Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Clarify and Enhance Rules Related to Comparison and Recording of CMU Securities, 27802-27807 [2018-12752]
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27802
Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices
POSTAL SERVICE
POSTAL SERVICE
POSTAL SERVICE
Product Change—Priority Mail
Negotiated Service Agreement
Product Change—Priority Mail
Negotiated Service Agreement
Product Change—Priority Mail Express
and Priority Mail Negotiated Service
Agreement
Postal ServiceTM.
Notice.
AGENCY:
AGENCY:
ACTION:
ACTION:
Postal ServiceTM.
Notice.
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: June 14,
2018.
FOR FURTHER INFORMATION CONTACT:
Elizabeth Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on June 8, 2018, it
filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Contract 439 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2018–162, CP2018–233.
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: June 14,
2018.
FOR FURTHER INFORMATION CONTACT:
Elizabeth Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on June 8, 2018, it
filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Contract 442 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2018–166, CP2018–238.
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2018–12743 Filed 6–13–18; 8:45 am]
[FR Doc. 2018–12746 Filed 6–13–18; 8:45 am]
BILLING CODE 7710–12––P
BILLING CODE 7710–12–P
SUMMARY:
Postal ServiceTM.
ACTION: Notice.
AGENCY:
SUMMARY:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: June 14,
2018.
FOR FURTHER INFORMATION CONTACT:
Elizabeth Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on June 8, 2018, it
filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Express & Priority Mail
Contract 66 to Competitive Product List.
Documents are available at
www.prc.gov, Docket Nos. MC2018–165,
CP2018–236.
SUMMARY:
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2018–12747 Filed 6–13–18; 8:45 am]
BILLING CODE 7710–12–P
POSTAL SERVICE
POSTAL SERVICE
Temporary Emergency Committee of
the Board of Governors; Sunshine Act
Meeting
Product Change—Priority Mail
Negotiated Service Agreement
Wednesday, June 20,
2018, at 9:00 a.m.
PLACE: Washington, DC.
STATUS: Closed.
MATTERS TO BE CONSIDERED: Wednesday,
June 20, 2018, at 9:00 a.m.
1. Financial Matters.
2. Strategic Items.
3. Executive Session—Discussion of
prior agenda items and Temporary
Emergency Committee governance.
GENERAL COUNSEL CERTIFICATION: The
General Counsel of the United States
Postal Service has certified that the
meeting may be closed under the
Government in the Sunshine Act.
CONTACT PERSON FOR MORE INFORMATION:
Michael J. Elston, Acting Secretary of
the Board, U.S. Postal Service, 475
L’Enfant Plaza SW, Washington, DC
20260–1000. Telephone: (202) 268–
4800.
ACTION:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: June 14,
2018.
FOR FURTHER INFORMATION CONTACT:
Elizabeth Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on June 8, 2018, it
filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Contract 441 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2018–164, CP2018–235.
Michael J. Elston,
Acting Secretary.
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2018–12868 Filed 6–12–18; 11:15 am]
[FR Doc. 2018–12745 Filed 6–13–18; 8:45 am]
BILLING CODE 7710–12–P
BILLING CODE 7710–12–P
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DATES AND TIMES:
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Postal ServiceTM.
Notice.
AGENCY:
[Release No. 34–83397; File No. SR–NSCC–
2018–002]
SUMMARY:
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SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Clarify and Enhance
Rules Related to Comparison and
Recording of CMU Securities
June 8, 2018.
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 June 7,
2018, National Securities Clearing
Corporation (‘‘NSCC’’) 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 the clearing agency. NSCC filed the
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
2 17
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19b–4(f)(4) thereunder 4 so that the
proposal was effective upon filing with
the Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
modifications to the Rules and
Procedures of NSCC (‘‘Rules’’) in order
to enhance the procedures that describe
the process by which Members may
submit debt securities, specifically
transactions in corporate bonds,
municipal bonds, and unit investment
trusts (referred to as ‘‘CMU securities’’),
for comparison and recording by (1)
making certain clarifications and
corrections to these procedures, and (2)
adding a comparison tolerance of 20
business days for the trade dates of
transactions submitted for comparison,
as described below.5
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
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(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
NSCC is proposing to make certain
revisions to Procedure II, Section C and
Section D of the Rules, which describes
the service provided by NSCC that
allows Members to submit transactions
in CMU securities for comparison and
recording. These sections of Procedure
II describe the rules that govern
comparison of submitted trade data,
including the information that must be
included in these submissions and the
timing of the submission, how the
resulting compared trades are reported
by NSCC, and how eligible compared
trades may be processed for clearance
and settlement through NSCC’s
facilities, among other related matters.
4 17
CFR 240.19b–4(f)(4).
not defined herein are defined in the
Rules, available at https://www.dtcc.com/legal/rulesand-procedures.
5 Terms
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NSCC is proposing to make a number
of revisions to these sections of
Procedure II in order to (1) clarify and
enhance the disclosures, correct
typographical and drafting errors, and
update descriptions that no longer
reflect current processing in order to
improve the transparency of these
provisions; and (2) include in the Rules
a matching tolerance of 20 business
days for the trade dates of submitted
transactions in order to improve the
accuracy of trade matching. Each of
these proposed changes is described
below.
(i) Proposed Changes To Clarify and
Enhance Transparency
NSCC is proposing to make a number
of technical, non-substantive revisions
to Sections C and D of Procedure II in
order to improve the descriptions of
these procedures and enhance the
transparency of the rules that apply to
the comparison and recording of CMU
securities at NSCC. These proposed
changes are described below.
Proposed Rule Changes To Revise Verb
Tense and Correct Typographical Errors
NSCC is proposing to revise the verb
tense in order to use a present verb
tense rather than a future verb tense,
and to correct typographical errors. The
proposed changes to revise the verb
tense used in these procedures would
align Sections C and D of Procedure II
with other provisions within the Rules
and, by using a present tense, would
utilize more appropriate language for
the description of procedures.
NSCC is also proposing to correct
typographical errors in order to improve
the descriptions of these procedures and
avoid confusion in a Member’s
understanding of these procedures. For
example, NSCC is proposing to correct
a typographical error by revising the
term ‘‘insure’’ to the term ‘‘ensure’’ in
Procedure II, Section C, 1(a). NSCC is
also proposing to correct the reference
in the renumbered Procedure II, Section
C, 1(k)(i) from ‘‘price’’ to ‘‘amount’’ to
more accurately describe the
information that is reported on the
Consolidated Trade Summary (‘‘CTS’’).6
The information that is being referred to
in this sentence includes both price and
6 The CTS is a report provided to Members that
contains summarized trade obligation information.
