requirements were located in Rule
54.
PO 00000
Frm 00122
Fmt 4703
Sfmt 4703
Retirement Services) is called a ‘‘Mutual
Fund/Insurance Services Member.’’
Thus when the term ‘‘Member’’ is used
within NSCC’s Rules, it may apply to a
full service Member (which may
generally use all NSCC services), a
Mutual Fund/Insurance Services
Member (which may only utilize the
Mutual Fund and Insurance and
Retirement Processing Services), or to
both depending upon the context.
Additionally, NSCC’s Rules make
reference to ‘‘Settling Members,’’ which
may apply to a full service Member, a
Mutual Fund/Insurance Services
Member, a Non-Clearing Member, or all
three member types. It is only in further
understanding the Rules or in the
context of a term’s use that one may
determine to which member type a Rule
may apply.5 Accordingly, NSCC
proposes to modify all references to
‘‘Settling Member’’ and to ‘‘Member’’
within each NSCC Rule to clearly
indicate which member type a rule is
applicable. Definitions associated with
these terms (contained in Rule 1) will be
modified, and the term ‘‘Settling
Member’’ will be deleted from NSCC’s
Rules.
4. Rule 15 (‘‘Financial Responsibility
and Operational Capability’’)
Rule 15 contains, among other things,
the requirements of members with
regard to reports to be filed on an
ongoing basis (e.g., annual audited
financial statements, Financial and
Operational Combined Uniform Single
(‘‘FOCUS’’) Reports, etc.) and
notifications that members are required
to make to NSCC regarding any failure
to maintain their membership
qualifications and standards, including
notifications of certain material changes
in business, ownership, or control.
NSCC proposes to move these ongoing
reporting requirements into new Rule
2B. Rule 15 will then be renamed
‘‘Assurances of Financial Responsibility
and Operational Capability.’’
In Section 2.A. (‘‘Reports and
Information’’) of new Rule 2B, NSCC is
adding text that clarifies that unless
specifically set forth within the Rule,
the time periods established for
submitting reports and data to NSCC are
set forth in the form of notices posted
on NSCC’s Web site and that each
5 For example, as a Mutual Fund/Insurance
Services Member may not participate in the
Continuous Net Settlement Service (‘‘CNS’’), any
reference to ‘‘Members’’ within Rule 11 (‘‘CNS’’)
will not apply to Mutual Fund/Insurance Services
Members. Any reference to ‘‘Settling Member’’
within Rule 17 (‘‘Fine Payments’’) will apply to all
full-service Members, Mutual Fund/Insurance
Services Members, and Non-Clearing Members
(which NSCC is renaming ‘‘Commission Billing
Members’’).
E:\FR\FM\21JAN1.SGM
21JAN1
Federal Register / Vol. 74, No. 12 / Wednesday, January 21, 2009 / Notices
member is required to retrieve all
notices from NSCC’s Web site daily.
In Section 2.B. (‘‘Notification of
Changes in Condition’’) of new Rule 2B,
NSCC is changing the reporting
requirements of certain member types
with respect to providing NSCC with
written notice of events that will effect
a change in control of the member or
that could have a material impact on the
member’s business and/or financial
condition. Historically, this provision
applied to full service Members (i.e.,
those Members for which certain
activity is guaranteed at a fixed point in
the clearance and settlement process) as
well as Mutual Fund/Insurance Services
Members, Fund Members, and
Insurance Carrier/Retirement Services
Members (i.e., those member types
whose activity is limited to use of nonguaranteed services). NSCC has
determined that this notification
provision should apply solely to full
service Members.
Additionally, NSCC seeks to delete
the current requirement that a
Commission Billing Member (previously
called a ‘‘Non-Clearing Member’’)
provide NSCC with written and oral
notice if it is no longer in compliance
with any of the relevant qualifications
and standards for membership.
Commission Billing Members
participate in NSCC solely for the
purpose of paying and receiving broker
commissions and file transmissions that
are sent to NSCC directly from either the
New York Stock Exchange or the
American Stock Exchange. As there are
no NSCC financial or operational
requirements applicable to this member
type and the participation of the
member is coordinated between NSCC
and the member’s Exchange, the current
requirement is not necessary.
Limited Member
5. Rule 1 (‘‘Definitions and
Descriptions’’)
NSCC’s Rules currently provide that
members sign and deliver to NSCC a
member’s agreement. The applicable
provisions of each type of member’s
agreement have historically been set
forth in the Rule that applies to that
member type (e.g., a Fund Member’s
agreement provisions are contained in
Rule 51, a full service Member’s
provisions are contained in Rule 2, a
Third Party Administrator Member’s
provisions are contained in Rule 60).
Regardless of member type, each
member agreement has certain standard
provisions that generally apply to all
members (e.g., the only services the
member may use are those that are
permitted by NSCC, that the member
will abide by NSCC’s Rules and be
bound by all provisions of the Rules,
etc.) and certain other provisions that
NSCC proposes the following with
respect to terms defined within Rule 1:
Board of Directors
The current definition is modified to
make clear that the term ‘‘Board of
Directors’’ means the Board of Directors
of NSCC or a committee thereof acting
on delegated authority.
mstockstill on PROD1PC66 with NOTICES
Commission Billing Member
NSCC is renaming Non-Clearing
Members ‘‘Commission Billing
Members’’ to better reflect the nature of
their participation in NSCC’s services.
Non-Clearing Members utilize NSCC’s
Commission Settlement Service solely
for the payment and collection of
commissions.
VerDate Nov<24>2008
18:54 Jan 16, 2009
Jkt 217001
The term ‘‘Limited Member’’ will
mean a Person whose use of NSCC’s
services is limited to those services
specified by NSCC.
Person
The proposed term ‘‘Person’’ will
mean a partnership, corporation, limited
liability corporation, or other
organization, entity, or individual.
Registered Broker-Dealer
The term ‘‘Registered Broker-Dealer’’
(currently defined in Rule 2 as ‘‘a broker
or dealer registered under the Securities
Exchange Act of 1934, as amended’’) is
being moved to Rule 1.
Settling Member
The term ‘‘Settling Member’’ is being
deleted from NSCC’s Rules. Each
member type encompassed by this term
is being specifically named within
NSCC’s Rules.
Other conforming technical changes
to Rule 1 are being made to
accommodate the restructuring of the
Rules.
6. Rule 2A (‘‘Initial Membership
Requirements’’)
Applicant Operational Testing
Requirements
Under NSCC’s Rules, certain
applicants as determined by NSCC must
demonstrate that they will be able to
satisfactorily communicate with NSCC.
These applicants conduct system/
operational tests with NSCC. NSCC is
adding new text to its rules (Rule 2A,
Section 1.C. [’’Application
Documents’’]) to make clear NSCC’s
current requirement with regard to
applicant testing.
