Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change To Add a New Service to the National Securities Clearing Corporation's Obligation Warehouse (“OW”) Which Would Pair Off and Close Certain Open Obligations, Reducing the Number of Open Obligations in OW, 2237-2239 [2014-00332]
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Federal Register / Vol. 79, No. 8 / Monday, January 13, 2014 / Notices
2237
an imbalance going into the closing
transaction.
100 F Street NE., Washington, DC
20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
All submissions should refer to File
Number SR–NYSEMKT–2013–107. 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
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 the
filing also will 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–
NYSEMKT–2013–107 and should be
submitted on or before February 3, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to
delegated authority.38
[Release No. 34–71251; File No. SR–NSCC–
2013–11]
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) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate, it has
become effective pursuant to 19(b)(3)(A)
of the Act 36 and Rule 19b–4(f)(6) 37
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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or 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
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEMKT–2013–107 on the subject
line.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–00344 Filed 1–10–14; 8:45 am]
BILLING CODE 8011–01–P
tkelley on DSK3SPTVN1PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
36 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
37 17
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Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Approving
Proposed Rule Change To Add a New
Service to the National Securities
Clearing Corporation’s Obligation
Warehouse (‘‘OW’’) Which Would Pair
Off and Close Certain Open
Obligations, Reducing the Number of
Open Obligations in OW
January 7, 2014.
I. Introduction
On November 14, 2013, the National
Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change SR–NSCC–
2013–11 pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder.2
The proposed rule change was
published for comment in the Federal
Register on November 29, 2013.3 The
Commission did not receive comments
on the proposed rule change. This order
approves the proposed rule change.
II. Description of the Proposal
NSCC’s proposed rule change
consisted of amendments to the Rules
and Procedures (‘‘Rules’’) of NSCC to
modify its Rules to add a new service to
NSCC’s Obligation Warehouse (‘‘OW’’)
that will daily apply a pair off
methodology to open OW Obligations,
designated by Members as eligible for
the service, based on the quantity of
underlying securities, the final money
amount, and the settlement dates of the
underlying obligations, the (‘‘Pair Off
Function’’). Upon making those
revisions to NSCC’s Rules, this
approved, new service to OW will pair
off and close certain open obligations,
thereby reducing the number of open
obligations in OW. The effective date of
the proposed rule change will be
announced via an NSCC Important
Notice.
NSCC’s OW, implemented in 2011, is
a non-guaranteed, automated service
that tracks, stores, and maintains
unsettled ex-clearing and failed
obligations, as well as obligations exited
from NSCC’s Continuous Net Settlement
(‘‘CNS’’) system, non-CNS Automated
Customer Account Transfer Service
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 34–70937
(Nov. 25, 2013), 78 FR 71686 (Nov. 29, 2013) (SR–
NSCC–2013–11).
2 17
38 17
PO 00000
CFR 200.30–3(a)(12).
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Federal Register / Vol. 79, No. 8 / Monday, January 13, 2014 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
(‘‘ACATS’’) Receive and Deliver
Instructions, Balance Orders, and
Special Trades, as defined in NSCC’s
Rules (collectively ‘‘OW Obligations’’).
The service provides transparency,
serves as a central storage of open (i.e.
failed or unsettled) broker-to-broker
obligations, and allows users to manage
and resolve exceptions in an efficient
and timely manner. Simultaneously,
OW provides on-going maintenance and
servicing of matched obligations that
have not been marked by a Member as
subject to upcoming delivery, closure,
or cancellation. Examples of this ongoing maintenance and servicing
include: Adjustments for certain
corporate actions; daily review for CNS
eligibility; and regular processing of the
Reconfirmation and Pricing Service
(‘‘RECAPS’’) in the OW on days
announced by Important Notices.