The CTS is described in Procedure II (Trade
Comparison and Recording Service), Procedure V
(Balance Order Accounting Operation) and
Procedure VII (CNS Accounting Operation) of the
Rules. NSCC recently implemented updates to the
CTS. See Securities Exchange Act Release No.
79904 (January 31, 2017), 82 FR 9448 (February 6,
2017) (SR–NSCC–2016–008).
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quantity, and, therefore, is more
accurately described as ‘‘amount.’’
NSCC is also proposing to change the
term ‘‘deleted’’ to ‘‘reversed’’ in
Procedure II, Section C, 2(e). While
Members may submit an instruction to
delete an uncompared trade if the firm
does not agree with the terms of the
trade, as described in Procedure II,
Section C, 2(b), this sentence in Section
C, 2(e) describes a different process by
which a Member may submit an
instruction to reverse a previously
compared trade. As such, the proposed
rule change would correct a
typographical error and avoid any
confusion about these two actions that
may be caused by the misuse of this
term. In connection with this proposed
change, NSCC would also add
‘‘reversed’’ to the following Section C,
2(f), as the provisions of that section
apply to both deleted and reversed
transactions. This proposed change
would clarify the applicability of this
section to transactions that are reversed
by a Member.
By correcting typographical errors in
these procedures, the proposed rule
changes would make the Rules accurate
and clearer to Members regarding their
rights and obligations in connection
with the use of this service.
Proposed Rule Changes To Improve and
Simplify Descriptions
NSCC is proposing rule changes that
would enhance the descriptions of these
procedures by disclosing additional
information, and is also proposing rule
changes that would simplify these
descriptions by removing unnecessary
information, as described below.
Enhancing Descriptions and
Disclosing Additional Information. First,
NSCC is proposing to make revisions
that include descriptions of additional
criteria for use of the comparison
service or other additional disclosures
that would improve the descriptions
and enhance the transparency of these
procedures.
NSCC is proposing to add MPID (the
market participant identifier that is
issued by the Financial Industry
Regulatory Authority, Inc. and used to
report trades) to the list of identifying
trade data details required to be
submitted for comparison processing in
Procedure II, Section C, 1(b). This
section includes a non-exhaustive list of
trade data that NSCC may require to be
submitted in connection with the use of
this service, and provides that NSCC
may require or permit Members to
submit other identifying trade details.
NSCC currently requires MPIDs among
the trade data details that must be
submitted for comparison purposes, and
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NSCC believes that adding this criteria
to the Rules would improve the
transparency of this requirement.
NSCC is proposing to revise the
reference to ‘‘OTC’’ transactions to
‘‘corporate bond security transactions’’
and the reference to ‘‘unit trust fund
transactions’’ to ‘‘unit investment trust
transactions’’ in Procedure II, Section C,
1(f). ‘‘OTC’’ or ‘‘over-the-counter’’
securities are securities that are not
traded on an exchange, and include debt
securities such as corporate bonds.
Therefore, while ‘‘OTC’’ is not incorrect
in this context, NSCC believes the use
of this term may imply that other
transactions are being referred to in this
subsection of the Rules. Therefore,
NSCC is proposing to revise the term to
more specifically refer to ‘‘corporate
bond security transactions.’’
Additionally, the term ‘‘unit trust fund
transactions’’ is not a term that is
commonly used to refer to unit
investment trust transactions. While
these securities may be considered
funds, the correct term for describing
these transactions is ‘‘unit investment
trust transactions.’’ Therefore, while
these proposed revisions would not
change what is intended by these terms,
they would enhance the transparency of
this section by using terminology that
would be more clearly recognizable to
Members.
NSCC is proposing to clarify the
language in Procedure II, Section C, 1(h)
to make clear that trades submitted for
comparison may be identified as ‘‘CNSeligible,’’ which would flag these trades
to be processed through the CNS
Accounting System; ‘‘non-CNSeligible,’’ which would flag these trades
to be processed through the Balance
Order Accounting System; or ‘‘Special
Trade,’’ which could flag these trades
either for trade-for-trade processing,
which normally settle outside of NSCC’s
facilitates, or for comparison-only
processing. The proposed rule changes
would add transparency to the Rules
regarding how these designations
impact the processing of trades
submitted to NSCC.
NSCC is proposing to add a sentence
to Procedure II, Section C, 1(i)(ii) to
make clear that trades submitted for
comparison-only processing are subject
to the rules of the Municipal Securities
Rulemaking Board (‘‘MSRB’’). NSCC
believes that this clarification is
appropriate because these submissions
are not required to meet the eligibility
requirements for clearance or settlement
through NSCC’s facilities, but must
comply with the rules of the MSRB.
Therefore, NSCC believes this proposed
change would enhance the transparency
of the Rules and would assist Members
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to understand the requirements that
apply to these trades.
NSCC is proposing to add a reference
to the ‘‘Balance Order Accounting
System’’ to the renumbered subsection
(k)(ii) of Procedure II, Section C, 1,
which describes how eligible, compared
trades may be further processed within
NSCC’s facilities. Currently, this
subsection is incomplete and does not
include reference to the Balance Order
Accounting System, where eligible
compared trades that are not eligible to
be processed in the CNS Accounting
System may be processed for clearance
and settlement. Therefore, the proposed
change would enhance this subsection
by including this additional reference.
NSCC is proposing to add a sentence
to the renumbered subsection (m) of
Procedure II, Section C, 1 that would
describe the process by which NSCC
would convert a bilateral trade that
matches a Qualified Special
Representative (‘‘QSR’’) trade
submission in all respects (other than its
designation as a bilateral trade) into a
QSR trade. NSCC is also proposing to
add a new subsection (vi) to
renumbered Procedure II, Section D,
2(g) that would describe the process by
which NSCC would convert a bilateral
trade that matches a syndicate takedown
trade or reversal in all respects (other
than its designation as a bilateral trade)
into a syndicate takedown trade or
reversal, as appropriate. These two
automatic conversions are a part of
NSCC’s existing processes, but, because
these conversions occur automatically
and do not require any action by
Members, these processes are not
described in these sections of the Rules.
NSCC believes these proposed changes
to describe these automatic conversions
would improve the transparency of the
Rules and provide Members with notice
that these conversions would occur in
the described circumstances.
NSCC is proposing to revise the
renumbered subsection (p) of Procedure
II, Section C, 1 to clarify that NSCC
processes cash transactions where the
trade date for the submitted transaction
is the same as the settlement date for
comparison-only processing. Currently,
this section of the Rules refers to these
transactions as ‘‘cash transactions,’’ and
the proposed change would improve the
transparency of this section by
including a further description of these
transactions. This proposed change
would provide Members with additional
information regarding the types of
transactions that are referred to in this
section and, therefore, would improve
the transparency of the Rules.