Member’s Agreement
PO 00000
Frm 00123
Fmt 4703
Sfmt 4703
3663
are unique to particular member types
(e.g., Fund Members have a unique
provision with regard to NSCC’s
inspection of their books and records).
NSCC new Rule 2A, Section 1.E.
(‘‘Membership and Other Agreements’’)
contains the main member agreement
provisions for all member types, as well
as address the requirements with regard
to any other agreements.
Third Party Administrator (‘‘TPA’’) ACH
Agreements
NSCC’s Rules currently state that TPA
Members (non-settling members) must
provide NSCC with an agreement for
preauthorized payments (an ‘‘ACH’’
agreement) so that NSCC may collect
monthly charges pursuant to Rule 26
(‘‘Bills Rendered’’). To accommodate
payment methods other than ACH (i.e.,
‘‘e-payment’’ using a credit card or bank
account), NSCC is replacing the specific
TPA ACH requirement within its Rules
with more generic text.
7. Rule 2B (‘‘Ongoing Membership
Requirements and Monitoring’’) Reports
and Information
Annual Audited Financial Statements
NSCC’s Rules currently state that a
member whose membership is
contingent upon a guarantee of a third
party must provide a copy of the annual
audited financial statements of the
guarantor. If such statements for the
member or its guarantor are not
available, NSCC may accept at its sole
discretion consolidated financial
statements prepared at the level of the
parent of the member or guarantor.
NSCC is modifying this text to make
clear that it may accept consolidated
financial statements or financial
information prepared at the level of the
parent of such entity.6
Call Reports
New Rule 2B, Section 2.A.(c) applies
to Call Reports filed with NSCC by
members that are banks or trust
companies. To the extent that such
information is not contained within the
Call Report or the member is a bank or
trust company that is not required to file
a Call Report, such member will be
required to provide NSCC with
information containing each of its
capital levels and ratios.
6 NSCC is also correcting a typographical error in
Rule 2B, Section 2.A.(a) in that ‘‘each’’ guarantor
should read ‘‘such’’ guarantor.
E:\FR\FM\21JAN1.SGM
21JAN1
3664
Federal Register / Vol. 74, No. 12 / Wednesday, January 21, 2009 / Notices
Supplemental and Quarterly Financial
Statements Filed With The National
Association of Insurance Commissioners
(‘‘NAIC’’)
8. Addendum B (‘‘Qualifications and
Standards of Financial Responsibility,
Operational Capability and Business
History’’)
NSCC is deleting the current Rule 15
requirement that Insurance Companies
provide NSCC with copies of their
supplemental and quarterly financial
statements filed with the NAIC or the
Insurance Company’s regulatory
authority. Currently, NSCC receives
annual audited financial statements and
annual regulatory reports from these
members in order to monitor adherence
to membership requirements. The
revised rule language will conform the
Rules to current practice.
Immediate Placement on Surveillance
by NSCC
Currently, NSCC’s Rules provide that
applicants to become a Member, Mutual
Fund/Insurance Services Member, Fund
Member, or Insurance Carrier/
Retirement Services Member may not be
known to be subject to any other action
or condition the existence of which will
require it to be placed on surveillance
by NSCC. In addition, the financial
requirements for certain members (full
service Members and Mutual Fund/
Insurance Services Members) state that
the member must have a capital ratio or
percentage that will not require the
applicant to be placed on immediate
surveillance by NSCC. All applicants
must meet their minimum financial
requirements, as applicable to their
member type. NSCC is deleting these
provisions.
When the NSCC membership
standards were developed, the NSCC
credit risk matrix was not in place. As
a result of the implementation of the
credit risk matrix, it is possible that
once an applicant is approved for
membership, it may be placed directly
on NSCC’s Watch List (i.e., surveillance
status). As sufficient discretion to deny
membership based on financial,
operational, or character issues exists in
other sections of NSCC’s rules,
elimination of these provisions will not
diminish NSCC’s authority under its
Rules to deny an applicant membership.
Securities Exchange Act Rule 15c3–1
Notification
NSCC is adding Rule 2B, Section
2.A.(g) to its Rules to require that a
member that has provided notice to the
Commission pursuant to paragraph (e)
of Securities Exchange Act Rule 15c3–
1 (‘‘Notice Provisions Relating to
Limitations on the Withdrawal of Equity
Capital’’) shall notify NSCC and shall
provide NSCC with a copy of such
notice by close of business on the day
such notice is provided to the
Commission.
Operational Testing
NSCC requires that certain ‘‘top tier’’
members participate in periodic
connectivity testing with NSCC for
business recovery purposes. NSCC is
adding Rule 2B, Section 3 (‘‘Operational
Testing’’) to its Rules to specifically set
forth NSCC’s operational testing
requirements.
Ongoing Monitoring—Surveillance
Status
Currently NSCC’s ‘‘credit risk
matrix,’’ (i.e., the provision relating to
NSCC’s ongoing monitoring of full
service Members) appears in Addendum
B. NSCC is moving its current risk
matrix into new Rule 2B. NSCC is also
replacing the term ‘‘Settling Member’’
with ‘‘Member’’ as the credit risk matrix
only applies to full service ‘‘Members.’’
mstockstill on PROD1PC66 with NOTICES
Voluntary Retirement
NSCC is adding Rule 2B, Section 5
(‘‘Voluntary Retirement’’) to its Rules,
which is the current process by which
an active participant may voluntarily
retire as an NSCC member.
VerDate Nov<24>2008
18:54 Jan 16, 2009
Jkt 217001
Fund Member Applicants Subject to
Securities Exchange Act Rule 17a–11
Reporting
NSCC is deleting Addendum I
(‘‘Standards of Financial Responsibility
and Operational Capability for Fund
Members’’), which includes a
requirement that a broker-dealer Fund
Member applicant not be subject to
reporting under Securities Exchange Act
Rule 17a–11 (‘‘Notification Provisions
for Broker and Dealers’’). As a Fund
Member, an applicant must meet
NSCC’s minimum financial
requirements for membership (and, as
stated above, NSCC retains sufficient
discretion to deny membership based on
financial, operational, or character
issues in other sections of NSCC’s
Rules). Thus, NSCC has determined that
this requirement is duplicative and that
its elimination will not diminish
NSCC’s authority under its Rules to
deny an applicant membership if it does
not meet the applicable financial
standards.