During the daily review for CNS
eligibility, OW Obligations that are
eligible for CNS are exited from the OW
and forwarded to CNS. On days when
RECAPS is run in the OW, OW
Obligations that are eligible for
RECAPS 4 are re-netted and, if
appropriate, marked to the current
market price 5 and provided with an
updated settlement date of the next
business day. The Pair Off Function will
run once a day, immediately following
the completion of the review for CNS
eligibility.6
Today, in order to reduce the number
of obligations that remain on their books
and records, Members may take actions
away from NSCC to close out these open
obligations in OW. Those Members
would then close the obligations in OW.
The Pair Off Function will facilitate the
close out of any OW Obligations that
Members designate as eligible for the
service. By facilitating the close out of
these obligations in an automated
manner within the OW, the Pair Off
Function should add transparency to
the life cycle of these obligations that
may otherwise be closed out away from
NSCC. With respect to obligations that
are removed from the OW as a result of
the Pair Off Function, Members’
administrative costs associated with
4 Obligations that are matched and have a
settlement date of at least two days prior to the date
on which the RECAPS process commences will be
considered for inclusion in the RECAPS process,
and therefore, fail items not already in the OW and
eligible for RECAPS processing must be submitted
by the Member prior to RECAPS processing.
5 In the event that the current market price for a
security is not available, the obligation’s price
details will be unchanged from when it was
previously matched.
6 NSCC will announce by Important Notice days
on which Pair Off function will not run, which may
include days on which the RECAPS process is run
in the OW.
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16:40 Jan 10, 2014
Jkt 232001
maintaining these obligations in OW
should be reduced.
NSCC Members will have the
opportunity to designate certain OW
Obligations that are in ‘‘Open’’ status in
the OW, to which they are a party, to be
eligible to be paired off with other OW
Obligations in the same CUSIP, and
ultimately closed.7 NSCC may, in its
discretion, exclude certain obligations
from the Pair Off Function, and will
announce by Important Notice which
obligations are excluded. Initially, the
following obligations will be excluded:
(1) OW Obligations in which the
underlying security is a mutual fund, a
when-issued security,8 or is part of a
syndicate; (2) OW Obligations that are
identified in OW as an ACATS Receive
and Deliver Instruction; (3) obligations
that, as of the time the Pair Off Function
runs, are identified in the OW as being
subject to a corporate action; and (4) an
obligation that is marked in the OW as
being in ‘‘Open’’ status but has already
been sent to The Depository Trust
Company’s Inventory Management
System (IMS) as a pending delivery.
The Pair Off Function will use a
matching methodology that will pair off
eligible OW Obligations based on the
quantity of underlying securities, the
final money amount, and the settlement
dates of the underlying obligations. The
Pair Off Function will only match OW
Obligations that have been designated as
eligible for pair off by both Members
that are party thereto, and that are in the
same CUSIP and have the same
counterparties, where the counterparties
have offsetting long and short
obligations. The methodology will pair
off eligible OW Obligations in order by
first pairing off those obligations that
have the most criteria in common. For
example, the methodology will first pair
off eligible OW Obligations where the
quantity of underlying securities, the
settlement dates of the obligations, and
the final money amounts are identical.
The methodology will continue to
review eligible OW Obligations subject
to certain rules, beginning with eligible
OW Obligations with the oldest
settlement date, and eligible OW
Obligations with the smallest number of
underlying securities.
7 Members may either participate in the Pair Off
Function on an account level, designating all OW
Obligations in an ‘‘Open’’ status in the OW to
which they are a party as eligible for the Pair Off
function and then opt out of the function with
respect to certain OW Obligations, or they may
designate only certain OW Obligations as eligible
for pair off.
8 A transaction in a ‘‘when issued’’ security is
made conditionally because the underlying security
has been authorized but not yet issued, and will
only settle after the security has been issued.