NSCC is proposing to revise
Procedure II, Section C, 2(g) to make it
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clearer that NSCC permits certain trade
details for uncompared trades to be
modified by the submitter, provided,
however, that trade details for syndicate
takedown submissions are only
permitted to be modified on the
submission date. The proposed rule
changes would also clarify that NSCC
may limit the trade data that can be
modified after a trade is matched.
Although Section C, 2(g) currently
describes these rules relating to the
modification of submitted trade details,
NSCC believes that the proposed
revisions would improve those
descriptions and thereby make such
rules clearer to Members and improve
the overall transparency of the Rules.
NSCC is proposing to revise
Procedure II, Section C, 2(h), which
provides that transactions that compare
after a cutoff time designated by NSCC
on the date the transaction was
scheduled to settle are assigned a
settlement date of the next business day
after the day the transaction is
compared. The proposed rule changes
would clarify that these rules apply to
any transactions that compare after the
set cutoff time, and not only to
transactions that compare for the first
time (meaning, transactions that have
not been previously submitted and
reversed by the counterparties pursuant
to the Rules). These proposed changes,
and the other marked revisions to this
section would clarify the applicability
of these rules and would improve the
readability, clarity and transparency of
this Section C, 2(h).
Simplifying Descriptions and
Removing Unnecessary Details. NSCC is
also proposing to make revisions that
would use fewer words to describe a
procedure or otherwise remove
unnecessary language that could cause
confusion in the interpretation of the
procedures. By rewording certain
provisions and using simpler language
in these descriptions, these proposed
changes would improve the
transparency of the procedures in
Sections C and D of Procedure II.
NSCC is proposing to remove the
following sentence from Procedure II,
Section C, 1(h), ‘‘Depending upon
whether trade data is submitted on T or
T+n and the format in which output is
produced with respect to such data, the
output may reflect totals.’’ NSCC
believes that this sentence is
unnecessary for purposes of describing
the procedures applicable to
comparison and recording of CMU
securities transactions. Therefore, the
proposed rule change to remove this
sentence would simplify the Rules and
remove unnecessary statements that do
not provide Members with important
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additional information related to this
service.
NSCC is proposing to remove from
Procedure II, Section C, 2(c) a statement
that a Member may submit an
instruction to delete an uncompared
trade if it finds that the trade data is
incorrect. The immediately prior
Section C, 2(b) of Procedure II states that
a Member may submit an instruction to
delete a trade if it does not agree with
the terms of the trade. While the fact
that the data is incorrect is most likely
the basis for a Member to disagree with
the terms of the trade, NSCC does not
believe the statement it is proposing to
remove from Procedure II, Section C,
2(c) adds to the rules, and believes this
statement could indicate to a Member
that its ability to delete an uncompared
trade is limited to circumstances when
the trade data is incorrect. NSCC
believes the proposed rule change to
remove this additional and unnecessary
language would clarify Members’ ability
to submit a delete instruction.
NSCC is proposing to remove
reference to comparison-only trades
from the renumbered subsection (l) of
Procedure II, Section C, 1, which
incorrectly states that the rules of the
MSRB are not applicable to comparisononly trades. This subsection describes
certain rules that are applicable to
trades that are designated as Special
Trades, including the fact that these
trades are subject to the rules of the
MSRB. Currently, this subsection
includes language that expressly
excludes comparison-only trades. NSCC
believes that expressly excluding
comparison-only trades from this
subsection could incorrectly imply to
Members that the rules described in this
subsection, including the applicability
of the MSRB rules, do not apply to
comparison-only trades. Procedure II,
Section C, 1(i)(ii) describes the rules
that apply to comparison-only trades,
including the fact that these trades are
subject to the rules of the MSRB.
Therefore, NSCC is proposing to remove
the express exclusion of comparisononly trades from the renumbered
subsection (l) of Procedure II, Section C,
1, which is unnecessary and could
cause confusion.
NSCC is proposing to remove from
Procedure II, Section D, 2(A)(2)(b) the
description of the timing by which an
eligible transaction may enter the CNS
Accounting Operation. The rules
applicable to the CNS Accounting
Operation, including, as applicable, any
relevant timing of processing in that
service, is described in Procedure VII.
This information is not necessary for the
operation of the comparison services,
and removing this information would
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simplify these rules, improving their
clarity to Members.
NSCC is also proposing to remove
subsection 2(A)(2)(c) from Procedure II,
Section D, which describes information
included in the output NSCC produces
in connection with the comparison
service. As currently written, this
subsection is incomplete and does not
list all of the information that may be
included in this output. Therefore, the
current description could create
confusion among Members regarding
what information may be included in
these reports. NSCC believes it is in
Members’ best interest that NSCC retain
flexibility to add or remove information
from these reports, for example, in
response to Members’ requests. As such,
NSCC does not believe it is necessary to
specify for Members the information
that may be included in these reports.
Therefore, NSCC believes the proposed
change to remove the unnecessary
section would simplify and improve the
Rules.
NSCC is also proposing a number of
revisions to the descriptions of the rules
regarding submission and processing of
syndicate takedown trades and
syndicate takedown reversals in
renumbered Procedure II, Section D,
2(A)(2)(g). The proposed revisions
would not change the rules that apply
to how these trades and reversals are
processed, but would re-order the
descriptions of these rules in order to
simplify, clarify and improve the
transparency of these provisions.
Proposed Rule Changes To Update and
Correct Descriptions
NSCC is proposing rule changes that
would update the procedures in order to
accurately describe current processing
and correct descriptions that have
become outdated. Each of these
proposed rule changes would improve
the Rules by correcting these errors.
NSCC is proposing to amend
Procedure II, Section C, 1(c)(1) and (2)
in order to clarify that the tolerances for
comparison of contract amounts apply
only to bilateral trades, and state that
the QSR’s or syndicate manager’s
contract amount is used for QSR and
syndicate trades for comparison
purposes. Currently, these two
subsections of the Rules describe the
contract amount tolerances that are
applicable to bilateral trades, but fail to
specify which tolerances apply to
bilateral trades, and which tolerances
apply to QSR and syndicate trades. The
proposed rule change would clarify that
the tolerances currently described in
these subsections apply only to bilateral
trades, and would add to these
subsections a description of the rules for
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comparing contract amounts applicable
to QSR and syndicate trades.
