Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change To Terminate the Commission Billing Service and the Commission Billing Limited Membership, 44353-44354 [2018-18782]
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Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices
NSCC–2017–805, as modified by
Amendment No. 1, and that NSCC is
authorized to implement the proposal as
of the date of this notice or the date of
an order by the Commission approving
proposed rule change SR–NSCC–2017–
017, as modified by Amendment No. 1,
whichever is later.
By the Commission.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–18869 Filed 8–29–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83937; File No. SR–NSCC–
2018–004]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Approving
Proposed Rule Change To Terminate
the Commission Billing Service and
the Commission Billing Limited
Membership
August 24, 2018.
On July 13, 2018, National Securities
Clearing Corporation (‘‘NSCC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–NSCC–2018–004,
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 July 24, 2018.3 The
Commission did not receive any
comment letters on the proposed rule
change. For the reasons discussed
below, the Commission approves the
proposed rule change.
I. Description of the Proposed Rule
Change
The proposed rule change would
amend the Rules and Procedures of
NSCC (‘‘Rules’’) 4 to terminate the
Commission Billing service. Currently,
the Commission Billing service
facilitates the payment of commissions
between NSCC’s members (‘‘Members’’)
and floor brokerage firms 5 that charge
commissions (‘‘Commission Billing
amozie on DSK3GDR082PROD with NOTICES1
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 83666 (July
18, 2018), 83 FR 35041 (July 24, 2018) (SR–NSCC–
2018–004) (‘‘Notice’’).
4 Available at https://www.dtcc.com/legal/rulesand-procedures.
5 Floor brokerage firms are members of the New
York Stock Exchange (‘‘NYSE’’) and NYSE
American. Floor brokerage firms execute trades on
behalf of their clients for a commission.
VerDate Sep<11>2014
17:25 Aug 29, 2018
Jkt 244001
Members’’).6 Commission Billing
Members hold a limited membership at
NSCC that allows such firms to
participate in NSCC solely for the
collection of commissions.7 NSCC
tabulates all commission payment
records received on a monthly basis,
and either sends amounts to The
Depository Trust Company (‘‘DTC’’) for
payment (for Members that are also
Participants of DTC) or processes
payments through the Automated
Clearing House.8
NSCC proposes to terminate the
Commission Billing service and the
associated membership category.9 NSCC
states that over the years the volumes of
trades handled by floor brokerage firms
have decreased, leading to a significant
decrease in the use of this service.10
NSCC states that the reduced volumes of
transactions have caused this service to
be provided at a financial loss to
NSCC.11 Additionally, NSCC states that
due to the use of legacy systems that
lack automation and support features,
the service continues to rely on manual
processes and requires personnel
involvement, which can lead to errors.12
NSCC would implement the proposed
changes no later than November 30,
2018.13
II. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Act 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.14 The Commission
believes the proposal is consistent with
Act, specifically Section 17A(b)(3)(F) of
the Act and Rules 17Ad–22(e)(21)(iv)
under the Act.15
A. Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act
requires, in part, that the rules of a
clearing agency, such as NSCC, be
designed to promote the prompt and
accurate clearance and settlement of
securities transactions.16
As described above, the proposed rule
change would terminate the
6 Notice,
83 FR at 35041.
7 Id.
8 Notice,
9 Notice,
83 FR at 35041–42.
83 FR at 35042.
10 Id.
11 Id.
12 Id.
13 Id.
14 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F); 17 CFR 240.17Ad–
22(e)(21)(iv).
16 15 U.S.C. 78q–1(b)(3)(F).
15 15
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
44353
Commission Billing service and the
associated membership category. The
proposed change is designed to
eliminate an underutilized service that
takes up NSCC resources (through its
reliance on manual operations and by
operating at a financial loss) and is no
longer relied on by Members or the
industry. As NSCC would no longer
need to divert resources to the service,
the proposed rule change would afford
NSCC the opportunity to redeploy those
resources in a manner that could better
support NSCC’s other, more utilized
clearance and settlement services.
