Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change To Enhance the Default Pricing Methodology Used by NSCC's Automated Customer Account Transfer Service, 50736-50738 [2012-20576]
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50736
Federal Register / Vol. 77, No. 163 / Wednesday, August 22, 2012 / Notices
the standard LCN connection.14
Additionally, the Exchange represents
that there is no differentiation among
Users regarding the fees charged for a
particular product, service or piece of
equipment. In light of the Exchange’s
representations, the Commission
believes that the co-location fees
proposed are consistent with Section
6(b)(4) and 6(b)(5) of the Exchange Act.
The Exchange is offering additional
co-location services as a convenience to
Users. For instance, the cross connects
and LCN CSP connections provide
Users within the data center with
another alternative to transmit data or
provide services, such as order routing
or market data delivery services. The
cages offered to Users can help prevent
the discovery of the hardware employed
by Users for co-location. As noted by the
Exchange, these additional co-location
services are available to all Users on an
equal basis. The Commission believes
that these additional services are also
consistent with Section 6(b)(5) of the
Exchange Act, as they are designed to
remove impediments to and perfect the
mechanism of a free and open market
and are not designed to permit unfair
discrimination between customers,
issuers, brokers or dealers.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,15 that the
proposed rule change (SR–NYSEMKT–
2012–11) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–20568 Filed 8–21–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67673; File No. SR–NSCC–
2012–06]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing of
Proposed Rule Change To Enhance
the Default Pricing Methodology Used
by NSCC’s Automated Customer
Account Transfer Service
mstockstill on DSK4VPTVN1PROD with NOTICES
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NSCC included statements concerning
the purpose and basis for the proposed
rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
and comments may be examined at the
places specified in Item IV below. NSCC
has prepared summaries, set forth in
sections A, B, and C below, of the most
significant aspects of these statements.3
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Background
ACATS enables NSCC Members to
effect automated transfers of customer
accounts among themselves.4 Pursuant
to Rule 50, an NSCC Member to whom
a customer’s full account will be
transferred (‘‘Receiving Member’’) will
initiate the transfer by submitting to
NSCC a transfer initiation request,
which contains the customer detail
information that the NSCC Member in
possession of the account (‘‘Delivering
Member’’) requires in order to transfer
14 A LCN CSP connection may only be used for
providing services to Subscribing Users and may
not be used for other purposes, such as accessing
the Exchange.
15 15 U.S.C. 78s(b)(2).
16 17 CFR 200.30–3(a)(12).
Jkt 226001
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Commission has modified the text of the
summaries provided by NSCC.
4 ACATS complements Financial Industry
Regulatory Authority (‘‘FINRA’’) Rule 11870
regarding Customer Account Transfers, which
requires FINRA members to use automated clearing
agency customer account transfer services, and to
effect customer account transfers within specified
time frames.
2 17
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
16:53 Aug 21, 2012
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The proposed rule change involves
Rule 50 of NSCC’s Rules and
Procedures. NSCC proposes to amend
this rule to eliminate the use of a default
pricing matrix to assign values to certain
items transferred through NSCC’s
Automated Customer Account Transfer
Service (‘‘ACATS’’).
1 15
August 15, 2012.
VerDate Mar<15>2010
(‘‘Act’’),1 and Rule 19b-4 thereunder,2
notice is hereby given that, on August
7, 2012, the National Securities Clearing
Corporation (‘‘NSCC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change described in Items I, II and III
below, which Items have been prepared
primarily by NSCC. The Commission is
publishing this Notice to solicit
comments on the proposed rule change
from interested persons.
PO 00000
Frm 00063
Fmt 4703
Sfmt 4703
the account. Delivering Members that
have neither rejected the account
transfer request nor sought corrections
to the request within the allotted time
must submit to NSCC certain detailed
customer account asset data.