NSCC is proposing to remove
subsection (j) from Procedure II, Section
C, 1, which states that Members may
override clearing agent designations by
submitting trade input for comparison
using the appropriate Trade-for-Trade
Indicator. NSCC is also proposing to
remove from the renumbered Procedure
II, Section C, 1(k)(i) the reference to
‘‘any clearing agent indicated by the
applicable contra party’’ as an example
of information that NSCC may provide
on the CTS. Members that are Municipal
Comparison Only Members may use
another Member as their ‘‘clearing
agent’’ to access NSCC’s clearing and
settlement services, and, historically,
clearing agent designations had been
reported on the CTS. However, in
connection with its recent updates to
the CTS, in response to Member
feedback that it is no longer necessary
to report these clearing agent
designations, NSCC removed the
designations from the CTS.7 In error,
NSCC did not remove references to the
clearing agent designation from
subsection (j) or from the renumbered
subsection (k)(i) of Procedure II,
Section C when it implemented these
updates. Therefore, the proposed change
would correct this error by removing
from the Rules statements that are no
longer accurate and could cause
Members confusion regarding the use of
this service.
Finally, NSCC is proposing two
changes that would correct errors that it
has identified in the Rules. The
proposed changes would correct
descriptions in these sections of the
Rules in order to accurately describe
processing that has been effective since
this service was implemented over 10
years ago. While these changes would
revise the Rules as written, the changes
would not result in any change in the
current operation of the service. NSCC
does not believe that either of these
changes would significantly affect the
respective rights or obligations of NSCC
or Members using this service.
First, NSCC is proposing to remove
from Procedure II, Section C, 1(g) an
incorrect statement that trades in
municipal bonds must be submitted in
multiples of a thousand. Municipal
bonds may be submitted in quantities
other than multiples of a thousand, and
such submissions would be subject to
the other provisions of this section that
are applicable to submissions of trades
in quantities other than multiples of a
thousand (specifically, that such
submissions be divided into separate
7 Supra
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submissions of the round lot and odd lot
quantity, and that odd lot quantities are
processed on a trade-for-trade basis).
Therefore, in addition to removing this
incorrect statement, NSCC would add
municipal bonds to these statements
within this same section. NSCC does not
believe that this change would
significantly affect the respective rights
or obligations of NSCC or Members
using this service because Members that
are currently submitting municipal
bonds in quantities of a thousand may
continue to do so, and Members that
submit municipal bonds in quantities
other than multiples of a thousand may
do so subject to the rules already
described in this section.
Second, NSCC is proposing to revise
Procedure II, Section D, 2(A), which
specifically describes processing of
when-issued securities. The special
processing rules within this section do
not apply to when-issued corporate
bonds, which are instead processed in
the same manner as all other
transactions in corporate bonds.
Therefore, this Procedure II, Section D,
2(A) incorrectly refers to corporate
bonds and the proposed change to
remove references to corporate bonds
would correct this error. This proposed
rule change would clarify that the
provisions of this subsection apply only
to transactions in municipal securities.
NSCC does not believe that this change
would significantly affect the respective
rights or obligations of NSCC or
Members using this service because
Members would be able to continue to
submit when-issued corporate bonds,
and such securities would be processed
through the regular processing rules.
daltland on DSKBBV9HB2PROD with NOTICES
(ii) Proposed Changes To Add a Trade
Date Comparison Tolerance
NSCC is also proposing to amend
Section C of Procedure II to include a
comparison tolerance of 20 business
days in order to improve the accuracy
of the matching of submitted trade data.
Currently, if two transactions are
submitted that match in all other
aspects as required by the Rules, but
have different trade dates, NSCC uses
the earlier of the two submitted trade
dates in producing and recording a
matched trade. Members that do not
agree with the terms of a matched trade
may submit an instruction to reverse a
matched trade pursuant to Procedure II,
Section C, 2(e). Therefore, this
procedure will result in a matched trade
if the counterparties submitted different
trade dates in error, and Members are
able to reverse that trade if the different
trade dates were not submitted in error
and the matched trade is incorrect.
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16:38 Jun 13, 2018
Jkt 244001
NSCC is now proposing to include a
tolerance of 20 business days to the
comparison criteria for trade dates in
order to improve the accuracy of its
trade comparison service. In order to
implement this change, NSCC is
proposing to amend Procedure II,
Section C, 1(d) to make clear a trade
would be deemed compared if the
submitted trade data matches in all
required respects other than trade date,
and the trade dates submitted are within
20 business days of each other. Under
the proposed rule change, NSCC would
continue to use the earlier of the
submitted trade dates in the resulting
compared trade. The proposed rule
change would also make clear that a
trade would remain uncompared if the
trade dates submitted are not within the
20 business day tolerance. Members
would still have the ability to submit
instructions to reverse a trade if they
disagree with the terms of a matched
trade.
NSCC believes trade dates submitted
for a trade that matches in all other
required respects but are different by
more than 20 business days are more
likely submitted in error. For example,
one counterparty may enter a trade date
of March 1, 2018 and the other
counterparty may enter for the same
trade a trade date of March 1, 2008 by
mistyping the year of the trade date.
Under the current rules, NSCC would
match the trade data and report a
compared trade with a trade date of
March 1, 2008, the earlier of the
submitted trade dates, and the
counterparties would have to submit
instructions to either delete or reverse
that trade, as appropriate. NSCC
believes the proposed rule change
would result in fewer trades that are
compared using an earlier trade date
that was submitted in error, and would
result in more accurate comparison
processing.
2. Statutory Basis
NSCC believes that the proposed
changes are consistent with the Section
17A(b)(3)(F) of the Act, which requires,
in part, that the rules of a registered
clearing agency be designed to promote
the prompt and accurate clearance and
settlement of securities transactions, for
the reasons described below.8 The
proposed rule change would increase
transparency of the Rules by clarifying
and enhancing the descriptions of the
CMU securities comparison service. In
this way, the proposed changes would
ensure that the Rules remain
transparent, accurate and clear, which
would enable Members to readily
understand their rights and obligations
in connection with the use of this
service. Additionally, the proposal to
add a 20 business day tolerance for
comparison of trade dates would
improve the accuracy of the comparison
service. Eligible transactions that are
submitted for comparison may also be
processed for clearance and settlement
through NSCC’s CNS Accounting
System or the Balance Order
Accounting system, as applicable.
Therefore, by improving the
transparency of these Rules and the
accuracy of the comparison service,
resulting in fewer trades compared at an
incorrect trade date, the proposed
changes would also promote the prompt
and accurate clearance and settlement of
securities transactions, consistent with
Section 17A(b)(3)(F) of the Act.9
Rule 17Ad–22(e)(23)(i) under the Act
requires, in part, that NSCC establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to provide for
publicly disclosing all relevant rules
and material procedures.10 As described
above, the proposed rule change would
improve the transparency, clarity and
accuracy of the Rules, such that these
provisions of the Rules would better
disclose all relevant and material
aspects of the comparison service.
