Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change To Enhance the Default Pricing Methodology Used by NSCC's Automated Customer Account Transfer Service, 61033-61035 [2012-24540]

Download as PDF Federal Register / Vol. 77, No. 194 / Friday, October 5, 2012 / Notices Research: Underdesigned and Opportunistic Computing Machines’’, and to provide advise and recommendations concerning further NSF support for the Center. Agenda Wednesday, October 31, 2012 7 p.m. to 9 p.m.: Closed Site Team and NSF Staff meets to discuss Site Visit materials, review process and charge. Thursday, November 1, 2012 8 a.m. to 1 p.m.: Open Presentations by Awardee Institution, faculty staff and students, to Site Team and NSF Staff. Discussions and question and answer sessions. 1 p.m.–8 p.m.: Closed Draft report on education and research activities. Friday, November 2, 2012 8:30 a.m.–noon: Open Response presentations by Awardee Institution faculty staff to Site Team and NSF Staff. Discussions and question and answer sessions. Noon to 3 p.m.: Closed Complete written site visit report with preliminary recommendations. Reason for Closing: The proposals being reviewed include information of a proprietary or confidential nature, including technical information; financial data, such as salaries; and personal information concerning individuals associated with the proposals. These matters are exempt under 5 U.S.C. 552b(c), (4) and (6) of the Government in the Sunshine Act. Dated: October 2, 2012. Susanne Bolton, Committee Management Officer. Agenda November 7, 2012 (Wednesday Morning) • Welcoming Remarks • Opening Introductions/Discussion with AC Members • National Challenges in STEM Education and Strategic Direction of EHR Working Lunch November 8, 2012 (Thursday Morning) September 28, 2012. • Research and Development in EHR • Evaluation and Monitoring Plan Working Lunch I. Introduction November 8, 2012 (Thursday Afternoon) • Strategic Communication Discussion • Dialogue with NSF Director and Deputy Director • Next Steps and Future Meeting Topics Adjournment Susanne Bolton, Committee Management Officer. [FR Doc. 2012–24648 Filed 10–4–12; 8:45 am] BILLING CODE 7555–01–P NATIONAL SCIENCE FOUNDATION Notice of Permit Issued Under the Antarctic Conservation Act of 1978 National Science Foundation. Notice of permit issued under the Antarctic Conservation of 1978, Public Law 95–541. The National Science Foundation (NSF) is required to publish notice of permits issued under the Antarctic Conservation Act of 1978. This is the required notice. SUMMARY: NATIONAL SCIENCE FOUNDATION Advisory Committee for Education and Human Resources; Notice of Meeting pmangrum on DSK3VPTVN1PROD with NOTICES In accordance with the Federal Advisory Committee Act (Pub. L. 92– 463, as amended), the National Science Foundation announces the following meeting: Name: Advisory Committee for Education and Human Resources (#1119). Date/Time: November 7, 2012: 11:00 a.m. to 5:00 p.m., November 8, 2012: 8:30 a.m. to 3:30 p.m. Place: NSF Headquarters, Room 375, 4201 Wilson Boulevard, Arlington, VA 22230. Type of Meeting: Open. Contact Person: Amanda Edelman, National Science Foundation, 4201 Wilson Boulevard, Arlington, VA 22230. Telephone: (703) 292–8600 or email: aedelman@nsf.gov. Purpose of Meeting: To provide advice with respect to the Foundation’s science technology, engineering, and mathematics (STEM) education and human resources programming. VerDate Mar<15>2010 15:25 Oct 04, 2012 Jkt 229001 [Release No. 34–67947; File No. SR–NSCC– 2012–06] • Collaborations Across NSF • Committee of Visitors Results and Discussion November 7, 2012 (Wednesday Afternoon) ACTION: BILLING CODE 7555–01–P SECURITIES AND EXCHANGE COMMISSION Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change To Enhance the Default Pricing Methodology Used by NSCC’s Automated Customer Account Transfer Service AGENCY: [FR Doc. 2012–24650 Filed 10–4–12; 8:45 am] 61033 FOR FURTHER INFORMATION CONTACT: Nadene G. Kennedy, Permit Office, Office of Polar Programs, Rm. 755, National Science Foundation, 4201 Wilson Boulevard, Arlington, VA 22230. On July 27, 2012, the National Science Foundation published a notice in the Federal Register of a permit application received. A Waste Management Permit was issued on September 24, 2012 to: SUPPLEMENTARY INFORMATION: Olaf Malver ................ Permit No. 2013 WM–001. Nadene G. Kennedy, Permit Officer. [FR Doc. 2012–24596 Filed 10–4–12; 8:45 am] BILLING CODE 7555–01–P PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 On August 7, 2012, the National Securities Clearing Corporation (‘‘NSCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) proposed rule change SR–NSCC–2012– 06. The proposed rule change, which was filed pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 was published for comment in the Federal Register on August 22, 2012.3 The Commission received no comment letters regarding the proposal. For the reasons discussed below, the Commission is granting approval of the proposed rule change. II. Description The proposed rule change will amend Rule 50 of NSCC’s Rules and Procedures 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’’). 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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Securities Exchange Act Release No. 67673 (August 15, 2012), 77 FR 50736 (August 22, 2012). 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 E:\FR\FM\05OCN1.SGM 05OCN1 61034 Federal Register / Vol. 77, No. 194 / Friday, October 5, 2012 / Notices pmangrum on DSK3VPTVN1PROD with NOTICES 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 receive 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 receives 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 item. 