PO 00000
Frm 00124
Fmt 4703
Sfmt 4703
Financial Responsibility—Entities That
Qualify for Membership Under the
Category of ‘‘Other’’ Entity Types
In certain instances in NSCC’s
membership Rules, an applicant that
does not qualify for membership under
one of the specifically defined
qualification criteria established for its
membership type, may apply for
membership if it has demonstrated to
NSCC that its business and capabilities
are such that it could reasonably expect
material benefit from direct access to
NSCC’s services. NSCC’s financial
requirements for such an applicant
required that it meet financial stability
standards as were applied to the
industry in which the applicant was
associated. Because industry standards
have not always been well-defined and
as there has not always been consensus
among market participants as to what
those industry standards should be, in
new Section 1 of Addendum B, NSCC
is modifying the financial requirements
for ‘‘other’’ applicants by requiring that
such applicants satisfy such minimum
standards of financial responsibility
deemed appropriate by NSCC.
Business History
NSCC’s Rules currently provide that
Insurance Carrier/Retirement Services
applicants and Third Party
Administrator applicants (both nonguaranteed service members) must have
an established business history of a
minimum of three years or personnel
with sufficient operational background
and experience to ensure the ability of
the applicant to conduct such a
business. The business history
requirement for full service Members, as
well as Mutual Fund/Insurance Services
Members and Fund Members (both nonguaranteed service members) is six
months, or the member must have
personnel with sufficient operational
background and experience to ensure
the ability of the applicant to conduct
such a business.
NSCC has determined that the
business history requirement of
Insurance Carrier/Retirement Services
and Third Party Administrator
applicants need not be any more
stringent that those applied to Fund
Members and Mutual Fund/Insurance
Services Members. Therefore, NSCC is
changing the three year requirement to
six months.
Fund Members That Are Insurance
Companies
Under NSCC’s Rules, an Insurance
Company may apply to become a Fund
Member; however, the financial
requirements for Insurance Companies
E:\FR\FM\21JAN1.SGM
21JAN1
Federal Register / Vol. 74, No. 12 / Wednesday, January 21, 2009 / Notices
is not specifically set forth in
Addendum I. Addendum I states that all
‘‘other’’ applicants shall be required to
meet financial stability and operational
capability standards as are applicable to
the industry in which the applicant is
associated. Historically, NSCC looked to
its Insurance Carrier/Retirement
Services Member financial standards set
forth in Rule 57. NSCC is clearly stating
Insurance Company financial standards
under its Fund Member financial
requirements in Addendum B, Section
3.
9. Rule 3 (‘‘Lists To Be Maintained’’)
In consolidating NSCC’s membership
standards, NSCC is moving to Rule 2 the
portions of Rule 3 (specifically, Sections
2, 5, and 6) that pertain to Municipal
Comparison Only Members, NonClearing Members, and/or Data Services
Only Members. For purposes of clarity,
the remaining information within Rule
3 is being reorganized and reordered.
10. Addendum D (‘‘Statement of Policy
Envelope Settlement Service’’)
To more accurately reflect the scope
of the information contained within
Addendum D, NSCC is renaming it
‘‘Statement of Policy Envelope
Settlement Service, Mutual Fund
Services, Insurance and Retirement
Processing Service and Other Services
Offered by the Corporation.’’
11. Rule 38 (‘‘Captions’’)
Mirroring FICC’s Rules, NSCC is
adding language to Rule 38 to make
clear that NSCC’s Rules are governed by
New York substantive law. This
language currently exists in NSCC’s
membership agreements only. Rule 38
will be renamed ‘‘Governing Law and
Captions.’’
mstockstill on PROD1PC66 with NOTICES
12. Technical Corrections
In 2006, NSCC submitted for
immediate effectiveness proposed rule
change SR–NSCC–2006–07 which made
clarifying and technical changes to
NSCC’s Rules related to funds which are
eligible for processing on Fund/Serv.7
At that time, the membership
qualifications contained within Section
1(viii) of Rule 31 (‘‘Data Services Only
Member’’) should have been modified to
reflect the definitional change made
within Rule 1 with respect to ‘‘TPA.’’
Accordingly, NSCC is correcting the text
within its rules to eliminate the
reference to ‘‘defined contribution plans
as defined in Section 414(i) of the
Internal Revenue Code of 1986, as
7 Securities
Exchange Act Release No. 54366
(August 25, 2006), 71 FR 52199.
VerDate Nov<24>2008
18:54 Jan 16, 2009
Jkt 217001
amended,’’ and to refer instead to ‘‘a
retirement or other benefit plan.’’
In 2006, NSCC submitted for
immediate effectiveness proposed rule
change SR–NSCC–2006–14 which,
among other things, deleted references
to the Product Repository service as
NSCC had determined not to offer the
service.8 At that time, all references
within NSCC’s Rules to ‘‘Repository
Data’’ should have been deleted.
Accordingly, NSCC is seeking to delete
such references.
In 2005, the Commission approved
NSCC proposed rule change SR–NSCC–
2005–01 which clarified that the
operational capability that is ordinarily
focused upon by NSCC during the
application process is the ability of an
applicant to appropriately communicate
with NSCC—that is the ability to input
to NSCC and to receive output from
NSCC on a timely and accurate basis.9
The rule change removed certain
provisions that might be interpreted to
impose upon NSCC an obligation to
make determinations with respect to
particular aspects of operational
capability. Instead, NSCC relies upon
the requirement that the applicant in
fact be able to satisfactorily
communicate with NSCC as generally
stated in the operational capability
requirements currently set forth for
members in NSCC’s Rules. At the time
of the filing, the provision within Rule
60 with respect to approval of TPA
Member applicants based upon an
alternative operational standard should
have been deleted. Accordingly, NSCC
now seeks to delete this provision from
its Rules. NSCC will continue to retain
the right to examine any aspect of an
applicant’s or member’s business
pursuant to the provisions of Rule 15.
In 2005, the Commission approved
NSCC proposed rule change SR–NSCC–
2005–14 which added Rule 64 (‘‘DTCC
Shareholders Agreement’’) requiring
that full service Members of NSCC
purchase shares of the common stock of
The Depository Trust & Clearing
Corporation (‘‘DTCC’’), NSCC’s parent
corporation, and that certain Limited
Member types could voluntarily
purchase such shares.10 Section 5 of
Rule 64 made incorrect references to
‘‘Members’’ and should have referenced
all member types specified in Section 2
(‘‘Members’’) and Section 3 (‘‘Fund
Members, Insurance Carrier/Retirement
Services Members, Municipal
Comparison Only Members, and Mutual
8 Securities Exchange Act Release No. 54921
(December 12, 2006), 71 FR 76415.
9 Securities Exchange Act Release No. 51600
(April 22, 2005), 70 FR 22167.
10 Securities Exchange Act Release No. 52922
(December 7, 2005), 70 FR 74070.
PO 00000
Frm 00125
Fmt 4703
Sfmt 4703
3665
Fund/Insurance Services Members’’) of
Rule 64. Accordingly, NSCC now
correcting such references.