Therefore, NSCC believes the proposed
rule changes are consistent with Rule
17Ad–22(e)(23)(i).11
(B) Clearing Agency’s Statement on
Burden on Competition
NSCC does not believe that the
proposed rule changes would have any
impact, or impose any burden, on
competition. The proposed rule changes
would improve Members’
understanding of their rights and
obligations with respect to the use of
this service, and would improve the
accuracy of the comparison service with
respect to trade dates. These proposed
changes would be applicable to all
Members that utilize this comparison
service, and would not alter Members’
rights or obligations. Therefore, NSCC
does not believe that the proposed rule
changes would have any impact on
competition.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
NSCC has not solicited or received
any written comments relating to this
proposal. NSCC will notify the
9 Id.
10 17
8 15
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U.S.C. 78q–1(b)(3)(F).
Frm 00058
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11 Id.
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Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices
Commission of any written comments
that it receives.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 12 and paragraph (f) of Rule
19b–4 thereunder.13 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:
daltland on DSKBBV9HB2PROD with NOTICES
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–
NSCC–2018–002 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NSCC–2018–002. 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 website (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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
12 15
U.S.C. 78s(b)(3)(A).
13 17 CFR 240.19b–4(f).
VerDate Sep<11>2014
16:38 Jun 13, 2018
Jkt 244001
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 NSCC and on NSCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–NSCC–
2018–002 and should be submitted on
or before July 5, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–12752 Filed 6–13–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83398; File No. SR–FINRA–
2018–013]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Designation
of Longer Period for Commission
Action on a Proposed Rule Change To
Establish a Second Trade Reporting
Facility in Conjunction With Nasdaq,
Inc.
June 8, 2018.
On April 19, 2018, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to establish a
second Trade Reporting Facility to be
operated in conjunction with Nasdaq,
Inc. The proposed rule change was
published for comment in the Federal
Register on April 26, 2018.3 The
Commission received no comment
letters on the proposal.
Section 19(b)(2) of the Act 4 provides
that, within 45 days of the publication
of the 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
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 83082
(April 20, 2018), 83 FR 18379 (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
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 June 10, 2018. The
Commission is extending this 45-day
time period.
The Commission has determined that
it is 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 issues
raised by the proposed rule change.
Accordingly, pursuant to Section
19(b)(2) of the Act,5 the Commission
designates July 25, 2018, as the date by
which the Commission shall either
approve, disapprove, or institute
proceedings to determine whether to
disapprove the proposed rule change
(File No. SR FINRA–2018–013).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–12753 Filed 6–13–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83396; File No. SR–BOX–
2018–21]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
the Fee Schedule on the BOX Market
LLC (‘‘BOX’’) Options Facility To
Amend Fees and Rebates for NonAuction Transactions
June 8, 2018.
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 May 31,
2018, BOX Options Exchange LLC (the
‘‘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 the Exchange. The
Exchange filed the proposed rule change
pursuant to Section 19(b)(3)(A)(ii) of the
1 15
PO 00000
Frm 00059
Fmt 4703
Sfmt 4703
27807
5 Id.
6 17
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 83, Number 115 (Thursday, June 14, 2018)]
[Notices]
[Pages 27802-27807]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-12752]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83397; File No. SR-NSCC-2018-002]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change To Clarify and Enhance Rules Related to Comparison and
Recording of CMU Securities
June 8, 2018.
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 June 7, 2018, National Securities Clearing Corporation (``NSCC'')
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 the clearing agency. NSCC filed the
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and
Rule
[[Page 27803]]
19b-4(f)(4) thereunder \4\ so that the proposal was effective upon
filing with the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of modifications to the Rules and
Procedures of NSCC (``Rules'') in order to enhance the procedures that
describe the process by which Members may submit debt securities,
specifically transactions in corporate bonds, municipal bonds, and unit
investment trusts (referred to as ``CMU securities''), for comparison
and recording by (1) making certain clarifications and corrections to
these procedures, and (2) adding a comparison tolerance of 20 business
days for the trade dates of transactions submitted for comparison, as
described below.\5\
---------------------------------------------------------------------------
\5\ Terms not defined herein are defined in the Rules, available
at https://www.dtcc.com/legal/rules-and-procedures.
---------------------------------------------------------------------------
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the clearing agency included
statements concerning the purpose of and basis for the proposed rule
change and discussed any comments it received on the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. The clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
NSCC is proposing to make certain revisions to Procedure II,
Section C and Section D of the Rules, which describes the service
provided by NSCC that allows Members to submit transactions in CMU
securities for comparison and recording. These sections of Procedure II
describe the rules that govern comparison of submitted trade data,
including the information that must be included in these submissions
and the timing of the submission, how the resulting compared trades are
reported by NSCC, and how eligible compared trades may be processed for
clearance and settlement through NSCC's facilities, among other related
matters.
NSCC is proposing to make a number of revisions to these sections
of Procedure II in order to (1) clarify and enhance the disclosures,
correct typographical and drafting errors, and update descriptions that
no longer reflect current processing in order to improve the
transparency of these provisions; and (2) include in the Rules a
matching tolerance of 20 business days for the trade dates of submitted
transactions in order to improve the accuracy of trade matching. Each
of these proposed changes is described below.
(i) Proposed Changes To Clarify and Enhance Transparency
NSCC is proposing to make a number of technical, non-substantive
revisions to Sections C and D of Procedure II in order to improve the
descriptions of these procedures and enhance the transparency of the
rules that apply to the comparison and recording of CMU securities at
NSCC. These proposed changes are described below.
Proposed Rule Changes To Revise Verb Tense and Correct Typographical
Errors
NSCC is proposing to revise the verb tense in order to use a
present verb tense rather than a future verb tense, and to correct
typographical errors. The proposed changes to revise the verb tense
used in these procedures would align Sections C and D of Procedure II
with other provisions within the Rules and, by using a present tense,
would utilize more appropriate language for the description of
procedures.
NSCC is also proposing to correct typographical errors in order to
improve the descriptions of these procedures and avoid confusion in a
Member's understanding of these procedures. For example, NSCC is
proposing to correct a typographical error by revising the term
``insure'' to the term ``ensure'' in Procedure II, Section C, 1(a).
NSCC is also proposing to correct the reference in the renumbered
Procedure II, Section C, 1(k)(i) from ``price'' to ``amount'' to more
accurately describe the information that is reported on the
Consolidated Trade Summary (``CTS'').\6\ The information that is being
referred to in this sentence includes both price and quantity, and,
therefore, is more accurately described as ``amount.''
---------------------------------------------------------------------------
\6\ The CTS is a report provided to Members that contains
summarized trade obligation information. The CTS is described in
Procedure II (Trade Comparison and Recording Service), Procedure V
(Balance Order Accounting Operation) and Procedure VII (CNS
Accounting Operation) of the Rules. NSCC recently implemented
updates to the CTS. See Securities Exchange Act Release No. 79904
(January 31, 2017), 82 FR 9448 (February 6, 2017) (SR-NSCC-2016-
008).