For items transferred through ACATS
that are not eligible to be processed
through NSCC’s Continuous Net
Settlement (‘‘CNS’’) system 5 (and for
CNS-eligible items that are designated to
be delivered ex-CNS), NSCC will
produce ACATS Receive and Deliver
Instructions. These ACATS transfers
then settle either outside of NSCC or
through a separate service at NSCC.6 In
order to incentivize the timely
completion of ACATS transfers, at the
start of the day on ACATS settlement
date, the Delivering Member’s NSCC
money settlement account will include
a debit, or an incentive charge
(‘‘Incentive Charge’’), equal to the
aggregate market value of the items the
Delivering Member is transferring
through ACATS; the Receiving
Member’s NSCC money settlement
account includes a credit in the same
amount.7 Once delivery of an item is
complete, the Incentive Charge
associated with that item is effectively
offset when the Receiving Member pays
the Delivering Member for the
transferred items. This Incentive Charge
is intended to encourage the Delivering
Member to make delivery of the item in
a timely manner.8
Each item transferred through ACATS
must be assigned a market value in
order to calculate the Incentive Charge.
CNS-eligible items being transferred
through ACATS are assigned a market
5 CNS is an ongoing accounting system that nets
today’s Settling Trades with yesterday’s Closing
Positions, producing net short or long positions per
security issue for each Member. NSCC is always
contraside for all positions. The positions are then
passed against the Member’s Designated Depository
positions and available securities are allocated by
book entry. This allocation of securities is
accomplished through an evening cycle followed by
a day cycle. Positions that remain open after the
evening cycle may be changed as a result of trades
accepted for settlement that day. To allocate
deliveries in both the night and day cycles, CNS
uses an algorithm based on priority groups in
descending order, age of position within a priority
group, and random numbers within age groups.
6 For example, non-CNS ACATS may settle at (i)
The Depository Trust Company (‘‘DTC’’), for DTCeligible items; (ii) NSCC’s automated ACATS-Fund/
SERV interface, for eligible mutual fund assets; (iii)
NSCC’s ACATS–IPS interface, for eligible annuities;
and (iv) the Options Clearing Corporation, where
transfers in customer-options positions take place,
for options.
7 Incentive Charges are not calculated for the
transfer of options or annuities.
8 It also allows the Receiving Member to record
the customer position on its books, regardless
whether the item is actually delivered on settlement
date. This process supports the requirements of
FINRA Rule 11870.
E:\FR\FM\22AUN1.SGM
22AUN1
Federal Register / Vol. 77, No. 163 / Wednesday, August 22, 2012 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
value through the CNS system. NonCNS eligible items, however, are
assigned a market value pursuant to
NSCC Rule 50, which calls for a market
value based on either (i) the price
obtained from a pricing source, if
available or, if a pricing source is not
available, (ii) the greater of (a) the price
in U.S. dollars assigned by the
Delivering Member (‘‘Submitter’s
Value’’), which, in most cases, must be
the current market value of the item,9 or
(b) the value ascribed to such item
pursuant to a default pricing matrix, as
established from time to time by NSCC.
The current default pricing matrix
assigns a value to an item based on its
‘‘asset category type,’’ as classified by
the Delivering Member in the detailed
customer account asset data submitted
to NSCC. For example, the current
default pricing matrix assigns equities a
default price of $1 per share, with a cap
of $20,000, and assigns U.S. government
securities and U.S. government agency
securities a default price of the face
amount. The default pricing matrix was
developed in close coordination with
industry participants and the National
Association of Securities Dealers shortly
after the initial development of ACATS.
It has been observed that the default
pricing matrix may, in some cases,
overvalue items being transferred
through ACATS. When this occurs, on
ACATS settlement date the Delivering
Member will be debited an Incentive
Charge based on a higher market value
than the actual value of the item being
transferred. Delivering Members will
not receive the offset for this Incentive
Charge until they deliver the related
ACATS item. Therefore, a Delivering
Member that does not deliver the
ACATS item on ACATS settlement date
will be required to pay the Incentive
Charge associated with that item. If the
default pricing matrix has overvalued an
ACATS Incentive Charge, a Delivering
Member that has failed to deliver the
item will be faced with an unexpected
inflated settlement charge on ACATS
settlement date.
2. Proposed Rule Change
In order to reduce the risk of
overcharging a Delivering Member,
NSCC is proposing a rule change that
will require NSCC to assign the
Submitter’s Value to items when the
system cannot otherwise find a price for
the security, thereby eliminating the use
9 See Section (d)(5)(A) of current FINRA Rule
11870, stating that a customer statement delivered
in connection with a transfer instruction, ‘‘must
include a then-current market value for all assets so
indicated. If a then-current market value for an asset
cannot be determined (e.g., a limited partnership
interest), the asset must be valued at original cost.’’