In 2004, the Commission approved
NSCC proposed rule change SR–NSCC–
2003–05 which modified NSCC’s Rules
to provide that notices to members
posted by NSCC via electronic format
(i.e., posted on NSCC’s Web site) meet
NSCC’s notification obligations.11 At
that time, Section 7 of Rule 45
(‘‘Notices’’) was added to NSCC’s Rules
with an incorrect reference to Section 3.
NSCC is seeking to remove this
incorrect reference.
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 perfect
the mechanism of a national system for
the prompt and accurate clearance and
settlement of securities transactions.12
The Commission believes that NSCC’s
rule change is consistent with this
Section because it should perfect the
mechanism of a national system for the
prompt and accurate clearance and
settlement of securities transactions by
assisting NSCC applicants and members
in understanding, and thereby
complying with, NSCC’s membership
standards and requirements.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change, as amended, is consistent
with the requirements of the Act and in
particular Section 17A of the Act and
the rules and regulations thereunder. In
approving the proposed rule change, as
amended, the Commission considered
the proposal’s impact on efficiency,
competition, and capital formation.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change (File No. SR–
NSCC–2006–17), as amended, be and
hereby is approved.
11 Securities Exchange Act Release No. 50085
(July 26, 2004), 69 FR 45872.
12 15 U.S.C. 78q–1(b)(3)(F).
E:\FR\FM\21JAN1.SGM
21JAN1
3666
Federal Register / Vol. 74, No. 12 / Wednesday, January 21, 2009 / Notices
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.13
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–1022 Filed 1–16–09; 8:45 am]
Annual Burden: 842.
SOCIAL SECURITY ADMINISTRATION
Jacqueline White,
Chief, Administrative Information Branch,
[FR Doc. E9–1044 Filed 1–16–09; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
SMALL BUSINESS ADMINISTRATION
Data Collection Available for Public
Comments and Recommendations
SUMMARY: In accordance with the
Paperwork Reduction Act of 1995, this
notice announces the Small Business
Administration’s intentions to request
approval on a new and/or currently
approved information collection.
DATES: Submit comments on or before
March 23, 2009.
Send all comments
regarding whether this information
collection is necessary for the proper
performance of the function of the
agency, whether the burden estimates
are accurate, and if there are ways to
minimize the estimated burden and
enhance the quality of the collection, to
Nancy Sternberg, Program Manager,
Program Gateway Program, Office of the
Chief Information Officer, Small
Business Administration, 409 3rd Street,
4th Floor, Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT:
Nancy Sternberg, Program Manager,
Program Gateway Program, Office of the
Chief Information Officer, 202–205–
6285, nancy.sternberg@sba.gov; Curtis
B. Rich, Management Analyst, 202–205–
7030 curtis.rich@sba.gov.
Customer
feedback is critical to developing Web
products and marketing materials that
meet the needs of the small business
community. This generic information
collection request encompasses several
data collection activities that will help
SBA obtain information necessary to
plan and deliver information and
services to the public more efficiently
and effectively.
Title: ‘‘Small Business Customer
Feedback.’’
Description of Respondents: Potential
and Current Small and Medium-seized
Business Owners.
Form Number: N/A.
Annual Responses: 3,840.
mstockstill on PROD1PC66 with NOTICES
CFR 200.30–3(a)(12).
18:54 Jan 16, 2009
SUMMARY: In accordance with the
Paperwork Reduction Act of 1995, this
notice announces the Small Business
Administration’s intentions to request
approval on a new and/or currently
approved information collection.
DATES: Submit comments on or before
March 23, 2009.
Send all comments
regarding whether this information
collection is necessary for the proper
performance of the function of the
agency, whether the burden estimates
are accurate, and if there are ways to
minimize the estimated burden and
enhance the quality of the collection, to
David Becker, Acting Chief Financial
Officer, Office of the Chief Financial
Officer, Small Business Administration,
409 3rd Street, 6th Floor, Washington,
DC 20416.
ADDRESSES:
ADDRESSES:
SUPPLEMENTARY INFORMATION:
Data Collection Available for Public
Comments and Recommendations
ACTION: Notice and request for
comments.
ACTION: Notice and request for
comments.
VerDate Nov<24>2008
Occupational Information Development
Advisory Panel Meeting
AGENCY:
BILLING CODE 8011–01–P
13 17
[Docket No. SSA–2009–0001]
FOR FURTHER INFORMATION CONTACT:
David Becker, Acting Chief Financial
Officer, Office of the Chief Financial
Officer, 202–205–6122,
david.becker@sba.gov; Curtis B. Rich,
Management Analyst, 202–205–7030
curtis.rich@sba.gov.
SBA will
use data from (1) recipients of SBAbacked loans or SBIC financing to access
customers satisfaction & perception of
program impact and (2) 7(a) lenders to
examine factors used to determine if
credit elsewhere requirements are met.
Title: ‘‘An Assessment of Small
Business Administration Loan and
Investment Performance.’’
Description of Respondents: This
survey will be administered to a random
sample of businesses assisted under
various SBA programs.
Form Numbers: 2284, 2285.
Annual Responses: 1.
Annual Burden: 346.
SUPPLEMENTARY INFORMATION:
Jacqueline White,
Chief, Administrative Information Branch.
[FR Doc. E9–1116 Filed 1–16–09; 8:45 am]
BILLING CODE 8025–01–P
Jkt 217001
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
Social Security Administration
(SSA).
ACTION:
Notice of Inaugural Meeting.
DATES: February 23, 2009, 8:30 a.m.–
4:30 p.m. (EST); February 24, 2009, 8:30
a.m.–5 p.m. (EST); February 25, 2009,
8:30 a.m.–12 p.m. (EST)
Location: Sheraton Crystal City Hotel.
ADDRESSES: 1800 Jefferson Davis
Highway, Arlington, VA 22202.
SUPPLEMENTARY INFORMATION: Type of
Meeting: The meeting is open to the
public.
Purpose: This discretionary Panel,
established under the Federal Advisory
Committee Act of 1972, as amended,
shall report to the Commissioner of
Social Security. The Panel will provide
independent advice and
recommendations on plans and
activities to replace the Dictionary of
Occupational Titles used in the Social
Security Administration’s (SSA)
disability determination process. The
Panel will advise the Agency on
creating an occupational information
system tailored specifically for SSA’s
disability programs and adjudicative
needs. Advice and recommendations
will relate to SSA’s disability programs
in the following areas: medical and
vocational analysis of disability claims;
occupational analysis, including
definitions, ratings and capture of
physical and mental/cognitive demands
of work and other occupational
information critical to SSA disability
programs; data collection; use of
occupational information in SSA’s
disability programs; and any other
area(s) that would enable SSA to
develop an occupational information
system suited to its disability programs
and improve the medical-vocational
adjudication policies and processes.