---------------------------------------------------------------------------
NSCC is also proposing to change the term ``deleted'' to
``reversed'' in Procedure II, Section C, 2(e). While Members may submit
an instruction to delete an uncompared trade if the firm does not agree
with the terms of the trade, as described in Procedure II, Section C,
2(b), this sentence in Section C, 2(e) describes a different process by
which a Member may submit an instruction to reverse a previously
compared trade. As such, the proposed rule change would correct a
typographical error and avoid any confusion about these two actions
that may be caused by the misuse of this term. In connection with this
proposed change, NSCC would also add ``reversed'' to the following
Section C, 2(f), as the provisions of that section apply to both
deleted and reversed transactions. This proposed change would clarify
the applicability of this section to transactions that are reversed by
a Member.
By correcting typographical errors in these procedures, the
proposed rule changes would make the Rules accurate and clearer to
Members regarding their rights and obligations in connection with the
use of this service.
Proposed Rule Changes To Improve and Simplify Descriptions
NSCC is proposing rule changes that would enhance the descriptions
of these procedures by disclosing additional information, and is also
proposing rule changes that would simplify these descriptions by
removing unnecessary information, as described below.
Enhancing Descriptions and Disclosing Additional Information.
First, NSCC is proposing to make revisions that include descriptions of
additional criteria for use of the comparison service or other
additional disclosures that would improve the descriptions and enhance
the transparency of these procedures.
NSCC is proposing to add MPID (the market participant identifier
that is issued by the Financial Industry Regulatory Authority, Inc. and
used to report trades) to the list of identifying trade data details
required to be submitted for comparison processing in Procedure II,
Section C, 1(b). This section includes a non-exhaustive list of trade
data that NSCC may require to be submitted in connection with the use
of this service, and provides that NSCC may require or permit Members
to submit other identifying trade details. NSCC currently requires
MPIDs among the trade data details that must be submitted for
comparison purposes, and
[[Page 27804]]
NSCC believes that adding this criteria to the Rules would improve the
transparency of this requirement.
NSCC is proposing to revise the reference to ``OTC'' transactions
to ``corporate bond security transactions'' and the reference to ``unit
trust fund transactions'' to ``unit investment trust transactions'' in
Procedure II, Section C, 1(f). ``OTC'' or ``over-the-counter''
securities are securities that are not traded on an exchange, and
include debt securities such as corporate bonds. Therefore, while
``OTC'' is not incorrect in this context, NSCC believes the use of this
term may imply that other transactions are being referred to in this
subsection of the Rules. Therefore, NSCC is proposing to revise the
term to more specifically refer to ``corporate bond security
transactions.'' Additionally, the term ``unit trust fund transactions''
is not a term that is commonly used to refer to unit investment trust
transactions. While these securities may be considered funds, the
correct term for describing these transactions is ``unit investment
trust transactions.'' Therefore, while these proposed revisions would
not change what is intended by these terms, they would enhance the
transparency of this section by using terminology that would be more
clearly recognizable to Members.
NSCC is proposing to clarify the language in Procedure II, Section
C, 1(h) to make clear that trades submitted for comparison may be
identified as ``CNS-eligible,'' which would flag these trades to be
processed through the CNS Accounting System; ``non-CNS-eligible,''
which would flag these trades to be processed through the Balance Order
Accounting System; or ``Special Trade,'' which could flag these trades
either for trade-for-trade processing, which normally settle outside of
NSCC's facilitates, or for comparison-only processing. The proposed
rule changes would add transparency to the Rules regarding how these
designations impact the processing of trades submitted to NSCC.
NSCC is proposing to add a sentence to Procedure II, Section C,
1(i)(ii) to make clear that trades submitted for comparison-only
processing are subject to the rules of the Municipal Securities
Rulemaking Board (``MSRB''). NSCC believes that this clarification is
appropriate because these submissions are not required to meet the
eligibility requirements for clearance or settlement through NSCC's
facilities, but must comply with the rules of the MSRB. Therefore, NSCC
believes this proposed change would enhance the transparency of the
Rules and would assist Members to understand the requirements that
apply to these trades.
NSCC is proposing to add a reference to the ``Balance Order
Accounting System'' to the renumbered subsection (k)(ii) of Procedure
II, Section C, 1, which describes how eligible, compared trades may be
further processed within NSCC's facilities. Currently, this subsection
is incomplete and does not include reference to the Balance Order
Accounting System, where eligible compared trades that are not eligible
to be processed in the CNS Accounting System may be processed for
clearance and settlement. Therefore, the proposed change would enhance
this subsection by including this additional reference.
NSCC is proposing to add a sentence to the renumbered subsection
(m) of Procedure II, Section C, 1 that would describe the process by
which NSCC would convert a bilateral trade that matches a Qualified
Special Representative (``QSR'') trade submission in all respects
(other than its designation as a bilateral trade) into a QSR trade.
NSCC is also proposing to add a new subsection (vi) to renumbered
Procedure II, Section D, 2(g) that would describe the process by which
NSCC would convert a bilateral trade that matches a syndicate takedown
trade or reversal in all respects (other than its designation as a
bilateral trade) into a syndicate takedown trade or reversal, as
appropriate. These two automatic conversions are a part of NSCC's
existing processes, but, because these conversions occur automatically
and do not require any action by Members, these processes are not
described in these sections of the Rules. NSCC believes these proposed
changes to describe these automatic conversions would improve the
transparency of the Rules and provide Members with notice that these
conversions would occur in the described circumstances.
NSCC is proposing to revise the renumbered subsection (p) of
Procedure II, Section C, 1 to clarify that NSCC processes cash
transactions where the trade date for the submitted transaction is the
same as the settlement date for comparison-only processing. Currently,
this section of the Rules refers to these transactions as ``cash
transactions,'' and the proposed change would improve the transparency
of this section by including a further description of these
transactions. This proposed change would provide Members with
additional information regarding the types of transactions that are
referred to in this section and, therefore, would improve the
transparency of the Rules.
NSCC is proposing to revise Procedure II, Section C, 2(g) to make
it clearer that NSCC permits certain trade details for uncompared
trades to be modified by the submitter, provided, however, that trade
details for syndicate takedown submissions are only permitted to be
modified on the submission date. The proposed rule changes would also
clarify that NSCC may limit the trade data that can be modified after a
trade is matched. Although Section C, 2(g) currently describes these
rules relating to the modification of submitted trade details, NSCC
believes that the proposed revisions would improve those descriptions
and thereby make such rules clearer to Members and improve the overall
transparency of the Rules.
