Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change To Enhance Its Margining Methodology as Applied to Municipal and Corporate Bonds, 21123-21125 [2012-8463]
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Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices
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.
The self-regulatory organization 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
Currently, the BOX Fee Schedule lists
fingerprint processing fees that are
imposed on BOX Participants by the
Financial Industry Regulatory
Authority, Inc., (‘‘FINRA’’) in
connection with participation in
FINRA’s Web CRD registration system.
The Exchange was recently notified by
FINRA that, effective March 19, 2012,
FINRA decreased the per card Initial
Submission and Third Submission fees
from $30.25 to $27.50. As such, the
Exchange proposes to amend the BOX
Fee Schedule to reflect this change.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the Act,4
in general, and Section 6(b)(4) of the
Act,5 in particular, in that it provides for
the equitable allocation of reasonable
dues, fees, and other charges among its
members and other persons using its
facilities. The Exchange believes the
proposed change is reasonable because
the fees for fingerprint processing will
now be lower than they previously
were. The proposed change is equitable
and not unfairly discriminatory because
the new, lower fingerprint processing
fees will apply to all eligible parties.
Further, this fee is not being assessed or
set by BOX or the Exchange, but by
FINRA.
pmangrum on DSK3VPTVN1PROD with NOTICES
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
4 15
5 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
VerDate Mar<15>2010
15:11 Apr 06, 2012
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is filed for
immediate effectiveness pursuant to
Section 19(b)(3)(A)(ii) of the Exchange
Act 6 and Rule 19b–4(f)(2) thereunder,7
because it establishes or changes a due,
fee, or other charge applicable only to a
member. As such, the proposed rule
change is effective upon filing with the
Commission.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend the rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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
• Use the Commission’s Internet
comment form https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–BX–2012–023 on the
subject line.
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–BX–2012–023. This file
number should be included on the
subject line if email 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
6 15
7 17
Jkt 226001
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
Frm 00057
Fmt 4703
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21123
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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing will
also be available for inspection and
copying at the principal office of the
Exchange. 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–BX–
2012–023 and should be submitted on
or before April 30, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–8430 Filed 4–6–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66731; File No. SR–NSCC–
2012–02]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Approving
Proposed Rule Change To Enhance Its
Margining Methodology as Applied to
Municipal and Corporate Bonds
April 4, 2012.
I. Introduction
On February 1, 2012, the National
Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change SR–NSCC–
2012–02 pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934
(‘‘Act’’).1 The proposed rule change was
published for comment in the Federal
Register on February 22, 2012.2 The
Commission received no comment
letters. For the reasons discussed below,
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 Securities Exchange Act Release No. 34–66398
(February 15, 2012), 77 FR 10589 (February 22,
2012).
1 15
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09APN1
21124
Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices
the Commission is granting approval of
the proposed rule change.
II. Description
This rule change will enhance NSCC’s
margining methodology as it applies to
municipal and corporate bonds
Proposal Overview
pmangrum on DSK3VPTVN1PROD with NOTICES
A primary objective of NSCC’s
clearing fund (‘‘Clearing Fund’’) is to
have on deposit from each applicable
member assets sufficient to satisfy losses
that may otherwise be incurred by
NSCC as the result of the default of the
member and the resultant close out of
that member’s unsettled positions under
NSCC’s trade guaranty. Each member’s
Clearing Fund required deposit is
calculated daily pursuant to a formula
set forth in Procedure XV of NSCC’s
Rules, which formula is designed to
provide sufficient funds to cover this
risk of loss. The Clearing Fund formula
accounts for a variety of risk factors
through the application of a number of
components, each described in
Procedure XV.3
The volatility component or ‘‘VaR’’ is
a core component of this formula and is
designed to calculate the amount of
money that may be lost on a portfolio
over a given period of time and that is
assumed would be necessary to
liquidate the portfolio within a given
level of confidence. Pursuant to
Procedure XV, NSCC may exclude from
this calculation net unsettled positions
in classes of securities such as illiquid
municipal or corporate bonds, whose
volatility is amenable to generally
accepted statistical analysis only in a
complex manner. The volatility charge
for such positions is determined by
multiplying the absolute value of the
positions by a predetermined percentage
(‘‘haircut’’), which shall not be less than
2%.