VerDate Mar<15>2010
16:53 Aug 21, 2012
Jkt 226001
of the ACATS default pricing matrix
altogether. Under the proposed rule
change, in the case of non-CNS eligible
items transferred through ACATS,
NSCC will assign a market value to
those items as either (i) the price
obtained from a pricing source, if
available or, if a pricing source is not
available, the assigned market value will
be (ii) the price in U.S. dollars assigned
by the Delivering Member (i.e., the
Submitter’s Value), which, in most
cases, must be the current market value
of the security.10
According to NSCC, this proposed
rule change will reduce the risk that a
non-CNS eligible item transferred
through ACATS is assigned an inflated
value based on its asset category, as it
will require that the market value of
these items be obtained either from a
pricing source or from the Delivering
Member.
3. Statutory Basis for Proposed Rule
Change
NSCC believes the proposed rule
change will facilitate the prompt and
accurate clearance and settlement of
securities transactions, a policy
underlying ACATS. As a result, it is
NSCC’s view that the proposal is
consistent with the requirements of the
Act 11 and the rules and regulations
thereunder applicable to NSCC.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NSCC does not believe that the
proposed rule change will have any
impact, or impose any burden, on
competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
NSCC will notify the Commission of
any written comments received by
NSCC.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register, or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
PO 00000
note 9, supra.
U.S.C. 78s(b)(1).
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
• Electronic comments may be
submitted by using the Commission’s
Internet comment form (https://
www.sec.gov/rules/sro.shtml), or by
sending an email to rulecomments@sec.gov. Please include File
No. SR–NSCC–2012–06 on the subject
line.
• Paper comments should be sent in
triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–0609.
All submissions should refer to File
Number SR–NSCC–2012–06. To help
the Commission process and review
your comments more efficiently, please
use only one method of submission. The
Commission will post all comments on
the Commission’s Internet Web site
(https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for 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
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of NSCC and on NSCC’s Web site
at: https://www.dtcc.com/downloads/
legal/rule_filings/2012/nscc/SR–NSCC–
2012–06.pdf.
All comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly.
All submissions should refer to File
Number SR–NSCC–2012–06 and should
be submitted on or before September 12,
2012.
10 See
11 15
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12 17
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50737
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CFR 200.30–3(a)(12).
22AUN1
50738
Federal Register / Vol. 77, No. 163 / Wednesday, August 22, 2012 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–20576 Filed 8–21–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67678; File No. SR–
NASDAQ–2012–094]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Remove the
Expired Pilot Under Rule 4753(c) From
the NASDAQ Rule Book
August 16, 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 August 3,
2012, The NASDAQ Stock Market LLC
(‘‘NASDAQ’’ or ‘‘Exchange’’), filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by NASDAQ. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
mstockstill on DSK4VPTVN1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ proposes to remove the
expired pilot under Rule 4753(c) (the
‘‘Volatility Guard’’) from the NASDAQ
rule book. NASDAQ will remove the
rule text 30 days after the filing date of
this proposal.
The text of the proposed rule change
is below. Proposed new language is
italicized; proposed deletions are in
[brackets].
*
*
*
*
*
4753. Nasdaq Halt and Imbalance
Crosses
(a)–(b) No change.
(c) Reserved. [For a pilot period
ending the earlier of July 31, 2012 or the
date on which, if approved, a limit up/
limit down mechanism to address
extraordinary market volatility, is
approved, between 9:30 a.m. and 3:35
p.m. EST, the System will automatically
monitor System executions to determine
whether the market is trading in an
orderly fashion and whether to conduct
an Imbalance Cross in order to restore
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Mar<15>2010
16:53 Aug 21, 2012
Jkt 226001
an orderly market in a single Nasdaq
Security.
(1) An Imbalance Cross shall occur if
the System executes a transaction in a
Nasdaq Security at a price that is
beyond the Threshold Range away from
the Triggering Price for that security.