Accordingly, the Commission finds that
the proposed rule change is designed to
promote the prompt and accurate
clearance and settlement of securities
transactions, consistent with Section
17A(b)(3)(F) of the Act.17
B. Rule 17Ad–22(e)(21)(iv) Under the
Act
Rule 17Ad–22(e)(21)(iv) under the Act
requires a covered clearing agency 18 to
establish, implement, maintain, and
enforce written policies and procedures
reasonably designed to be efficient and
effective in meeting the requirements of
its participants and the markets it
serves.19 As described above, use of the
Commission Billing service has
significantly decreased, as the industry
has change and the service no longer
provides the same value that it had
historically. As a result, NSCC currently
operates the service at a financial loss.
As such, NSCC has determined that it
would be more efficient and effective in
meeting the requirements of its
Members and the market NSCC serves to
eliminate the service. In doing so, NSCC
would be able to redirect the resources
being consumed by the Commission
Billing service to other, more needed
services. Therefore, the Commission
finds that the proposed rule change is
designed to help ensure that NSCC is
efficient and effective in meeting the
requirements of its participants,
17 Id.
18 A ‘‘covered clearing agency’’ means, among
other things, a clearing agency registered with the
Commission under Section 17A of the Exchange
Act (15 U.S.C. 78q–1 et seq.) that is designated
systemically important by the Financial Stability
Oversight Counsel (‘‘FSOC’’) pursuant to the
Payment, Clearing, and Settlement Supervision Act
of 2010 (12 U.S.C. 5461 et seq.). See 17 CFR
240.17Ad–22(a)(5)–(6). On July 18, 2012, FSOC
designated NSCC as systemically important. U.S.
Department of the Treasury, ‘‘FSOC Makes First
Designations in Effort to Protect Against Future
Financial Crises,’’ available at https://
www.treasury.gov/press-center/press-releases/
Pages/tg1645.asp. Therefore, NSCC is a covered
clearing agency.
19 17 CFR 240.17Ad–22(e)(21)(iv).
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44354
Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices
consistent with Rule 17Ad–22(e)(21)(iv)
under the Act.20
III. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act, in particular the requirements of
Section 17A of the Act 21 and the rules
and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that
proposed rule change SR–NSCC–2018–
004 be, and hereby is, approved.22
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–18782 Filed 8–29–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83952; File No. SR–NSCC–
2017–806]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of No Objection to
an Advance Notice, as Modified by
Amendment No. 1, To Amend the Loss
Allocation Rules and Make Other
Changes
August 27, 2018.
On December 18, 2017, National
Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
advance notice SR–NSCC–2017–806
pursuant to Section 806(e)(1) of Title
VIII of the Dodd-Frank Wall Street
Reform and Consumer Protection Act
entitled the Payment, Clearing, and
Settlement Supervision Act of 2010
(‘‘Clearing Supervision Act’’) 1 and Rule
19b–4(n)(1)(i) under the Securities
Exchange Act of 1934 (‘‘Act’’) 2 to
amend NSCC’s loss allocation rules,
accelerate the return of certain deposits
to former Members, and make other
conforming and technical changes.3 The
20 Id.
21 15
U.S.C. 78q–1.
approving the proposed rule change, the
Commission considered the proposals’ impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
23 17 CFR 200.30–3(a)(12).
1 12 U.S.C. 5465(e)(1).
2 17 CFR 240.19b–4(n)(1)(i).