3 In addition to those described in this filing,
Clearing Fund components also include (i) a markto-market component that takes into account the
difference between the contract price and market
price for the net position of each security in a
member’s portfolio through settlement; (ii) the
Market Maker Domination component (‘‘MMDOM’’)
is charged to Market Makers or firms that clear for
them; (iii) a ‘‘special charge’’ in view of price
fluctuations in or volatility or lack of liquidity of
any security; (iv) an additional charge between 5–
10% of a member’s outstanding fail positions; (v)
a ‘‘specified activity charge’’ for transactions
scheduled to settle on a shortened settlement cycle
(i.e., less than T+3 or T+3 for ‘‘as-of’’ transactions);
(vi) an additional charge that NSCC may require of
members on surveillance status; and (vii) an
‘‘Excess Capital Premium’’ that takes into account
the degree to which a member’s collateral
requirement compares to the member’s excess net
capital by applying a charge if a member’s Required
Deposit minus amounts applied from the charges
described in (ii) and (iii) above is above its required
capital.
VerDate Mar<15>2010
15:11 Apr 06, 2012
Jkt 226001
In connection with its ongoing review
of the adequacy and appropriateness of
its margining methodologies, NSCC is
amending Procedure XV of its Rules so
that NSCC will apply this haircut-based
margining methodology at a rate of no
less than 2% as is currently permitted
by Procedure XV to all municipal and
corporate bonds processed through
NSCC. The proposed rule change will
make clear that to the extent NSCC
deems appropriate NSCC may apply this
haircut to any of the municipal and
corporate bonds that it processes. As
NSCC continues its ongoing review of
the adequacy of its margining
methodology in achieving the desired
coverage, the proposed rule change will
allow NSCC to apply a margin
requirement to these instruments that it
deems appropriate.
NSCC reviews its risk management
processes against applicable regulatory
and industry standards, including, but
not limited to: (i) The Recommendations
for Central Counterparties
(‘‘Recommendations’’) of the Committee
on Payment and Settlement Systems
and the Technical Committee of the
International Organization of Securities
Commissions (‘‘IOSCO’’) and (ii) the
securities laws and rulemaking
promulgated by the Commission. In
conformance with Recommendations 3
and 4 of the IOSCO Recommendations
and with the Commission rules
proposed under the Dodd-Frank Wall
Street Reform and Consumer Protection
Act of 2010, specifically proposed Rule
17Ad–22(b)(1) addressing measurement
and management of credit exposures,
this proposed rule change will assist
NSCC in its continuous efforts to ensure
the reliability of its margining
methodology and will limit NSCC’s
exposures to losses by allowing NSCC to
apply a margin requirement to the
corporate and municipal bonds it clears
that captures the risk characteristics,
which are asset class specific, of these
instruments, including historical price
volatility, market liquidity, and
idiosyncratic risk.
Implementation Timeframe
Members will be advised of the
implementation date through issuance
of an NSCC Important Notice.
Proposed Rule Changes
In order to make clear that to the
extent NSCC deems appropriate it may
apply a haircut-based margining
methodology to all municipal and
corporate bonds processed at NSCC,
NSCC is amending Sections I(A)(1)(a)(ii)
and I(A)(2)(a)(ii) of Procedure XV, as
marked on Exhibit 5 to the proposed
rule filing, by removing the qualifier
PO 00000
Frm 00058
Fmt 4703
Sfmt 4703
‘‘illiquid’’ before ‘‘municipal or
corporate bonds.’’ No other changes to
the Rules are contemplated by this
proposed rule change.
III. Discussion
Section 17A(b)(3)(F) of the Act 4
requires, among other things, that the
rules of a clearing agency be designed,
to assure the safeguarding of securities
and funds which are in the custody or
control of such clearing agency or for
which it is responsible and in general to
protect investors and the public interest.