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 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 5 CNS is an ongoing accounting system that nets each day’s Settling Trades with the prior day’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 transfers 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. VerDate Mar<15>2010 15:25 Oct 04, 2012 Jkt 229001 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 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. 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 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.’’ PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 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. III. Discussion Section 19(b)(2)(C) of the Act 11 directs the Commission to approve a self-regulatory organization’s proposed rule change if it determines that the 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 12 requires, among other things, that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of security transactions, and to assure the safeguarding of securities and funds that are in the custody or control of such clearing agency, or for which it is responsible. The Commission concludes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to NSCC. The proposed rule change should ensure that NSCC members will no longer be surprised with inflated settlement charges in connection with ACATS transfers. By allowing NSCC members to gauge their liabilities more accurately, the proposed rule change will foster the prompt and accurate clearance and settlement of security transactions, and will assure the safeguarding of securities and funds in NSCC’s custody or control, or for which NSCC is responsible. IV. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act, in particular with the requirements of Section 17A of the Act 13 and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,14 that the proposed rule change (File No. SR– 10 See note 9, supra. U.S.C. 78s(b)(2)(C). 12 15 U.S.C. 78q–1(b)(3)(F). 13 15 U.S.C. 78q–1. 14 15 U.S.C. 78s(b)(2). 11 15 E:\FR\FM\05OCN1.SGM 05OCN1 Federal Register / Vol. 77, No. 194 / Friday, October 5, 2012 / Notices NSCC–2012–06) be, and hereby is, APPROVED.15 For the Commission by the Division of Trading and Markets, pursuant to delegated authority.16 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–24540 Filed 10–4–12; 8:45 am] BILLING CODE 8011–01–P A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67957; File No. SR–ISE– 2012–74] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend ISE Rule 711 To Provide for the Nullification of Trades by Mutual Agreement of the Parties Thereto October 1, 2012. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on September 19, 2012, the International Securities Exchange, LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) 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 the Exchange. 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 the Substance of the Proposed Rule Change The Exchange proposes to amend ISE Rule 711 to provide for the nullification of trades by mutual agreement of the parties thereto. The text of the proposed rule change is available on the Exchange’s Web site www.ise.com, at the principal office of the Exchange, at the Commission’s Web site https:// www.sec.gov, 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, the Exchange included statements 15 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). 16 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. VerDate Mar<15>2010 15:25 Oct 04, 2012 Jkt 229001 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. 1. Purpose The purpose of this proposed rule change is to amend ISE Rule 711 to provide for the nullification of trades by mutual agreement of the parties thereto. Under Proposed ISE Rule 711(b), a trade would be nullified if all parties to the trade agree to the nullification.3 After agreement has been reached between the parties to nullify a trade, one party would be required to notify the Exchange and the Exchange promptly will disseminate the nullification to the Options Price Reporting Authority (‘‘OPRA’’). Proposed ISE Rule 711(b) would provide the parties to a trade with the ability to nullify a trade under circumstances where, for example, an obvious or catastrophic error is not deemed to have occurred, but the parties to the trade nonetheless desire that the trade be nullified. 2. Statutory Basis The Exchange believes that the proposed rule change, which would permit a trade to be nullified upon the mutual agreement of all parties to the trade, is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’),4 in general, and furthers the objectives of Section 6(b)(5) of the Exchange Act,5 in particular, because it is designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanism for a free and open market and a national market system, and in general, to protect investors and the public interest. The proposed rule change makes clear the contractual rights of the parties to a trade to nullify the trade upon mutual agreement. The Exchange believes that the proposed rule change is consistent with a free and open market and the public interest 3 The changes proposed to ISE Rule 711 are based on NYSE MKT LLC (formerly known as NYSE Amex LLC) Rule 965NY, Commentary .02. The Exchange believes that, though not required, parties generally would need to agree to nullify a trade prior to that trade being settled. 4 15 U.S.C. 78f(b). 5 15 U.S.C. 78f(b)(5). PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 61035 because it gives effect to the contractual rights of the parties to a trade. B. Self-Regulatory Organization’s Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) does not impose any significant burden on competition; and (iii) does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) 6 of the Act and Rule 19b– 4(f)(6) 7 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such 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 6 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing the proposed rule change. 7 17 E:\FR\FM\05OCN1.SGM 05OCN1