The Triggering Price for each Nasdaq
Security shall be the price of any
execution by the System in that security
within the prior 30 seconds. The
Threshold Range shall be determined as
follows:
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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NASDAQ is proposing to remove the
expired pilot under Rule 4753(c) from
the rule book. On June 18, 2010,
Threshold range
NASDAQ filed a rule change for
away from
Execution price
Commission approval, proposing to
triggering price
adopt Volatility Guard as a six month
(percent)
pilot in 100 NASDAQ-listed securities.3
$1.75 and under ...........
15 NASDAQ proposed implementing the
Over $1.75 and up to
Volatility Guard pilot as a means to
$25 ............................
10 address aberrant trading volatility on
Over $25 and up to $50
5
the Exchange, in part, as a response to
Over $50 .......................
3
the unprecedented aberrant volatility
(2) If the System determines pursuant witnessed on May 6, 2010 and the
limited effect that NASDAQ’s market
to subsection (1) above to conduct an
collars had in dampening such
Imbalance Cross in a Nasdaq Security,
volatility.
the System shall automatically cease
On March 11, 2011, the Commission
executing trades in that security for a
approved the Volatility Guard.
60-second Display Only Period. During
Important to its subsequent
that 60-second Display Only Period, the
determination to hold the
System shall:
implementation of Volatility Guard in
(A) Maintain all current quotes and
abeyance, NASDAQ notes that the
orders and continue to accept quotes
Commission stated in approving
and orders in that System Security; and
Volatility Guard that it may find
(B) Disseminate by electronic means
exchange-specific volatility moderators
an Order Imbalance Indicator every 5
inconsistent with the Act once a
seconds.
(3) At the conclusion of the 60-second uniform, cross-market mechanism to
address aberrant volatility is adopted.
Display Only Period, the System shall
Specifically, the Commission stated:
re-open the market by executing the
[T]hat it is continuing to work diligently
Nasdaq Halt Cross as set forth in
with the exchanges and FINRA to develop an
subsection (b)(2)–(4) above.
appropriate consistent cross-market
(4) If the opening price established by mechanism to moderate excessive volatility
the Nasdaq Halt Cross pursuant to
that could be applied widely to individual
subsection (b)(2)(A)–(D) above is outside exchange-listed securities and to address
the benchmarks established by Nasdaq
commenters’ concerns regarding the
by a threshold amount, the Nasdaq Halt complexity and potential confusion of
exchange-specific volatility moderators. To
Cross will occur at the price within the
threshold amounts that best satisfies the the extent the Commission approves such a
mechanism, whether it be an expanded
conditions of subparagraphs (b)(2)(A)
circuit breaker with a limit up/limit down
through (D) above. Nasdaq management feature or otherwise, the Commission may no
shall set and modify such benchmarks
longer be able to find that exchange-specific
and thresholds from time to time upon
volatility moderators—including both
Nasdaq’s Volatility Guard and the NYSE’s
prior notice to market participants.]
LRPs—are consistent with the Act.4
(d) No change.
*
*
*
*
*
During the time that the Volatility
Guard pilot was progressing through the
II. Self-Regulatory Organization’s
notice and comment process with the
Statement of the Purpose of, and
Commission, NASDAQ together with
Statutory Basis for, the Proposed Rule
the other national securities exchanges
Change
and FINRA (‘‘SROs’’) and in
In its filing with the Commission,
3 Securities Exchange Act Release No. 64071
NASDAQ included statements
(March 11, 2011), 76 FR 14699 (March 17, 2011)
concerning the purpose of and basis for
the proposed rule change and discussed (SR–NASDAQ–2010–074). The proposal was
amended to identify the 100 pilot securities as the
any comments it received on the
securities comprising NASDAQ 100 Index. See
proposed rule change. The text of these
Amendment 1 to SR–NASDAQ–2010–074.