Agenda: The Panel will meet on
Monday, February 23, 2009, from 8:30
a.m.until 4:30 p.m. (EST); Tuesday,
February 24, 2009, from 8:30 a.m. until
5 p.m. (EST) and Wednesday, February
25, 2009, from 8:30 a.m. to 12 p.m.
(EST). The agenda will be available on
the Internet at https://
www.socialsecurity.gov/oidap/ one
week prior to the meeting.
The Panel will hear presentations on
a variety of issues including: a general
overview of the Agency’s policy,
procedures and business practices as
they relate to the use of the Dictionary
of Occupational Titles in the disability
E:\FR\FM\21JAN1.SGM
21JAN1
]]>Agencies
[Federal Register Volume 74, Number 12 (Wednesday, January 21, 2009)]
[Notices]
[Pages 3661-3666]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-1022]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59238; File No. SR-NSCC-2006-17]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Approving Proposed Rule Change To Reorganize
Membership Rules and Procedures
January 13, 2009.
I. Introduction
On December 13, 2006, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') and on January 31, 2008, amended proposed rule change
SR-NSCC-2006-17 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 July 10, 2008.\2\ On August 4, 2008, NSCC again
amended the proposed rule change.\3\ The Commission received no comment
letters. For the reasons discussed below, the Commission is approving
the proposed rule change, as amended.
---------------------------------------------------------------------------
\1\ U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 58100 (July 3, 2008), 73
FR 39759.
\3\ The August 4, 2008, amendment was technical in nature and
did not require the proposed rule change to be noticed, again.
---------------------------------------------------------------------------
II. Description
NSCC is reorganizing its Rules and Procedures (``Rules'') related
to membership standards and membership requirements to conform them to
its current practices and to harmonize them with similar rules of
NSCC's affiliate, the Fixed Income Clearing Corporation (``FICC'').\4\
---------------------------------------------------------------------------
\4\ Both NSCC and FICC's Government Securities Division
(``GSD'') share a number of common members, and both act as central
counterparties with respect to certain transactions submitted by
members. Harmonization of NSCC and FICC Rules is an ongoing process,
and additional NSCC and FICC ``harmonizing'' rule filings will
follow.
---------------------------------------------------------------------------
Over the years, NSCC has created a variety of membership classes,
each with different initial and continuing membership requirements.
These requirements are currently scattered throughout NSCC's Rules.
With the objective of promoting greater transparency, NSCC is
reorganizing and restructuring its Rules related to member types, the
membership application process, and the ongoing requirements of NSCC
members in a form that it believes will make them more readily located
and understood by applicants and members alike.
[[Page 3662]]
To accomplish this, NSCC is restructuring Rule 2 (previously,
``Members'') into a revised Rule 2 (``Members and Limited Members'')
and is creating a new Rule 2A (``Initial Membership Requirements'') and
a new Rule 2B (``Ongoing Membership Requirements and Monitoring'').
Current provisions and rule text will be moved from existing rules and
addenda and will be relocated within these newly structured rules.
Certain provisions will be modified where necessary and, where
possible, harmonized with analogous provisions of GSD's rules.
Additionally, NSCC proposes to add descriptive text to its Rules with
regard to the membership application process and with regard to the
voluntary membership retirement process (i.e., text which codifies
NSCC's current process of evaluating applicants and the current process
by which an existing member may voluntarily retire from membership in
NSCC).
1. Membership Types--Members and Limited Members
NSCC's previous Rule 2 (currently titled ``Members'') provided that
an applicant may apply to become a member that uses all of NSCC's
services or to become a member that uses certain limited services.
In restructuring and revising Rule 2, NSCC seeks to clearly,
concisely, and in one location, set forth each membership type
differentiating between member types that may generally, unless
otherwise limited by NSCC access all services made available by NSCC
(often referred to as ``full service Members'') and those member types
that may utilize NSCC's systems and services only on a limited basis
(``Limited Members''). Limited Members will include the following: Fund
Members, Insurance Carrier/Retirement Services Members, Municipal
Comparison Only Members, Mutual Fund/Insurance Services Members, Data
Services Only Members, Commission Billing Members (previously ``Non-
Clearing Members''), Settling Bank Only Members, and Third Party
Administrator Members. This change is cosmetic only, logically grouping
member types, and will not alter in any way each member's existing
rights and obligations.
Additionally, NSCC is adding text to Rule 2 making it clear that no
full service Member or Limited Member may submit or confirm any
transaction, charge, request, instruction, or transmission through
NSCC's services, or otherwise utilize NSCC's services, in contravention
of any law, rule, regulation, or statute.
2. Consolidation of Membership Standards and Requirements Within the
Rules
The membership qualifications, financial standards, and operational
requirements for each member type previously were set forth in separate
rules and addenda, which were spread throughout NSCC's Rules.\4\
---------------------------------------------------------------------------
\4\ ``Members'' qualifications, standards, and requirements were
located in Rule 2 and in Addendum B. ``Mutual Fund/Insurance
Services Members,'' also defined to be ``Members,'' qualifications,
standards, and requirements were located in Rule 2 and in Addendum
B. ``Fund Members'' qualifications, standards, and requirements were
located in Rule 51 and Addendum I. ``Insurance Carrier/Retirement
Services Members'' qualifications, standards, and requirements are
located in Rule 56 and in Addendum Q. ``Third Party Administrator
Members'' qualifications, standards, and requirements were located
in Rule 60 and in Addendum R. ``Data Services Only Members''
qualifications, standards, and requirements were located in Rule 31.
``Municipal Comparison Only Members'' qualifications, standards, and
requirements were located in Rule 3, Section 2. ``Non-Clearing
Members'' qualifications, standards, and requirements were located
in Rule 3, Section 2. ``Settling Bank Only Members'' qualifications,
standards, and requirements were located in Rule 54.
---------------------------------------------------------------------------
To consolidate this information, NSCC is creating two new rules,
Rule 2A and Rule 2B, which will contain the content moved from
membership Rules 3, 31, 51, 54, 56, and 60. Rule 2A (``Initial
Membership Requirements'') provides information regarding initial
membership eligibility requirements for all member types and addresses
the membership application and evaluation process. Rule 2B (``Ongoing
Membership Requirements and Monitoring'') contains provisions regarding
the continuing requirements of members. For ease of reference, NSCC is
also relocating and consolidating the detailed membership
qualifications, financial standards, and operational requirements for
all member types into Addendum B (renamed ``Qualifications and
Standards of Financial Responsibility, Operational Capability and
Business History''). The content NSCC is reorganizing into Addendum B
is currently spread throughout Addenda B, I, Q, and R.