As a central counterparty, NSCC
occupies an important role in the
securities settlement system by
interposing itself between
counterparties to financial transactions,
thereby reducing the risk faced by
members and contributing to global
financial stability. The effectiveness of a
central counterparty’s risk controls and
the adequacy of its financial resources
are critical to achieving these riskreducing goals. Because the proposed
rule change will assist NSCC in its
continuous efforts to ensure the
reliability of its margining methodology
and will limit NSCC’s exposures to
losses by allowing it to apply a margin
requirement to corporate and municipal
bonds cleared at NSCC that better
addresses the risk characteristics of
these instruments, the proposed rule
change should help assure the
safeguarding of securities and funds
which are in the custody or control of
NSCC or for which it is responsible, and
in general, protect investors and the
public interest and therefore is
consistent with the requirements of
Section 17A(b)(3)(F) of the Act. The
proposed rule change is not inconsistent
with the existing rules of NSCC,
including any other rules proposed to be
amended.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act and in particular with the
requirements of Section 17A of the Act 5
and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,6 that the
proposed rule change (File No. SR–
NSCC–2012–02) be, and hereby is,
approved.7
4 15
U.S.C. 78q–1(b)(3)(F).
U.S.C. 78q–1.
6 15 U.S.C. 78s(b)(2).
7 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition and capital formation. 15
U.S.C. 78c(f).
8 17 CFR 200.30–3(a)(12).
5 15
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09APN1
Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.8
Kevin O’Neill,
Deputy Secretary.
[FR Doc. 2012–8463 Filed 4–6–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66724; File No. SR–
NASDAQ–2012–044]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify the
Fees Applicable to Non-Display Usage
of Certain NASDAQ Depth-of-Book
Market Data
April 3, 2012.
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 March 26,
2012, The NASDAQ Stock Market LLC
(‘‘NASDAQ’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by NASDAQ. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
pmangrum on DSK3VPTVN1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ is filing this proposed
change to modify the fees applicable to
Non-Display Usage of certain NASDAQ
Depth-of-Book market data. The text of
the proposed rule change is available at
nasdaq.cchwallstreet.com, at
NASDAQ’s principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NASDAQ 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.
NASDAQ has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Mar<15>2010
15:11 Apr 06, 2012
Jkt 226001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Growth in Use of Non-Displayed Data.
The implementation of Regulation NMS
in 2006 and 2007 triggered a dramatic
change in the composition, speed, and
consumption of market data products in
U.S. equities trading. Regulation NMS
spurred the development and
proliferation of proprietary data
products by liberalizing SEC Rule 603,
allowing self-regulatory organizations to
offer on a proprietary basis data that
previously was confined to national
market system plans, and permit
investors to use this proprietary data in
circumstances where consolidated data
previously was required. Regulation
NMS also drove market participants to
increase trading speed and, by
necessity, the speed of market data feeds
by requiring in Rule 611 that all market
participants compete to access a limited
set of protected quotations. As a result,
some market participants and exchanges
have used Depth-of-Book data to
identify liquidity in fragmented
markets.
Technological advancements and
their use by increasingly sophisticated
market participants have intensified the
changes brought about by Regulation
NMS. For example, the prevalence and
importance of co-location has grown
rapidly as market participants seek to
access protected quotes faster than their
competitors. Also, markets and market
participants continually seek expanded
bandwidth options to communicate an
ever-increasing number of trading
messages without significant latencies
and improvement of determinism.
Connectivity offerings have multiplied
as new networks and technologies come
on line.
As technology, automation, speed,
and other aspects of trading have
evolved, so too has market data
consumption. No longer is trading and
investing dominated by individuals
responding to market data displayed on
trading screens by manually entering
quotes and trades into the markets.
Instead, the vast majority of trading is
done by firms leveraging powerful
servers running sophisticated
algorithms and consuming massive
quantities of data without displaying
that data to individual traders. While
certain groups of investors, including
retail investors, continue to view
traditional market data displays, their
orders are generally processed,
delivered, and executed by firm servers
using non-displayed data. Non-Display
PO 00000
Frm 00059
Fmt 4703
Sfmt 4703
21125
Usage is used not only for automated
order generation and program trading,
but also to provide reference prices for
algorithmic trading and order routing;
and for various back office processes,
including surveillance, order
verification, and risk management
functions.
NASDAQ Market Data Pricing.
NASDAQ’s pricing model for market
data products must keep pace with
changes in data consumption patterns in
order to allocate fees and charges fairly
among Subscribers. NASDAQ’s pricing
has evolved over time in response to
previous changes in market data
consumption, and it now includes
numerous factors for setting fees.
