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]

Download as PDF 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). E:\FR\FM\30AUN1.SGM 30AUN1 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]


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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'').
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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.
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    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.
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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\
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    \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).
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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).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18782 Filed 8-29-18; 8:45 am]
 BILLING CODE 8011-01-P
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