NSCC is proposing to revise Procedure II, Section C, 2(h), which
provides that transactions that compare after a cutoff time designated
by NSCC on the date the transaction was scheduled to settle are
assigned a settlement date of the next business day after the day the
transaction is compared. The proposed rule changes would clarify that
these rules apply to any transactions that compare after the set cutoff
time, and not only to transactions that compare for the first time
(meaning, transactions that have not been previously submitted and
reversed by the counterparties pursuant to the Rules). These proposed
changes, and the other marked revisions to this section would clarify
the applicability of these rules and would improve the readability,
clarity and transparency of this Section C, 2(h).
Simplifying Descriptions and Removing Unnecessary Details. NSCC is
also proposing to make revisions that would use fewer words to describe
a procedure or otherwise remove unnecessary language that could cause
confusion in the interpretation of the procedures. By rewording certain
provisions and using simpler language in these descriptions, these
proposed changes would improve the transparency of the procedures in
Sections C and D of Procedure II.
NSCC is proposing to remove the following sentence from Procedure
II, Section C, 1(h), ``Depending upon whether trade data is submitted
on T or T+n and the format in which output is produced with respect to
such data, the output may reflect totals.'' NSCC believes that this
sentence is unnecessary for purposes of describing the procedures
applicable to comparison and recording of CMU securities transactions.
Therefore, the proposed rule change to remove this sentence would
simplify the Rules and remove unnecessary statements that do not
provide Members with important
[[Page 27805]]
additional information related to this service.
NSCC is proposing to remove from Procedure II, Section C, 2(c) a
statement that a Member may submit an instruction to delete an
uncompared trade if it finds that the trade data is incorrect. The
immediately prior Section C, 2(b) of Procedure II states that a Member
may submit an instruction to delete a trade if it does not agree with
the terms of the trade. While the fact that the data is incorrect is
most likely the basis for a Member to disagree with the terms of the
trade, NSCC does not believe the statement it is proposing to remove
from Procedure II, Section C, 2(c) adds to the rules, and believes this
statement could indicate to a Member that its ability to delete an
uncompared trade is limited to circumstances when the trade data is
incorrect. NSCC believes the proposed rule change to remove this
additional and unnecessary language would clarify Members' ability to
submit a delete instruction.
NSCC is proposing to remove reference to comparison-only trades
from the renumbered subsection (l) of Procedure II, Section C, 1, which
incorrectly states that the rules of the MSRB are not applicable to
comparison-only trades. This subsection describes certain rules that
are applicable to trades that are designated as Special Trades,
including the fact that these trades are subject to the rules of the
MSRB. Currently, this subsection includes language that expressly
excludes comparison-only trades. NSCC believes that expressly excluding
comparison-only trades from this subsection could incorrectly imply to
Members that the rules described in this subsection, including the
applicability of the MSRB rules, do not apply to comparison-only
trades. Procedure II, Section C, 1(i)(ii) describes the rules that
apply to comparison-only trades, including the fact that these trades
are subject to the rules of the MSRB. Therefore, NSCC is proposing to
remove the express exclusion of comparison-only trades from the
renumbered subsection (l) of Procedure II, Section C, 1, which is
unnecessary and could cause confusion.
NSCC is proposing to remove from Procedure II, Section D,
2(A)(2)(b) the description of the timing by which an eligible
transaction may enter the CNS Accounting Operation. The rules
applicable to the CNS Accounting Operation, including, as applicable,
any relevant timing of processing in that service, is described in
Procedure VII. This information is not necessary for the operation of
the comparison services, and removing this information would simplify
these rules, improving their clarity to Members.
NSCC is also proposing to remove subsection 2(A)(2)(c) from
Procedure II, Section D, which describes information included in the
output NSCC produces in connection with the comparison service. As
currently written, this subsection is incomplete and does not list all
of the information that may be included in this output. Therefore, the
current description could create confusion among Members regarding what
information may be included in these reports. NSCC believes it is in
Members' best interest that NSCC retain flexibility to add or remove
information from these reports, for example, in response to Members'
requests. As such, NSCC does not believe it is necessary to specify for
Members the information that may be included in these reports.
Therefore, NSCC believes the proposed change to remove the unnecessary
section would simplify and improve the Rules.
NSCC is also proposing a number of revisions to the descriptions of
the rules regarding submission and processing of syndicate takedown
trades and syndicate takedown reversals in renumbered Procedure II,
Section D, 2(A)(2)(g). The proposed revisions would not change the
rules that apply to how these trades and reversals are processed, but
would re-order the descriptions of these rules in order to simplify,
clarify and improve the transparency of these provisions.
Proposed Rule Changes To Update and Correct Descriptions
NSCC is proposing rule changes that would update the procedures in
order to accurately describe current processing and correct
descriptions that have become outdated. Each of these proposed rule
changes would improve the Rules by correcting these errors.
NSCC is proposing to amend Procedure II, Section C, 1(c)(1) and (2)
in order to clarify that the tolerances for comparison of contract
amounts apply only to bilateral trades, and state that the QSR's or
syndicate manager's contract amount is used for QSR and syndicate
trades for comparison purposes. Currently, these two subsections of the
Rules describe the contract amount tolerances that are applicable to
bilateral trades, but fail to specify which tolerances apply to
bilateral trades, and which tolerances apply to QSR and syndicate
trades. The proposed rule change would clarify that the tolerances
currently described in these subsections apply only to bilateral
trades, and would add to these subsections a description of the rules
for comparing contract amounts applicable to QSR and syndicate trades.
NSCC is proposing to remove subsection (j) from Procedure II,
Section C, 1, which states that Members may override clearing agent
designations by submitting trade input for comparison using the
appropriate Trade-for-Trade Indicator. NSCC is also proposing to remove
from the renumbered Procedure II, Section C, 1(k)(i) the reference to
``any clearing agent indicated by the applicable contra party'' as an
example of information that NSCC may provide on the CTS. Members that
are Municipal Comparison Only Members may use another Member as their
``clearing agent'' to access NSCC's clearing and settlement services,
and, historically, clearing agent designations had been reported on the
CTS. However, in connection with its recent updates to the CTS, in
response to Member feedback that it is no longer necessary to report
these clearing agent designations, NSCC removed the designations from
the CTS.\7\ In error, NSCC did not remove references to the clearing
agent designation from subsection (j) or from the renumbered subsection
(k)(i) of Procedure II, Section C when it implemented these updates.
Therefore, the proposed change would correct this error by removing
from the Rules statements that are no longer accurate and could cause
Members confusion regarding the use of this service.
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\7\ Supra note 6.