Accordingly, NSCC is deleting current membership related Rules 3
(specifically, Sections 2, 5, and 6), 31, 51, 54, 56, and 60. In
addition, NSCC will delete Addenda I, Q, and R.
3. Use of the Terms ``Members'' and ``Settling Members'' Throughout the
Rules
Currently, an applicant that agrees to limit its use of NSCC's
services to those specified by NSCC (i.e., Mutual Fund Services and/or
Insurance and Retirement Services) is called a ``Mutual Fund/Insurance
Services Member.'' Thus when the term ``Member'' is used within NSCC's
Rules, it may apply to a full service Member (which may generally use
all NSCC services), a Mutual Fund/Insurance Services Member (which may
only utilize the Mutual Fund and Insurance and Retirement Processing
Services), or to both depending upon the context. Additionally, NSCC's
Rules make reference to ``Settling Members,'' which may apply to a full
service Member, a Mutual Fund/Insurance Services Member, a Non-Clearing
Member, or all three member types. It is only in further understanding
the Rules or in the context of a term's use that one may determine to
which member type a Rule may apply.\5\ Accordingly, NSCC proposes to
modify all references to ``Settling Member'' and to ``Member'' within
each NSCC Rule to clearly indicate which member type a rule is
applicable. Definitions associated with these terms (contained in Rule
1) will be modified, and the term ``Settling Member'' will be deleted
from NSCC's Rules.
---------------------------------------------------------------------------
\5\ For example, as a Mutual Fund/Insurance Services Member may
not participate in the Continuous Net Settlement Service (``CNS''),
any reference to ``Members'' within Rule 11 (``CNS'') will not apply
to Mutual Fund/Insurance Services Members. Any reference to
``Settling Member'' within Rule 17 (``Fine Payments'') will apply to
all full-service Members, Mutual Fund/Insurance Services Members,
and Non-Clearing Members (which NSCC is renaming ``Commission
Billing Members'').
---------------------------------------------------------------------------
4. Rule 15 (``Financial Responsibility and Operational Capability'')
Rule 15 contains, among other things, the requirements of members
with regard to reports to be filed on an ongoing basis (e.g., annual
audited financial statements, Financial and Operational Combined
Uniform Single (``FOCUS'') Reports, etc.) and notifications that
members are required to make to NSCC regarding any failure to maintain
their membership qualifications and standards, including notifications
of certain material changes in business, ownership, or control. NSCC
proposes to move these ongoing reporting requirements into new Rule 2B.
Rule 15 will then be renamed ``Assurances of Financial Responsibility
and Operational Capability.''
In Section 2.A. (``Reports and Information'') of new Rule 2B, NSCC
is adding text that clarifies that unless specifically set forth within
the Rule, the time periods established for submitting reports and data
to NSCC are set forth in the form of notices posted on NSCC's Web site
and that each
[[Page 3663]]
member is required to retrieve all notices from NSCC's Web site daily.
In Section 2.B. (``Notification of Changes in Condition'') of new
Rule 2B, NSCC is changing the reporting requirements of certain member
types with respect to providing NSCC with written notice of events that
will effect a change in control of the member or that could have a
material impact on the member's business and/or financial condition.
Historically, this provision applied to full service Members (i.e.,
those Members for which certain activity is guaranteed at a fixed point
in the clearance and settlement process) as well as Mutual Fund/
Insurance Services Members, Fund Members, and Insurance Carrier/
Retirement Services Members (i.e., those member types whose activity is
limited to use of non-guaranteed services). NSCC has determined that
this notification provision should apply solely to full service
Members.
Additionally, NSCC seeks to delete the current requirement that a
Commission Billing Member (previously called a ``Non-Clearing Member'')
provide NSCC with written and oral notice if it is no longer in
compliance with any of the relevant qualifications and standards for
membership. Commission Billing Members participate in NSCC solely for
the purpose of paying and receiving broker commissions and file
transmissions that are sent to NSCC directly from either the New York
Stock Exchange or the American Stock Exchange. As there are no NSCC
financial or operational requirements applicable to this member type
and the participation of the member is coordinated between NSCC and the
member's Exchange, the current requirement is not necessary.
5. Rule 1 (``Definitions and Descriptions'')
NSCC proposes the following with respect to terms defined within
Rule 1:
Board of Directors
The current definition is modified to make clear that the term
``Board of Directors'' means the Board of Directors of NSCC or a
committee thereof acting on delegated authority.
Commission Billing Member
NSCC is renaming Non-Clearing Members ``Commission Billing
Members'' to better reflect the nature of their participation in NSCC's
services. Non-Clearing Members utilize NSCC's Commission Settlement
Service solely for the payment and collection of commissions.
Limited Member
The term ``Limited Member'' will mean a Person whose use of NSCC's
services is limited to those services specified by NSCC.
Person
The proposed term ``Person'' will mean a partnership, corporation,
limited liability corporation, or other organization, entity, or
individual.
Registered Broker-Dealer
The term ``Registered Broker-Dealer'' (currently defined in Rule 2
as ``a broker or dealer registered under the Securities Exchange Act of
1934, as amended'') is being moved to Rule 1.
Settling Member
The term ``Settling Member'' is being deleted from NSCC's Rules.
Each member type encompassed by this term is being specifically named
within NSCC's Rules.
Other conforming technical changes to Rule 1 are being made to
accommodate the restructuring of the Rules.
6. Rule 2A (``Initial Membership Requirements'')
Applicant Operational Testing Requirements
Under NSCC's Rules, certain applicants as determined by NSCC must
demonstrate that they will be able to satisfactorily communicate with
NSCC. These applicants conduct system/operational tests with NSCC. NSCC
is adding new text to its rules (Rule 2A, Section 1.C. [''Application
Documents'']) to make clear NSCC's current requirement with regard to
applicant testing.
Member's Agreement
NSCC's Rules currently provide that members sign and deliver to
NSCC a member's agreement. The applicable provisions of each type of
member's agreement have historically been set forth in the Rule that
applies to that member type (e.g., a Fund Member's agreement provisions
are contained in Rule 51, a full service Member's provisions are
contained in Rule 2, a Third Party Administrator Member's provisions
are contained in Rule 60). Regardless of member type, each member
agreement has certain standard provisions that generally apply to all
members (e.g., the only services the member may use are those that are
permitted by NSCC, that the member will abide by NSCC's Rules and be
bound by all provisions of the Rules, etc.) and certain other
provisions that are unique to particular member types (e.g., Fund
Members have a unique provision with regard to NSCC's inspection of
their books and records).