Agencies

[Federal Register Volume 77, Number 194 (Friday, October 5, 2012)]
[Notices]
[Pages 61033-61035]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-24540]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67947; File No. SR-NSCC-2012-06]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving Proposed Rule Change To Enhance the 
Default Pricing Methodology Used by NSCC's Automated Customer Account 
Transfer Service

September 28, 2012.

I. Introduction

    On August 7, 2012, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') proposed rule change SR-NSCC-2012-06. The proposed 
rule change, which was filed pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ was published for comment in the Federal Register on 
August 22, 2012.\3\ The Commission received no comment letters 
regarding the proposal. For the reasons discussed below, the Commission 
is granting approval of the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 67673 (August 15, 2012), 
77 FR 50736 (August 22, 2012).
---------------------------------------------------------------------------

II. Description

    The proposed rule change will amend Rule 50 of NSCC's Rules and 
Procedures 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'').
    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

[[Page 61034]]

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 receive 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 receives 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 item. 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 each day's 
Settling Trades with the prior day'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 transfers 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 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.
---------------------------------------------------------------------------

    \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.''
---------------------------------------------------------------------------

    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 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.
    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\
---------------------------------------------------------------------------

    \10\ See note 9, supra.
---------------------------------------------------------------------------

    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.

III. Discussion

    Section 19(b)(2)(C) of the Act \11\ directs the Commission to 
approve a self-regulatory organization's proposed rule change if it 
determines that the 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 \12\ 
requires, among other things, that the rules of a clearing agency be 
designed to promote the prompt and accurate clearance and settlement of 
security transactions, and to assure the safeguarding of securities and 
funds that are in the custody or control of such clearing agency, or 
for which it is responsible.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(2)(C).
    \12\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The Commission concludes that the proposed rule change is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to NSCC. The proposed rule change 
should ensure that NSCC members will no longer be surprised with 
inflated settlement charges in connection with ACATS transfers. By 
allowing NSCC members to gauge their liabilities more accurately, the 
proposed rule change will foster the prompt and accurate clearance and 
settlement of security transactions, and will assure the safeguarding 
of securities and funds in NSCC's custody or control, or for which NSCC 
is responsible.

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act, in particular 
with the requirements of Section 17A of the Act \13\ and the rules and 
regulations thereunder.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (File No. SR-

[[Page 61035]]

NSCC-2012-06) be, and hereby is, APPROVED.\15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(2).
    \15\ 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).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-24540 Filed 10-4-12; 8:45 am]
BILLING CODE 8011-01-P
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