PO 00000
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Fmt 4703
Sfmt 4703
Eligible OW Obligations will be
paired off where the quantity of
underlying securities, the final money
amount, or the settlement dates of the
underlying obligations may not be
identical, and, in certain cases, one OW
Obligation may be paired off against
multiple OW Obligations. However, a
pair off would never occur if it would
result in: (1) A negative quantity of
underlying securities in either of the
original obligations; (2) a negative final
money amount; or (3) at least one of the
obligations subject to the pair off to
remaining open, with a reduced
quantity of underlying securities and a
final money amount of zero or less than
zero. Additionally, OW Obligations in
municipal bonds would only be eligible
for pair off where the quantity of the
underlying securities in the obligations
subject to the pair off is identical and no
underlying securities remain.
When the pair off criteria are met, the
OW Obligations will either be closed or,
when the quantities of underlying
securities are not exactly matched
between obligations being paired off, the
pair off will result in one or more of the
obligations being reduced by the
quantity of securities that were paired
off. Those obligations will remain in
‘‘Open’’ status in OW and will be
adjusted to reflect the reduced number
of underlying securities. Where the
underlying final money amounts are not
exactly matched between obligations
being paired off, the pair off will result
in a cash adjustment, which will be
reflected in the Members’ money
settlement with NSCC on the following
business day.
III. Discussion and Commission Finding
Section 19(b)(2)(C) of the Act 9 directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that such
proposed rule change is consistent with
the requirements of the Act and rules
and regulations thereunder applicable to
such organization. Section 17A(b)(3)(F)
of the Act 10 requires that the rules of a
clearing agency to be designed to,
among other things, ‘‘promote the
prompt and accurate clearance and
settlement of securities transactions and
. . . to assure the safeguarding of
securities and funds which are in the
custody or control of the clearing agency
or for which it is responsible.’’ 11
Further, Section 17A(b)(3)(F) of the Act
requires that the rules of a clearing
agency be designed to, ‘‘perfect the
mechanism of a national system for the
9 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
11 15 U.S.C. 78q–1(b)(3)(F).
10 12
E:\FR\FM\13JAN1.SGM
13JAN1
Federal Register / Vol. 79, No. 8 / Monday, January 13, 2014 / Notices
prompt and accurate clearance and
settlement of securities transactions.’’ 12
The Commission finds that NSCC’s
proposed rule change is consistent with
these requirements because: the Pair Off
Function is designed to provide for
greater efficiency and transparency with
respect to obligations processed through
the OW; and to improve NSCC’s current
mechanism for the clearance and
settlement of securities transactions that
are placed in the OW.
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 13 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change SR–NSCC–2013–
11 be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–00332 Filed 1–10–14; 8:45 am]
BILLING CODE 8011–01–P
2013.3 The Commission has received no
comment letters on the proposal.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day for this filing
is January 19, 2014. The Commission is
extending this 45-day time period.
The Commission finds it appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change.
Accordingly, the Commission,
pursuant to Section 19(b)(2) of the Act,5
designates March 5, 2014, as the date by
which the Commission should either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–CBOE–2013–113).
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71248; File No. SR–CBOE–
2013–113]
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–00343 Filed 1–10–14; 8:45 am]
BILLING CODE 8011–01–P
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Designation of
a Longer Period for Commission
Action on Proposed Rule Change
Relating to Multi-Class Spread Orders
January 7, 2014.
tkelley on DSK3SPTVN1PROD with NOTICES
On November 18, 2013, the Chicago
Board Options Exchange, Incorporated
(the ‘‘Exchange’’ or ‘‘CBOE’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend CBOE
24.19 to revise several provisions
governing the trading of Multi-Class
Spread Orders. The proposed rule
change was published for comment in
the Federal Register on December 5,
12 Id.
13 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
14 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
16:40 Jan 10, 2014
Jkt 232001
SMALL BUSINESS ADMINISTRATION
[License No. 06/06–0326]
Main Street Mezzanine Fund, L.P.;
Notice Seeking Exemption Under
Section 312 of the Small Business
Investment Act, Conflicts of Interest
Notice is hereby given that Main
Street Mezzanine Fund, L.P., 1300 Post
Oak Boulevard, Suite 800, Houston TX,
77056, a Federal Licensee under the
Small Business Investment Act of 1958,
as amended (‘‘the Act’’), in connection
with the financing of a small concern,
has sought an exemption under Section
312 of the Act and Section 107.730,
Financings which Constitute Conflicts
of Interest of the Small Business
Administration (‘‘SBA’’) Rules and
Regulations (13 CFR 107.730). Main
Street Mezzanine Fund, L.P.proposes to
3 See Securities Exchange Act Release No. 70961
(November 29, 2013), 78 FR 73211.