3 On December 18, 2017, NSCC filed the advance
notice as proposed rule change SR–NSCC–2017–
018 with the Commission pursuant to Section
19(b)(1) of the Act and Rule 19b–4 thereunder
(‘‘Proposed Rule Change’’). 15 U.S.C. 78s(b)(1) and
17 CFR 240.19b–4, respectively. The Proposed Rule
Change was published in the Federal Register on
amozie on DSK3GDR082PROD with NOTICES1
22 In
VerDate Sep<11>2014
17:25 Aug 29, 2018
Jkt 244001
advance notice was published for
comment in the Federal Register on
January 30, 2018.4 In that publication,
the Commission also extended the
review period of the advance notice for
an additional 60 days, pursuant to
Section 806(e)(1)(H) of the Clearing
Supervision Act.5 On April 10, 2018,
the Commission required additional
information from NSCC pursuant to
Section 806(e)(1)(D) of the Clearing
Supervision Act,6 which tolled the
Commission’s period of review of the
advance notice until 60 days from the
date the information required by the
Commission was received by the
Commission.7 On June 28, 2018, NSCC
filed Amendment No. 1 to the advance
January 8, 2018. Securities Exchange Act Release
No. 82428 (January 2, 2018), 83 FR 897 (January 8,
2018) (SR–NSCC–2017–018). On February 8, 2018,
the Commission designated a longer period within
which to approve, disapprove, or institute
proceedings to determine whether to approve or
disapprove the Proposed Rule Change. Securities
Exchange Act Release No. 82670 (February 8, 2018),
83 FR 6626 (February 14, 2018) (SR–DTC–2017–
022, SR–FICC–2017–022, SR–NSCC–2017–018). On
March 20, 2018, the Commission instituted
proceedings to determine whether to approve or
disapprove the Proposed Rule Change. Securities
Exchange Act Release No. 82910 (March 20, 2018),
83 FR 12968 (March 26, 2018) (SR–NSCC–2017–
018). On June 25, 2018, the Commission designated
a longer period for Commission action on the
proceedings to determine whether to approve or
disapprove the Proposed Rule Change. Securities
Exchange Act Release No. 83510 (June 25, 2018), 83
FR 30791 (June 29, 2018) (SR–DTC–2017–022, SR–
FICC–2017–022, SR–NSCC–2017–018). On June 28,
2018, NSCC filed Amendment No. 1 to the
Proposed Rule Change, which was published in the
Federal Register on July 19, 2018. Securities
Exchange Act Release No. 83633 (July 13, 2018), 83
FR 34227 (July 19, 2018) (SR–NSCC–2017–018).
NSCC submitted a courtesy copy of Amendment
No. 1 to the Proposed Rule Change through the
Commission’s electronic public comment letter
mechanism. Accordingly, Amendment No. 1 to the
Proposed Rule Change has been publicly available
on the Commission’s website at https://
www.sec.gov/rules/sro/nscc.htm since June 29,
2018. The Commission did not receive any
comments. The proposal, as set forth in both the
advance notice and the Proposed Rule Change, each
as modified by Amendments No. 1, shall not take
effect until all required regulatory actions are
completed.
4 Securities Exchange Act Release No. 82584
(January 24, 2018), 83 FR 4377 (January 30, 2018)
(SR–NSCC–2017–806) (‘‘Notice’’).
5 Pursuant to Section 806(e)(1)(H) of the Clearing
Supervision Act, the Commission may extend the
review period of an advance notice for an
additional 60 days, if the changes proposed in the
advance notice raise novel or complex issues,
subject to the Commission providing the clearing
agency with prompt written notice of the extension.
12 U.S.C. 5465(e)(1)(H). The Commission found that
the advance notice raised complex issues and,
accordingly, extended the review period of the
advance notice for an additional 60 days until April
17, 2018. See Notice, supra note 4.
6 12 U.S.C. 5465(e)(1)(D).
7 See 12 U.S.C. 5465(e)(1)(E)(ii) and (G)(ii); see
Memorandum from the Office of Clearance and
Settlement Supervision, Division of Trading and
Markets, titled ‘‘Commission’s Request for
Additional Information,’’ available at https://
www.sec.gov/rules/sro/nscc-an.htm.
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
notice to amend and replace in its
entirety the advance notice as originally
filed on December 18, 2017.8 On July 6,
2018, the Commission received a
response to its request for additional
information in consideration of the
advance notice, which, in turn, added a
further 60 days to the review period
pursuant to Section 806(e)(1)(E) and (G)
of the Clearing Supervision Act.9 The
Commission did not receive any
comments. This publication serves as
notice that the Commission does not
object to the proposed changes set forth
in the advance notice, as modified by
Amendment No. 1 (hereinafter,
‘‘Advance Notice’’).