NSCC new Rule 2A, Section 1.E. (``Membership and Other
Agreements'') contains the main member agreement provisions for all
member types, as well as address the requirements with regard to any
other agreements.
Third Party Administrator (``TPA'') ACH Agreements
NSCC's Rules currently state that TPA Members (non-settling
members) must provide NSCC with an agreement for preauthorized payments
(an ``ACH'' agreement) so that NSCC may collect monthly charges
pursuant to Rule 26 (``Bills Rendered''). To accommodate payment
methods other than ACH (i.e., ``e-payment'' using a credit card or bank
account), NSCC is replacing the specific TPA ACH requirement within its
Rules with more generic text.
7. Rule 2B (``Ongoing Membership Requirements and Monitoring'') Reports
and Information
Annual Audited Financial Statements
NSCC's Rules currently state that a member whose membership is
contingent upon a guarantee of a third party must provide a copy of the
annual audited financial statements of the guarantor. If such
statements for the member or its guarantor are not available, NSCC may
accept at its sole discretion consolidated financial statements
prepared at the level of the parent of the member or guarantor. NSCC is
modifying this text to make clear that it may accept consolidated
financial statements or financial information prepared at the level of
the parent of such entity.\6\
---------------------------------------------------------------------------
\6\ NSCC is also correcting a typographical error in Rule 2B,
Section 2.A.(a) in that ``each'' guarantor should read ``such''
guarantor.
---------------------------------------------------------------------------
Call Reports
New Rule 2B, Section 2.A.(c) applies to Call Reports filed with
NSCC by members that are banks or trust companies. To the extent that
such information is not contained within the Call Report or the member
is a bank or trust company that is not required to file a Call Report,
such member will be required to provide NSCC with information
containing each of its capital levels and ratios.
[[Page 3664]]
Supplemental and Quarterly Financial Statements Filed With The National
Association of Insurance Commissioners (``NAIC'')
NSCC is deleting the current Rule 15 requirement that Insurance
Companies provide NSCC with copies of their supplemental and quarterly
financial statements filed with the NAIC or the Insurance Company's
regulatory authority. Currently, NSCC receives annual audited financial
statements and annual regulatory reports from these members in order to
monitor adherence to membership requirements. The revised rule language
will conform the Rules to current practice.
Securities Exchange Act Rule 15c3-1 Notification
NSCC is adding Rule 2B, Section 2.A.(g) to its Rules to require
that a member that has provided notice to the Commission pursuant to
paragraph (e) of Securities Exchange Act Rule 15c3-1 (``Notice
Provisions Relating to Limitations on the Withdrawal of Equity
Capital'') shall notify NSCC and shall provide NSCC with a copy of such
notice by close of business on the day such notice is provided to the
Commission.
Operational Testing
NSCC requires that certain ``top tier'' members participate in
periodic connectivity testing with NSCC for business recovery purposes.
NSCC is adding Rule 2B, Section 3 (``Operational Testing'') to its
Rules to specifically set forth NSCC's operational testing
requirements.
Ongoing Monitoring--Surveillance Status
Currently NSCC's ``credit risk matrix,'' (i.e., the provision
relating to NSCC's ongoing monitoring of full service Members) appears
in Addendum B. NSCC is moving its current risk matrix into new Rule 2B.
NSCC is also replacing the term ``Settling Member'' with ``Member'' as
the credit risk matrix only applies to full service ``Members.''
Voluntary Retirement
NSCC is adding Rule 2B, Section 5 (``Voluntary Retirement'') to its
Rules, which is the current process by which an active participant may
voluntarily retire as an NSCC member.
8. Addendum B (``Qualifications and Standards of Financial
Responsibility, Operational Capability and Business History'')
Immediate Placement on Surveillance by NSCC
Currently, NSCC's Rules provide that applicants to become a Member,
Mutual Fund/Insurance Services Member, Fund Member, or Insurance
Carrier/Retirement Services Member may not be known to be subject to
any other action or condition the existence of which will require it to
be placed on surveillance by NSCC. In addition, the financial
requirements for certain members (full service Members and Mutual Fund/
Insurance Services Members) state that the member must have a capital
ratio or percentage that will not require the applicant to be placed on
immediate surveillance by NSCC. All applicants must meet their minimum
financial requirements, as applicable to their member type. NSCC is
deleting these provisions.
When the NSCC membership standards were developed, the NSCC credit
risk matrix was not in place. As a result of the implementation of the
credit risk matrix, it is possible that once an applicant is approved
for membership, it may be placed directly on NSCC's Watch List (i.e.,
surveillance status). As sufficient discretion to deny membership based
on financial, operational, or character issues exists in other sections
of NSCC's rules, elimination of these provisions will not diminish
NSCC's authority under its Rules to deny an applicant membership.
Fund Member Applicants Subject to Securities Exchange Act Rule 17a-11
Reporting
NSCC is deleting Addendum I (``Standards of Financial
Responsibility and Operational Capability for Fund Members''), which
includes a requirement that a broker-dealer Fund Member applicant not
be subject to reporting under Securities Exchange Act Rule 17a-11
(``Notification Provisions for Broker and Dealers''). As a Fund Member,
an applicant must meet NSCC's minimum financial requirements for
membership (and, as stated above, NSCC retains sufficient discretion to
deny membership based on financial, operational, or character issues in
other sections of NSCC's Rules). Thus, NSCC has determined that this
requirement is duplicative and that its elimination will not diminish
NSCC's authority under its Rules to deny an applicant membership if it
does not meet the applicable financial standards.
Financial Responsibility--Entities That Qualify for Membership Under
the Category of ``Other'' Entity Types
In certain instances in NSCC's membership Rules, an applicant that
does not qualify for membership under one of the specifically defined
qualification criteria established for its membership type, may apply
for membership if it has demonstrated to NSCC that its business and
capabilities are such that it could reasonably expect material benefit
from direct access to NSCC's services. NSCC's financial requirements
for such an applicant required that it meet financial stability
standards as were applied to the industry in which the applicant was
associated. Because industry standards have not always been well-
defined and as there has not always been consensus among market
participants as to what those industry standards should be, in new
Section 1 of Addendum B, NSCC is modifying the financial requirements
for ``other'' applicants by requiring that such applicants satisfy such
minimum standards of financial responsibility deemed appropriate by
NSCC.
Business History
NSCC's Rules currently provide that Insurance Carrier/Retirement
Services applicants and Third Party Administrator applicants (both non-
guaranteed service members) must have an established business history
of a minimum of three years or personnel with sufficient operational
background and experience to ensure the ability of the applicant to
conduct such a business. The business history requirement for full
service Members, as well as Mutual Fund/Insurance Services Members and
Fund Members (both non-guaranteed service members) is six months, or
the member must have personnel with sufficient operational background
and experience to ensure the ability of the applicant to conduct such a
business.