4 15 U.S.C. 78s(b)(2).
5 15 U.S.C. 78s(b)(2).
6 17 CFR 200.30–3(a)(31).
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
2239
provide loan financing to LKCM
Distribution Holdings, LLC, 301
Commerce Street, Suite 1600, Fort
Worth, Texas 76102 (‘‘LKCM’’).
The financing is brought within the
purview of § 107.730(a)(l) of the
Regulations because a director of Main
Street Capital Corporation, the Parent of
Main Street Mezzanine Fund, L.P.is also
a director of LKCM. The financing is
also brought within the purview of
§ 107.730(a)(4) of the Regulations
because LKCM is going to use the
proceeds to purchase the assets of
Thermal & Mechanical Equipment
Company, LLC, 1423 E. Richey Road,
Houston, Texas 77073 (‘‘TMEC’’). Main
Street Mezzanine Fund, L.P., Main
Street Capital II, L.P., and Main Street
Capital Corporation have outstanding
loans to TMEC and Main Street Equity
Interests, Inc. and Main Street Capital II
Equity Interests hold equity in TMEC,
all Associates of Main Street Mezzanine
Fund, L.P.The proceeds from the sale of
TMEC’s assets will be used to discharge
the loan obligations and redeem the
equity interests. Therefore this
transaction is considered a financing
constituting a conflict of interest
requiring prior SBA approval. ·
Notice is hereby given that any
interested person may submit written
comments on the transaction, within
fifteen days of the date of this
publication, to the Associate
Administrator, Office of Investment and
Innovation, U.S. Small Business
Administration, 409 Third Street SW.,
Washington, DC 20416.
Javier Saade,
Associate Administrator, Office of Investment
and Innovation.
[FR Doc. 2014–00297 Filed 1–10–14; 8:45 am]
BILLING CODE P
DEPARTMENT OF STATE
[Public Notice 8591]
60-Day Notice of Proposed Information
Collection: Form—DS–1950,
Department of State Application for
Employment, OMB Control Number
1405–0139
Notice of request for public
comment.
ACTION:
The Department of State is
seeking Office of Management and
Budget (OMB) approval for the
information collection described below.
In accordance with the Paperwork
Reduction Act of 1995, we are
requesting comments on this collection
from all interested individuals and
organizations. The purpose of this
SUMMARY:
E:\FR\FM\13JAN1.SGM
13JAN1
]]>Agencies
[Federal Register Volume 79, Number 8 (Monday, January 13, 2014)]
[Notices]
[Pages 2237-2239]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00332]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71251; File No. SR-NSCC-2013-11]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Approving Proposed Rule Change To Add a New Service
to the National Securities Clearing Corporation's Obligation Warehouse
(``OW'') Which Would Pair Off and Close Certain Open Obligations,
Reducing the Number of Open Obligations in OW
January 7, 2014.
I. Introduction
On November 14, 2013, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change SR-NSCC-2013-11 pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder.\2\ The proposed rule change was published
for comment in the Federal Register on November 29, 2013.\3\ The
Commission did not receive comments on the proposed rule change. This
order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 34-70937 (Nov. 25,
2013), 78 FR 71686 (Nov. 29, 2013) (SR-NSCC-2013-11).