I. Description of the Advance Notice
The Advance Notice consists of
proposed changes to NSCC’s Rules and
Procedures (‘‘Rules’’) 10 in order to (1)
modify the loss allocation process; (2)
align NSCC’s loss allocation rules with
the three clearing agencies of The
Depository Trust & Clearing Corporation
(‘‘DTCC’’)—The Depository Trust
Company (‘‘DTC’’), Fixed Income
Clearing Corporation (‘‘FICC’’)
(including the Government Securities
Division (‘‘FICC/GSD’’) and the
Mortgage-Backed Securities Division
(‘‘FICC/MBSD’’)), and NSCC
(collectively, the ‘‘DTCC Clearing
Agencies’’); 11 (3) reduce the time within
which NSCC is required to return a
former Member’s Clearing Fund deposit;
and (4) make conforming and technical
changes. Each of these proposed
changes is described below. A detailed
description of the specific rule text
changes proposed in this Advance
8 Securities Exchange Act Release No. 83748 (July
31, 2018), 83 FR 38375 (August 6, 2018) (SR–
NSCC–2017–806) (‘‘Notice of Amendment No. 1’’).
NSCC submitted a courtesy copy of Amendment
No. 1 to the advance notice through the
Commission’s electronic public comment letter
mechanism. Accordingly, Amendment No. 1 to the
advance notice has been publicly available on the
Commission’s website at https://www.sec.gov/rules/
sro/nscc-an.htm since June 29, 2018.
9 12 U.S.C. 5465(e)(1)(E) and (G); see
Memorandum from the Office of Clearance and
Settlement Supervision, Division of Trading and
Markets, titled ‘‘Response to the Commission’s
Request for Additional Information,’’ available at
https://www.sec.gov/rules/sro/nscc-an.htm.
10 Each capitalized term not otherwise defined
herein has its respective meaning as set forth in the
Rules, available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/rules/nscc_rules.pdf.
11 DTCC is a user-owned and user-governed
holding company and is the parent company of
DTC, FICC, and NSCC. DTCC operates on a shared
services model with respect to the DTCC Clearing
Agencies. Most corporate functions are established
and managed on an enterprise-wide basis pursuant
to intercompany agreements under which it is
generally DTCC that provides a relevant service to
a DTCC Clearing Agency.
E:\FR\FM\30AUN1.SGM
30AUN1
]]>Agencies
[Federal Register Volume 83, Number 169 (Thursday, August 30, 2018)]
[Notices]
[Pages 44353-44354]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-18782]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83937; File No. SR-NSCC-2018-004]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Approving Proposed Rule Change To Terminate the
Commission Billing Service and the Commission Billing Limited
Membership
August 24, 2018.
On July 13, 2018, National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') proposed rule change SR-NSCC-2018-004, 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 July 24, 2018.\3\ The Commission
did not receive any comment letters on the proposed rule change. For
the reasons discussed below, the Commission 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. 83666 (July 18, 2018),
83 FR 35041 (July 24, 2018) (SR-NSCC-2018-004) (``Notice'').
---------------------------------------------------------------------------
I. Description of the Proposed Rule Change
The proposed rule change would amend the Rules and Procedures of
NSCC (``Rules'') \4\ to terminate the Commission Billing service.
Currently, the Commission Billing service facilitates the payment of
commissions between NSCC's members (``Members'') and floor brokerage
firms \5\ that charge commissions (``Commission Billing Members'').\6\
Commission Billing Members hold a limited membership at NSCC that
allows such firms to participate in NSCC solely for the collection of
commissions.\7\ NSCC tabulates all commission payment records received
on a monthly basis, and either sends amounts to The Depository Trust
Company (``DTC'') for payment (for Members that are also Participants
of DTC) or processes payments through the Automated Clearing House.\8\
---------------------------------------------------------------------------
\4\ Available at https://www.dtcc.com/legal/rules-and-procedures.
\5\ Floor brokerage firms are members of the New York Stock
Exchange (``NYSE'') and NYSE American. Floor brokerage firms execute
trades on behalf of their clients for a commission.
\6\ Notice, 83 FR at 35041.
\7\ Id.
\8\ Notice, 83 FR at 35041-42.
---------------------------------------------------------------------------
NSCC proposes to terminate the Commission Billing service and the
associated membership category.\9\ NSCC states that over the years the
volumes of trades handled by floor brokerage firms have decreased,
leading to a significant decrease in the use of this service.\10\ NSCC
states that the reduced volumes of transactions have caused this
service to be provided at a financial loss to NSCC.\11\ Additionally,
NSCC states that due to the use of legacy systems that lack automation
and support features, the service continues to rely on manual processes
and requires personnel involvement, which can lead to errors.\12\
---------------------------------------------------------------------------
\9\ Notice, 83 FR at 35042.