Generally, NASDAQ allocates market
data fees among Subscribers based on
the data elements consumed, including
top-of-book,3 Depth-of-Book,4 and other,
more sophisticated data products.5
NASDAQ also distinguishes between
different sets of securities, NASDAQlisted securities versus securities listed
on other markets for which NASDAQ’s
data plays a different, often more
limited, role. Moreover, NASDAQ has
long followed industry practice by
distinguishing between real-time and
delayed data, allocating higher fees to
real-time usage and lower or no fees to
delayed data usage. Also, since 1999
NASDAQ has distinguished between
Professional and Non-Professional
Subscribers, offering lower fees to NonProfessional Subscribers in order to
encourage use by average investors and
also recognizing that Professional
Subscribers make heavier use of the
same data feeds.6 These four
distinctions have existed in tandem for
many years.
Since the mid-2000s, in response to
changes driven by Regulation NMS,
NASDAQ has added new considerations
to its pricing. Thus, in 2005, NASDAQ
amended its Distributor fee schedule to
distinguish between distributions [sic]
that is Internal (redistribution within an
entity that receives NASDAQ market
data) versus External (redistribution
outside that entity) to the Distributor.7
Also, in 2005 NASDAQ began
differentiating between Direct Access
and Indirect Access, charging more for
firms that access data directly from
NASDAQ based on the enhanced speed
and simplicity for Subscribers and the
3 Compare NASDAQ Rule 7011 (top-of-book
consolidated data) and NASDAQ Rule 7047 (top-ofbook NASDAQ-only data).
4 See NASDAQ Rule 7023.
5 See NASDAQ Rules 7044 (Market Pathfinders),
7048 (Custom Data Feeds), and 7057 (NASDAQ
MatchView).
6 See NASDAQ Rule 7023(a)(3)(A).
7 See NASDAQ Rule 7023(a)(4).
E:\FR\FM\09APN1.SGM
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]]>Agencies
[Federal Register Volume 77, Number 68 (Monday, April 9, 2012)]
[Notices]
[Pages 21123-21125]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8463]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66731; File No. SR-NSCC-2012-02]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Approving Proposed Rule Change To Enhance Its
Margining Methodology as Applied to Municipal and Corporate Bonds
April 4, 2012.
I. Introduction
On February 1, 2012, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change SR-NSCC-2012-02 pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'').\1\
The proposed rule change was published for comment in the Federal
Register on February 22, 2012.\2\ The Commission received no comment
letters. For the reasons discussed below,
[[Page 21124]]
the Commission is granting approval of the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 34-66398 (February 15,
2012), 77 FR 10589 (February 22, 2012).
---------------------------------------------------------------------------
II. Description
This rule change will enhance NSCC's margining methodology as it
applies to municipal and corporate bonds
Proposal Overview
A primary objective of NSCC's clearing fund (``Clearing Fund'') is
to have on deposit from each applicable member assets sufficient to
satisfy losses that may otherwise be incurred by NSCC as the result of
the default of the member and the resultant close out of that member's
unsettled positions under NSCC's trade guaranty. Each member's Clearing
Fund required deposit is calculated daily pursuant to a formula set
forth in Procedure XV of NSCC's Rules, which formula is designed to
provide sufficient funds to cover this risk of loss. The Clearing Fund
formula accounts for a variety of risk factors through the application
of a number of components, each described in Procedure XV.\3\
---------------------------------------------------------------------------
\3\ In addition to those described in this filing, Clearing Fund
components also include (i) a mark-to-market component that takes
into account the difference between the contract price and market
price for the net position of each security in a member's portfolio
through settlement; (ii) the Market Maker Domination component
(``MMDOM'') is charged to Market Makers or firms that clear for
them; (iii) a ``special charge'' in view of price fluctuations in or
volatility or lack of liquidity of any security; (iv) an additional
charge between 5-10% of a member's outstanding fail positions; (v) a
``specified activity charge'' for transactions scheduled to settle
on a shortened settlement cycle (i.e., less than T+3 or T+3 for
``as-of'' transactions); (vi) an additional charge that NSCC may
require of members on surveillance status; and (vii) an ``Excess
Capital Premium'' that takes into account the degree to which a
member's collateral requirement compares to the member's excess net
capital by applying a charge if a member's Required Deposit minus
amounts applied from the charges described in (ii) and (iii) above
is above its required capital.