---------------------------------------------------------------------------
II. Description of the Proposal
NSCC's proposed rule change consisted of amendments to the Rules
and Procedures (``Rules'') of NSCC to modify its Rules to add a new
service to NSCC's Obligation Warehouse (``OW'') that will daily apply a
pair off methodology to open OW Obligations, designated by Members as
eligible for the service, based on the quantity of underlying
securities, the final money amount, and the settlement dates of the
underlying obligations, the (``Pair Off Function''). Upon making those
revisions to NSCC's Rules, this approved, new service to OW will pair
off and close certain open obligations, thereby reducing the number of
open obligations in OW. The effective date of the proposed rule change
will be announced via an NSCC Important Notice.
NSCC's OW, implemented in 2011, is a non-guaranteed, automated
service that tracks, stores, and maintains unsettled ex-clearing and
failed obligations, as well as obligations exited from NSCC's
Continuous Net Settlement (``CNS'') system, non-CNS Automated Customer
Account Transfer Service
[[Page 2238]]
(``ACATS'') Receive and Deliver Instructions, Balance Orders, and
Special Trades, as defined in NSCC's Rules (collectively ``OW
Obligations''). The service provides transparency, serves as a central
storage of open (i.e. failed or unsettled) broker-to-broker
obligations, and allows users to manage and resolve exceptions in an
efficient and timely manner. Simultaneously, OW provides on-going
maintenance and servicing of matched obligations that have not been
marked by a Member as subject to upcoming delivery, closure, or
cancellation. Examples of this on-going maintenance and servicing
include: Adjustments for certain corporate actions; daily review for
CNS eligibility; and regular processing of the Reconfirmation and
Pricing Service (``RECAPS'') in the OW on days announced by Important
Notices. During the daily review for CNS eligibility, OW Obligations
that are eligible for CNS are exited from the OW and forwarded to CNS.
On days when RECAPS is run in the OW, OW Obligations that are eligible
for RECAPS \4\ are re-netted and, if appropriate, marked to the current
market price \5\ and provided with an updated settlement date of the
next business day. The Pair Off Function will run once a day,
immediately following the completion of the review for CNS
eligibility.\6\
---------------------------------------------------------------------------
\4\ Obligations that are matched and have a settlement date of
at least two days prior to the date on which the RECAPS process
commences will be considered for inclusion in the RECAPS process,
and therefore, fail items not already in the OW and eligible for
RECAPS processing must be submitted by the Member prior to RECAPS
processing.
\5\ In the event that the current market price for a security is
not available, the obligation's price details will be unchanged from
when it was previously matched.
\6\ NSCC will announce by Important Notice days on which Pair
Off function will not run, which may include days on which the
RECAPS process is run in the OW.
---------------------------------------------------------------------------
Today, in order to reduce the number of obligations that remain on
their books and records, Members may take actions away from NSCC to
close out these open obligations in OW. Those Members would then close
the obligations in OW. The Pair Off Function will facilitate the close
out of any OW Obligations that Members designate as eligible for the
service. By facilitating the close out of these obligations in an
automated manner within the OW, the Pair Off Function should add
transparency to the life cycle of these obligations that may otherwise
be closed out away from NSCC. With respect to obligations that are
removed from the OW as a result of the Pair Off Function, Members'
administrative costs associated with maintaining these obligations in
OW should be reduced.
NSCC Members will have the opportunity to designate certain OW
Obligations that are in ``Open'' status in the OW, to which they are a
party, to be eligible to be paired off with other OW Obligations in the
same CUSIP, and ultimately closed.\7\ NSCC may, in its discretion,
exclude certain obligations from the Pair Off Function, and will
announce by Important Notice which obligations are excluded. Initially,
the following obligations will be excluded: (1) OW Obligations in which
the underlying security is a mutual fund, a when-issued security,\8\ or
is part of a syndicate; (2) OW Obligations that are identified in OW as
an ACATS Receive and Deliver Instruction; (3) obligations that, as of
the time the Pair Off Function runs, are identified in the OW as being
subject to a corporate action; and (4) an obligation that is marked in
the OW as being in ``Open'' status but has already been sent to The
Depository Trust Company's Inventory Management System (IMS) as a
pending delivery.