\10\ Id.
\11\ Id.
\12\ Id.
---------------------------------------------------------------------------
NSCC would implement the proposed changes no later than November
30, 2018.\13\
---------------------------------------------------------------------------
\13\ Id.
---------------------------------------------------------------------------
II. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act 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.\14\ The Commission believes the proposal is consistent
with Act, specifically Section 17A(b)(3)(F) of the Act and Rules 17Ad-
22(e)(21)(iv) under the Act.\15\
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(2)(C).
\15\ 15 U.S.C. 78q-1(b)(3)(F); 17 CFR 240.17Ad-22(e)(21)(iv).
---------------------------------------------------------------------------
A. Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a clearing agency, such as NSCC, be designed to promote the prompt
and accurate clearance and settlement of securities transactions.\16\
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
As described above, the proposed rule change would terminate the
Commission Billing service and the associated membership category. The
proposed change is designed to eliminate an underutilized service that
takes up NSCC resources (through its reliance on manual operations and
by operating at a financial loss) and is no longer relied on by Members
or the industry. As NSCC would no longer need to divert resources to
the service, the proposed rule change would afford NSCC the opportunity
to redeploy those resources in a manner that could better support
NSCC's other, more utilized clearance and settlement services.
Accordingly, the Commission finds that the proposed rule change is
designed to promote the prompt and accurate clearance and settlement of
securities transactions, consistent with Section 17A(b)(3)(F) of the
Act.\17\
---------------------------------------------------------------------------
\17\ Id.
---------------------------------------------------------------------------
B. Rule 17Ad-22(e)(21)(iv) Under the Act
Rule 17Ad-22(e)(21)(iv) under the Act requires a covered clearing
agency \18\ to establish, implement, maintain, and enforce written
policies and procedures reasonably designed to be efficient and
effective in meeting the requirements of its participants and the
markets it serves.\19\ As described above, use of the Commission
Billing service has significantly decreased, as the industry has change
and the service no longer provides the same value that it had
historically. As a result, NSCC currently operates the service at a
financial loss. As such, NSCC has determined that it would be more
efficient and effective in meeting the requirements of its Members and
the market NSCC serves to eliminate the service. In doing so, NSCC
would be able to redirect the resources being consumed by the
Commission Billing service to other, more needed services. Therefore,
the Commission finds that the proposed rule change is designed to help
ensure that NSCC is efficient and effective in meeting the requirements
of its participants,
[[Page 44354]]
consistent with Rule 17Ad-22(e)(21)(iv) under the Act.\20\
---------------------------------------------------------------------------
\18\ A ``covered clearing agency'' means, among other things, a
clearing agency registered with the Commission under Section 17A of
the Exchange Act (15 U.S.C. 78q-1 et seq.) that is designated
systemically important by the Financial Stability Oversight Counsel
(``FSOC'') pursuant to the Payment, Clearing, and Settlement
Supervision Act of 2010 (12 U.S.C. 5461 et seq.). See 17 CFR
240.17Ad-22(a)(5)-(6). On July 18, 2012, FSOC designated NSCC as
systemically important. U.S. Department of the Treasury, ``FSOC
Makes First Designations in Effort to Protect Against Future
Financial Crises,'' available at https://www.treasury.gov/press-center/press-releases/Pages/tg1645.asp. Therefore, NSCC is a covered
clearing agency.
\19\ 17 CFR 240.17Ad-22(e)(21)(iv).
\20\ Id.
---------------------------------------------------------------------------
III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act, in particular
the requirements of Section 17A of the Act \21\ and the rules and
regulations thereunder.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that proposed rule change SR-NSCC-2018-004 be, and hereby is,
approved.\22\
---------------------------------------------------------------------------
\22\ In approving the proposed rule change, the Commission
considered the proposals' impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18782 Filed 8-29-18; 8:45 am]
BILLING CODE 8011-01-P