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Finally, NSCC is proposing two changes that would correct errors
that it has identified in the Rules. The proposed changes would correct
descriptions in these sections of the Rules in order to accurately
describe processing that has been effective since this service was
implemented over 10 years ago. While these changes would revise the
Rules as written, the changes would not result in any change in the
current operation of the service. NSCC does not believe that either of
these changes would significantly affect the respective rights or
obligations of NSCC or Members using this service.
First, NSCC is proposing to remove from Procedure II, Section C,
1(g) an incorrect statement that trades in municipal bonds must be
submitted in multiples of a thousand. Municipal bonds may be submitted
in quantities other than multiples of a thousand, and such submissions
would be subject to the other provisions of this section that are
applicable to submissions of trades in quantities other than multiples
of a thousand (specifically, that such submissions be divided into
separate
[[Page 27806]]
submissions of the round lot and odd lot quantity, and that odd lot
quantities are processed on a trade-for-trade basis). Therefore, in
addition to removing this incorrect statement, NSCC would add municipal
bonds to these statements within this same section. NSCC does not
believe that this change would significantly affect the respective
rights or obligations of NSCC or Members using this service because
Members that are currently submitting municipal bonds in quantities of
a thousand may continue to do so, and Members that submit municipal
bonds in quantities other than multiples of a thousand may do so
subject to the rules already described in this section.
Second, NSCC is proposing to revise Procedure II, Section D, 2(A),
which specifically describes processing of when-issued securities. The
special processing rules within this section do not apply to when-
issued corporate bonds, which are instead processed in the same manner
as all other transactions in corporate bonds. Therefore, this Procedure
II, Section D, 2(A) incorrectly refers to corporate bonds and the
proposed change to remove references to corporate bonds would correct
this error. This proposed rule change would clarify that the provisions
of this subsection apply only to transactions in municipal securities.
NSCC does not believe that this change would significantly affect the
respective rights or obligations of NSCC or Members using this service
because Members would be able to continue to submit when-issued
corporate bonds, and such securities would be processed through the
regular processing rules.
(ii) Proposed Changes To Add a Trade Date Comparison Tolerance
NSCC is also proposing to amend Section C of Procedure II to
include a comparison tolerance of 20 business days in order to improve
the accuracy of the matching of submitted trade data. Currently, if two
transactions are submitted that match in all other aspects as required
by the Rules, but have different trade dates, NSCC uses the earlier of
the two submitted trade dates in producing and recording a matched
trade. Members that do not agree with the terms of a matched trade may
submit an instruction to reverse a matched trade pursuant to Procedure
II, Section C, 2(e). Therefore, this procedure will result in a matched
trade if the counterparties submitted different trade dates in error,
and Members are able to reverse that trade if the different trade dates
were not submitted in error and the matched trade is incorrect.
NSCC is now proposing to include a tolerance of 20 business days to
the comparison criteria for trade dates in order to improve the
accuracy of its trade comparison service. In order to implement this
change, NSCC is proposing to amend Procedure II, Section C, 1(d) to
make clear a trade would be deemed compared if the submitted trade data
matches in all required respects other than trade date, and the trade
dates submitted are within 20 business days of each other. Under the
proposed rule change, NSCC would continue to use the earlier of the
submitted trade dates in the resulting compared trade. The proposed
rule change would also make clear that a trade would remain uncompared
if the trade dates submitted are not within the 20 business day
tolerance. Members would still have the ability to submit instructions
to reverse a trade if they disagree with the terms of a matched trade.
NSCC believes trade dates submitted for a trade that matches in all
other required respects but are different by more than 20 business days
are more likely submitted in error. For example, one counterparty may
enter a trade date of March 1, 2018 and the other counterparty may
enter for the same trade a trade date of March 1, 2008 by mistyping the
year of the trade date. Under the current rules, NSCC would match the
trade data and report a compared trade with a trade date of March 1,
2008, the earlier of the submitted trade dates, and the counterparties
would have to submit instructions to either delete or reverse that
trade, as appropriate. NSCC believes the proposed rule change would
result in fewer trades that are compared using an earlier trade date
that was submitted in error, and would result in more accurate
comparison processing.
2. Statutory Basis
NSCC believes that the proposed changes are consistent with the
Section 17A(b)(3)(F) of the Act, which requires, in part, that the
rules of a registered clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions, for
the reasons described below.\8\ The proposed rule change would increase
transparency of the Rules by clarifying and enhancing the descriptions
of the CMU securities comparison service. In this way, the proposed
changes would ensure that the Rules remain transparent, accurate and
clear, which would enable Members to readily understand their rights
and obligations in connection with the use of this service.
Additionally, the proposal to add a 20 business day tolerance for
comparison of trade dates would improve the accuracy of the comparison
service. Eligible transactions that are submitted for comparison may
also be processed for clearance and settlement through NSCC's CNS
Accounting System or the Balance Order Accounting system, as
applicable. Therefore, by improving the transparency of these Rules and
the accuracy of the comparison service, resulting in fewer trades
compared at an incorrect trade date, the proposed changes would also
promote the prompt and accurate clearance and settlement of securities
transactions, consistent with Section 17A(b)(3)(F) of the Act.\9\
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\8\ 15 U.S.C. 78q-1(b)(3)(F).
\9\ Id.
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Rule 17Ad-22(e)(23)(i) under the Act requires, in part, that NSCC
establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide for publicly disclosing all
relevant rules and material procedures.\10\ As described above, the
proposed rule change would improve the transparency, clarity and
accuracy of the Rules, such that these provisions of the Rules would
better disclose all relevant and material aspects of the comparison
service. Therefore, NSCC believes the proposed rule changes are
consistent with Rule 17Ad-22(e)(23)(i).\11\
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\10\ 17 CFR 240.17Ad-22(e)(23)(i).
\11\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
NSCC does not believe that the proposed rule changes would have any
impact, or impose any burden, on competition. The proposed rule changes
would improve Members' understanding of their rights and obligations
with respect to the use of this service, and would improve the accuracy
of the comparison service with respect to trade dates. These proposed
changes would be applicable to all Members that utilize this comparison
service, and would not alter Members' rights or obligations. Therefore,
NSCC does not believe that the proposed rule changes would have any
impact on competition.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
NSCC has not solicited or received any written comments relating to
this proposal. NSCC will notify the
[[Page 27807]]
Commission of any written comments that it receives.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \12\ and paragraph (f) of Rule 19b-4
thereunder.\13\ 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.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f).
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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 [email protected]. Please include
File Number SR-NSCC-2018-002 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NSCC-2018-002. 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 website (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 website 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 NSCC and on NSCC's website
(https://dtcc.com/legal/sec-rule-filings.aspx). All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NSCC-2018-002 and should be submitted on
or before July 5, 2018.
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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12752 Filed 6-13-18; 8:45 am]
BILLING CODE 8011-01-P