---------------------------------------------------------------------------
The volatility component or ``VaR'' is a core component of this
formula and is designed to calculate the amount of money that may be
lost on a portfolio over a given period of time and that is assumed
would be necessary to liquidate the portfolio within a given level of
confidence. Pursuant to Procedure XV, NSCC may exclude from this
calculation net unsettled positions in classes of securities such as
illiquid municipal or corporate bonds, whose volatility is amenable to
generally accepted statistical analysis only in a complex manner. The
volatility charge for such positions is determined by multiplying the
absolute value of the positions by a predetermined percentage
(``haircut''), which shall not be less than 2%.
In connection with its ongoing review of the adequacy and
appropriateness of its margining methodologies, NSCC is amending
Procedure XV of its Rules so that NSCC will apply this haircut-based
margining methodology at a rate of no less than 2% as is currently
permitted by Procedure XV to all municipal and corporate bonds
processed through NSCC. The proposed rule change will make clear that
to the extent NSCC deems appropriate NSCC may apply this haircut to any
of the municipal and corporate bonds that it processes. As NSCC
continues its ongoing review of the adequacy of its margining
methodology in achieving the desired coverage, the proposed rule change
will allow NSCC to apply a margin requirement to these instruments that
it deems appropriate.
NSCC reviews its risk management processes against applicable
regulatory and industry standards, including, but not limited to: (i)
The Recommendations for Central Counterparties (``Recommendations'') of
the Committee on Payment and Settlement Systems and the Technical
Committee of the International Organization of Securities Commissions
(``IOSCO'') and (ii) the securities laws and rulemaking promulgated by
the Commission. In conformance with Recommendations 3 and 4 of the
IOSCO Recommendations and with the Commission rules proposed under the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,
specifically proposed Rule 17Ad-22(b)(1) addressing measurement and
management of credit exposures, this proposed rule change will assist
NSCC in its continuous efforts to ensure the reliability of its
margining methodology and will limit NSCC's exposures to losses by
allowing NSCC to apply a margin requirement to the corporate and
municipal bonds it clears that captures the risk characteristics, which
are asset class specific, of these instruments, including historical
price volatility, market liquidity, and idiosyncratic risk.
Implementation Timeframe
Members will be advised of the implementation date through issuance
of an NSCC Important Notice.
Proposed Rule Changes
In order to make clear that to the extent NSCC deems appropriate it
may apply a haircut-based margining methodology to all municipal and
corporate bonds processed at NSCC, NSCC is amending Sections
I(A)(1)(a)(ii) and I(A)(2)(a)(ii) of Procedure XV, as marked on Exhibit
5 to the proposed rule filing, by removing the qualifier ``illiquid''
before ``municipal or corporate bonds.'' No other changes to the Rules
are contemplated by this proposed rule change.
III. Discussion
Section 17A(b)(3)(F) of the Act \4\ requires, among other things,
that the rules of a clearing agency be designed, to assure the
safeguarding of securities and funds which are in the custody or
control of such clearing agency or for which it is responsible and in
general to protect investors and the public interest.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
As a central counterparty, NSCC occupies an important role in the
securities settlement system by interposing itself between
counterparties to financial transactions, thereby reducing the risk
faced by members and contributing to global financial stability. The
effectiveness of a central counterparty's risk controls and the
adequacy of its financial resources are critical to achieving these
risk-reducing goals. Because the proposed rule change will assist NSCC
in its continuous efforts to ensure the reliability of its margining
methodology and will limit NSCC's exposures to losses by allowing it to
apply a margin requirement to corporate and municipal bonds cleared at
NSCC that better addresses the risk characteristics of these
instruments, the proposed rule change should help assure the
safeguarding of securities and funds which are in the custody or
control of NSCC or for which it is responsible, and in general, protect
investors and the public interest and therefore is consistent with the
requirements of Section 17A(b)(3)(F) of the Act. The proposed rule
change is not inconsistent with the existing rules of NSCC, including
any other rules proposed to be amended.
IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A of the Act \5\ and the
rules and regulations thereunder.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\6\ that the proposed rule change (File No. SR-NSCC-2012-02) be,
and hereby is, approved.\7\
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\6\ 15 U.S.C. 78s(b)(2).
\7\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition and
capital formation. 15 U.S.C. 78c(f).
\8\ 17 CFR 200.30-3(a)(12).
[[Page 21125]]
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For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\8\
Kevin O'Neill,
Deputy Secretary.
[FR Doc. 2012-8463 Filed 4-6-12; 8:45 am]
BILLING CODE 8011-01-P