---------------------------------------------------------------------------
\7\ Members may either participate in the Pair Off Function on
an account level, designating all OW Obligations in an ``Open''
status in the OW to which they are a party as eligible for the Pair
Off function and then opt out of the function with respect to
certain OW Obligations, or they may designate only certain OW
Obligations as eligible for pair off.
\8\ A transaction in a ``when issued'' security is made
conditionally because the underlying security has been authorized
but not yet issued, and will only settle after the security has been
issued.
---------------------------------------------------------------------------
The Pair Off Function will use a matching methodology that will
pair off eligible OW Obligations based on the quantity of underlying
securities, the final money amount, and the settlement dates of the
underlying obligations. The Pair Off Function will only match OW
Obligations that have been designated as eligible for pair off by both
Members that are party thereto, and that are in the same CUSIP and have
the same counterparties, where the counterparties have offsetting long
and short obligations. The methodology will pair off eligible OW
Obligations in order by first pairing off those obligations that have
the most criteria in common. For example, the methodology will first
pair off eligible OW Obligations where the quantity of underlying
securities, the settlement dates of the obligations, and the final
money amounts are identical. The methodology will continue to review
eligible OW Obligations subject to certain rules, beginning with
eligible OW Obligations with the oldest settlement date, and eligible
OW Obligations with the smallest number of underlying securities.
Eligible OW Obligations will be paired off where the quantity of
underlying securities, the final money amount, or the settlement dates
of the underlying obligations may not be identical, and, in certain
cases, one OW Obligation may be paired off against multiple OW
Obligations. However, a pair off would never occur if it would result
in: (1) A negative quantity of underlying securities in either of the
original obligations; (2) a negative final money amount; or (3) at
least one of the obligations subject to the pair off to remaining open,
with a reduced quantity of underlying securities and a final money
amount of zero or less than zero. Additionally, OW Obligations in
municipal bonds would only be eligible for pair off where the quantity
of the underlying securities in the obligations subject to the pair off
is identical and no underlying securities remain.
When the pair off criteria are met, the OW Obligations will either
be closed or, when the quantities of underlying securities are not
exactly matched between obligations being paired off, the pair off will
result in one or more of the obligations being reduced by the quantity
of securities that were paired off. Those obligations will remain in
``Open'' status in OW and will be adjusted to reflect the reduced
number of underlying securities. Where the underlying final money
amounts are not exactly matched between obligations being paired off,
the pair off will result in a cash adjustment, which will be reflected
in the Members' money settlement with NSCC on the following business
day.
III. Discussion and Commission Finding
Section 19(b)(2)(C) of the Act \9\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that such proposed rule change is consistent with the
requirements of the Act and rules and regulations thereunder applicable
to such organization. Section 17A(b)(3)(F) of the Act \10\ requires
that the rules of a clearing agency to be designed to, among other
things, ``promote the prompt and accurate clearance and settlement of
securities transactions and . . . to assure the safeguarding of
securities and funds which are in the custody or control of the
clearing agency or for which it is responsible.'' \11\ Further, Section
17A(b)(3)(F) of the Act requires that the rules of a clearing agency be
designed to, ``perfect the mechanism of a national system for the
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prompt and accurate clearance and settlement of securities
transactions.'' \12\ The Commission finds that NSCC's proposed rule
change is consistent with these requirements because: the Pair Off
Function is designed to provide for greater efficiency and transparency
with respect to obligations processed through the OW; and to improve
NSCC's current mechanism for the clearance and settlement of securities
transactions that are placed in the OW.
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\9\ 15 U.S.C. 78s(b)(2)(C).
\10\ 12 U.S.C. 78q-1(b)(3)(F).
\11\ 15 U.S.C. 78q-1(b)(3)(F).
\12\ Id.
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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 \13\ and the
rules and regulations thereunder.
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\13\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change SR-NSCC-2013-11 be, and it hereby is,
approved.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-00332 Filed 1-10-14; 8:45 am]
BILLING CODE 8011-01-P