4 Id. at 14701 (emphasis added).
statements may be examined at the
PO 00000
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E:\FR\FM\22AUN1.SGM
22AUN1
]]>Agencies
[Federal Register Volume 77, Number 163 (Wednesday, August 22, 2012)]
[Notices]
[Pages 50736-50738]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-20576]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67673; File No. SR-NSCC-2012-06]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change To Enhance the
Default Pricing Methodology Used by NSCC's Automated Customer Account
Transfer Service
August 15, 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 August 7, 2012, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change described in Items I, II and
III below, which Items have been prepared primarily by NSCC. The
Commission is publishing this Notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change involves Rule 50 of NSCC's Rules and
Procedures. NSCC proposes to amend this rule to eliminate the use of a
default pricing matrix to assign values to certain items transferred
through NSCC's Automated Customer Account Transfer Service (``ACATS'').
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NSCC included statements
concerning the purpose and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements and comments may be examined at the places
specified in Item IV below. NSCC has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of these
statements.\3\
---------------------------------------------------------------------------
\3\ The Commission has modified the text of the summaries
provided by NSCC.
---------------------------------------------------------------------------
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Background
ACATS enables NSCC Members to effect automated transfers of
customer accounts among themselves.\4\ Pursuant to Rule 50, an NSCC
Member to whom a customer's full account will be transferred
(``Receiving Member'') will initiate the transfer by submitting to NSCC
a transfer initiation request, which contains the customer detail
information that the NSCC Member in possession of the account
(``Delivering Member'') requires in order to transfer the account.
Delivering Members that have neither rejected the account transfer
request nor sought corrections to the request within the allotted time
must submit to NSCC certain detailed customer account asset data.
---------------------------------------------------------------------------
\4\ ACATS complements Financial Industry Regulatory Authority
(``FINRA'') Rule 11870 regarding Customer Account Transfers, which
requires FINRA members to use automated clearing agency customer
account transfer services, and to effect customer account transfers
within specified time frames.
---------------------------------------------------------------------------
For items transferred through ACATS that are not eligible to be
processed through NSCC's Continuous Net Settlement (``CNS'') system \5\
(and for CNS-eligible items that are designated to be delivered ex-
CNS), NSCC will produce ACATS Receive and Deliver Instructions. These
ACATS transfers then settle either outside of NSCC or through a
separate service at NSCC.\6\ In order to incentivize the timely
completion of ACATS transfers, at the start of the day on ACATS
settlement date, the Delivering Member's NSCC money settlement account
will include a debit, or an incentive charge (``Incentive Charge''),
equal to the aggregate market value of the items the Delivering Member
is transferring through ACATS; the Receiving Member's NSCC money
settlement account includes a credit in the same amount.\7\ Once
delivery of an item is complete, the Incentive Charge associated with
that item is effectively offset when the Receiving Member pays the
Delivering Member for the transferred items. This Incentive Charge is
intended to encourage the Delivering Member to make delivery of the
item in a timely manner.\8\
---------------------------------------------------------------------------
\5\ CNS is an ongoing accounting system that nets today's
Settling Trades with yesterday's Closing Positions, producing net
short or long positions per security issue for each Member. NSCC is
always contraside for all positions. The positions are then passed
against the Member's Designated Depository positions and available
securities are allocated by book entry. This allocation of
securities is accomplished through an evening cycle followed by a
day cycle. Positions that remain open after the evening cycle may be
changed as a result of trades accepted for settlement that day. To
allocate deliveries in both the night and day cycles, CNS uses an
algorithm based on priority groups in descending order, age of
position within a priority group, and random numbers within age
groups.
\6\ For example, non-CNS ACATS may settle at (i) The Depository
Trust Company (``DTC''), for DTC-eligible items; (ii) NSCC's
automated ACATS-Fund/SERV interface, for eligible mutual fund
assets; (iii) NSCC's ACATS-IPS interface, for eligible annuities;
and (iv) the Options Clearing Corporation, where transfers in
customer-options positions take place, for options.
\7\ Incentive Charges are not calculated for the transfer of
options or annuities.
\8\ It also allows the Receiving Member to record the customer
position on its books, regardless whether the item is actually
delivered on settlement date. This process supports the requirements
of FINRA Rule 11870.