NSCC has determined that the business history requirement of
Insurance Carrier/Retirement Services and Third Party Administrator
applicants need not be any more stringent that those applied to Fund
Members and Mutual Fund/Insurance Services Members. Therefore, NSCC is
changing the three year requirement to six months.
Fund Members That Are Insurance Companies
Under NSCC's Rules, an Insurance Company may apply to become a Fund
Member; however, the financial requirements for Insurance Companies
[[Page 3665]]
is not specifically set forth in Addendum I. Addendum I states that all
``other'' applicants shall be required to meet financial stability and
operational capability standards as are applicable to the industry in
which the applicant is associated. Historically, NSCC looked to its
Insurance Carrier/Retirement Services Member financial standards set
forth in Rule 57. NSCC is clearly stating Insurance Company financial
standards under its Fund Member financial requirements in Addendum B,
Section 3.
9. Rule 3 (``Lists To Be Maintained'')
In consolidating NSCC's membership standards, NSCC is moving to
Rule 2 the portions of Rule 3 (specifically, Sections 2, 5, and 6) that
pertain to Municipal Comparison Only Members, Non-Clearing Members,
and/or Data Services Only Members. For purposes of clarity, the
remaining information within Rule 3 is being reorganized and reordered.
10. Addendum D (``Statement of Policy Envelope Settlement Service'')
To more accurately reflect the scope of the information contained
within Addendum D, NSCC is renaming it ``Statement of Policy Envelope
Settlement Service, Mutual Fund Services, Insurance and Retirement
Processing Service and Other Services Offered by the Corporation.''
11. Rule 38 (``Captions'')
Mirroring FICC's Rules, NSCC is adding language to Rule 38 to make
clear that NSCC's Rules are governed by New York substantive law. This
language currently exists in NSCC's membership agreements only. Rule 38
will be renamed ``Governing Law and Captions.''
12. Technical Corrections
In 2006, NSCC submitted for immediate effectiveness proposed rule
change SR-NSCC-2006-07 which made clarifying and technical changes to
NSCC's Rules related to funds which are eligible for processing on
Fund/Serv.\7\ At that time, the membership qualifications contained
within Section 1(viii) of Rule 31 (``Data Services Only Member'')
should have been modified to reflect the definitional change made
within Rule 1 with respect to ``TPA.'' Accordingly, NSCC is correcting
the text within its rules to eliminate the reference to ``defined
contribution plans as defined in Section 414(i) of the Internal Revenue
Code of 1986, as amended,'' and to refer instead to ``a retirement or
other benefit plan.''
---------------------------------------------------------------------------
\7\ Securities Exchange Act Release No. 54366 (August 25, 2006),
71 FR 52199.
---------------------------------------------------------------------------
In 2006, NSCC submitted for immediate effectiveness proposed rule
change SR-NSCC-2006-14 which, among other things, deleted references to
the Product Repository service as NSCC had determined not to offer the
service.\8\ At that time, all references within NSCC's Rules to
``Repository Data'' should have been deleted. Accordingly, NSCC is
seeking to delete such references.
---------------------------------------------------------------------------
\8\ Securities Exchange Act Release No. 54921 (December 12,
2006), 71 FR 76415.
---------------------------------------------------------------------------
In 2005, the Commission approved NSCC proposed rule change SR-NSCC-
2005-01 which clarified that the operational capability that is
ordinarily focused upon by NSCC during the application process is the
ability of an applicant to appropriately communicate with NSCC--that is
the ability to input to NSCC and to receive output from NSCC on a
timely and accurate basis.\9\ The rule change removed certain
provisions that might be interpreted to impose upon NSCC an obligation
to make determinations with respect to particular aspects of
operational capability. Instead, NSCC relies upon the requirement that
the applicant in fact be able to satisfactorily communicate with NSCC
as generally stated in the operational capability requirements
currently set forth for members in NSCC's Rules. At the time of the
filing, the provision within Rule 60 with respect to approval of TPA
Member applicants based upon an alternative operational standard should
have been deleted. Accordingly, NSCC now seeks to delete this provision
from its Rules. NSCC will continue to retain the right to examine any
aspect of an applicant's or member's business pursuant to the
provisions of Rule 15.
---------------------------------------------------------------------------
\9\ Securities Exchange Act Release No. 51600 (April 22, 2005),
70 FR 22167.
---------------------------------------------------------------------------
In 2005, the Commission approved NSCC proposed rule change SR-NSCC-
2005-14 which added Rule 64 (``DTCC Shareholders Agreement'') requiring
that full service Members of NSCC purchase shares of the common stock
of The Depository Trust & Clearing Corporation (``DTCC''), NSCC's
parent corporation, and that certain Limited Member types could
voluntarily purchase such shares.\10\ Section 5 of Rule 64 made
incorrect references to ``Members'' and should have referenced all
member types specified in Section 2 (``Members'') and Section 3 (``Fund
Members, Insurance Carrier/Retirement Services Members, Municipal
Comparison Only Members, and Mutual Fund/Insurance Services Members'')
of Rule 64. Accordingly, NSCC now correcting such references.
---------------------------------------------------------------------------
\10\ Securities Exchange Act Release No. 52922 (December 7,
2005), 70 FR 74070.
---------------------------------------------------------------------------
In 2004, the Commission approved NSCC proposed rule change SR-NSCC-
2003-05 which modified NSCC's Rules to provide that notices to members
posted by NSCC via electronic format (i.e., posted on NSCC's Web site)
meet NSCC's notification obligations.\11\ At that time, Section 7 of
Rule 45 (``Notices'') was added to NSCC's Rules with an incorrect
reference to Section 3. NSCC is seeking to remove this incorrect
reference.
---------------------------------------------------------------------------
\11\ Securities Exchange Act Release No. 50085 (July 26, 2004),
69 FR 45872.
---------------------------------------------------------------------------
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 perfect the mechanism of a national
system for the prompt and accurate clearance and settlement of
securities transactions.\12\ The Commission believes that NSCC's rule
change is consistent with this Section because it should perfect the
mechanism of a national system for the prompt and accurate clearance
and settlement of securities transactions by assisting NSCC applicants
and members in understanding, and thereby complying with, NSCC's
membership standards and requirements.
---------------------------------------------------------------------------
\12\ 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, as amended, is consistent with the requirements
of the Act and in particular Section 17A of the Act and the rules and
regulations thereunder. In approving the proposed rule change, as
amended, the Commission considered the proposal's impact on efficiency,
competition, and capital formation.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-NSCC-2006-17), as amended,
be and hereby is approved.
[[Page 3666]]
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-1022 Filed 1-16-09; 8:45 am]
BILLING CODE 8011-01-P