---------------------------------------------------------------------------
Each item transferred through ACATS must be assigned a market value
in order to calculate the Incentive Charge. CNS-eligible items being
transferred through ACATS are assigned a market
[[Page 50737]]
value through the CNS system. Non-CNS eligible items, however, are
assigned a market value pursuant to NSCC Rule 50, which calls for a
market value based on either (i) the price obtained from a pricing
source, if available or, if a pricing source is not available, (ii) the
greater of (a) the price in U.S. dollars assigned by the Delivering
Member (``Submitter's Value''), which, in most cases, must be the
current market value of the item,\9\ or (b) the value ascribed to such
item pursuant to a default pricing matrix, as established from time to
time by NSCC. The current default pricing matrix assigns a value to an
item based on its ``asset category type,'' as classified by the
Delivering Member in the detailed customer account asset data submitted
to NSCC. For example, the current default pricing matrix assigns
equities a default price of $1 per share, with a cap of $20,000, and
assigns U.S. government securities and U.S. government agency
securities a default price of the face amount. The default pricing
matrix was developed in close coordination with industry participants
and the National Association of Securities Dealers shortly after the
initial development of ACATS.
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\9\ See Section (d)(5)(A) of current FINRA Rule 11870, stating
that a customer statement delivered in connection with a transfer
instruction, ``must include a then-current market value for all
assets so indicated. If a then-current market value for an asset
cannot be determined (e.g., a limited partnership interest), the
asset must be valued at original cost.''
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It has been observed that the default pricing matrix may, in some
cases, overvalue items being transferred through ACATS. When this
occurs, on ACATS settlement date the Delivering Member will be debited
an Incentive Charge based on a higher market value than the actual
value of the item being transferred. Delivering Members will not
receive the offset for this Incentive Charge until they deliver the
related ACATS item. Therefore, a Delivering Member that does not
deliver the ACATS item on ACATS settlement date will be required to pay
the Incentive Charge associated with that item. If the default pricing
matrix has overvalued an ACATS Incentive Charge, a Delivering Member
that has failed to deliver the item will be faced with an unexpected
inflated settlement charge on ACATS settlement date.
2. Proposed Rule Change
In order to reduce the risk of overcharging a Delivering Member,
NSCC is proposing a rule change that will require NSCC to assign the
Submitter's Value to items when the system cannot otherwise find a
price for the security, thereby eliminating the use of the ACATS
default pricing matrix altogether. Under the proposed rule change, in
the case of non-CNS eligible items transferred through ACATS, NSCC will
assign a market value to those items as either (i) the price obtained
from a pricing source, if available or, if a pricing source is not
available, the assigned market value will be (ii) the price in U.S.
dollars assigned by the Delivering Member (i.e., the Submitter's
Value), which, in most cases, must be the current market value of the
security.\10\
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\10\ See note 9, supra.
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According to NSCC, this proposed rule change will reduce the risk
that a non-CNS eligible item transferred through ACATS is assigned an
inflated value based on its asset category, as it will require that the
market value of these items be obtained either from a pricing source or
from the Delivering Member.
3. Statutory Basis for Proposed Rule Change
NSCC believes the proposed rule change will facilitate the prompt
and accurate clearance and settlement of securities transactions, a
policy underlying ACATS. As a result, it is NSCC's view that the
proposal is consistent with the requirements of the Act \11\ and the
rules and regulations thereunder applicable to NSCC.
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\11\ 15 U.S.C. 78s(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change will have any
impact, or impose any burden, on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
NSCC will notify the Commission of any written comments received by
NSCC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register, or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic comments may be submitted by using the
Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml), or by sending an email to rule-comments@sec.gov. Please
include File No. SR-NSCC-2012-06 on the subject line.
Paper comments should be sent in triplicate to Elizabeth
M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street
NE., Washington, DC 20549-0609.
All submissions should refer to File Number SR-NSCC-2012-06. To
help the Commission process and review your comments more efficiently,
please use only one method of submission. The Commission will post all
comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for 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 10:00 a.m. and 3:00 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of NSCC
and on NSCC's Web site at: https://www.dtcc.com/downloads/legal/rule_filings/2012/nscc/SR-NSCC-2012-06.pdf.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly.
All submissions should refer to File Number SR-NSCC-2012-06 and
should be submitted on or before September 12, 2012.
[[Page 50738]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-20576 Filed 8-21-12; 8:45 am]
BILLING CODE 8011-01-P
