Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Enhance National Securities Clearing Corporation's Automated Customer Account Transfer Service (ACATS) Transfer Processes and Make Certain Clarifications in Rule 50, 6655-6659 [2020-02185]
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Federal Register / Vol. 85, No. 24 / Wednesday, February 5, 2020 / Notices
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rule 19b–1(e) is estimated to be
$12,000.10
The Commission staff estimates that
there are approximately 2,230 UITs 11
that may rely on rule 19b–1(c) to make
capital gains distributions. The staff
estimates that, on average, these UITs
rely on rule 19b–1(c) once a year to
make a capital gains distribution.12 In
most cases, the trustee of the UIT is
responsible for preparing and sending
the notices that must accompany a
capital gains distribution under rule
19b–1(c)(2). These notices require
limited preparation, the cost of which
accounts for only a small, indiscrete
portion of the comprehensive fee
charged by the trustee for its services to
the UIT. The staff believes that as a
matter of good business practice, and for
tax preparation reasons, UITs would
collect and distribute the capital gains
information required to be sent to
unitholders under rule 19b–1(c) even in
the absence of the rule. The staff
estimates that the cost of preparing a
notice for a capital gains distribution
under rule 19b–1(c)(2) is approximately
$50. There is no separate cost to mail
the notices because they are mailed with
the capital gains distribution. Thus, the
staff estimates that the capital gains
distribution notice requirement imposes
an annual cost on UITs of
approximately $111,500.13 The staff
therefore estimates that the total cost
imposed by rule 19b–1 is $123,500.14
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
Written comments are invited on: (a)
Whether the collection of information is
necessary for the proper performance of
the functions of the Commission,
including whether the information has
practical utility; (b) the accuracy of the
Commission’s estimate of the burden of
the collection of information; (c) ways to
10 This estimate is based on the following
calculation: $4,000 multiplied by 3 funds equals
$12,000.
11 See 2019 Investment Company Fact Book,
Investment Company Institute, available at https://
www.ici.org/pdf/2019_factbook.pdf.
12 The number of times UITs rely on the rule to
make capital gains distributions depends on a wide
range of factors and, thus, can vary greatly across
years and UITs. UITs may distribute capital gains
biannually, annually, quarterly, or at other
intervals. Additionally, a number of UITs are
organized as grantor trusts, and therefore do not
generally make capital gains distributions under
rule 19b–1(c), or may not rely on rule 19b–1(c) as
they do not meet the rule’s requirements.
13 This estimate is based on the following
calculation: 2,230 UITs multiplied by $50 equals
$111,500.
14 $111,500 (total cost associated with rule 19b–
1(c)) + $12,000 (total cost associated with rule 19b–
1(e)) = $123,500.
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enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Please direct your written comments
to David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Cynthia
Roscoe, 100 F Street NE, Washington,
DC 20549; or send an email to: PRA_
Mailbox@sec.gov.
Dated: January 31, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–02232 Filed 2–4–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88090; File No. SR-Nasdaq2019–089]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change To Amend Rule 5815 To
Preclude Stay During Hearing Panel
Review of Staff Delisting
Determinations in Certain
Circumstances
January 30, 2020.
On November 27, 2019, The Nasdaq
Stock Market LLC (‘‘Nasdaq’’ or
‘‘Exchange’’) 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
amend Nasdaq Rule 5815 regarding
review of Nasdaq Staff Delisting
Determinations by Hearings Panels to
preclude the stay of a Nasdaq Staff
Delisting Determination during the
review period in specified
circumstances. The proposed rule
change was published for comment in
the Federal Register on December 17,
2019.3 The Commission has received no
comment letters on the proposed rule
change.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 87716
(Dec. 11, 2019), 84 FR 69007.
4 15 U.S.C. 78s(b)(2).
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is January 31,
2020. The Commission is extending this
45-day time period.
The Commission finds it appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change.
Accordingly, the Commission, pursuant
to Section 19(b)(2) of the Act,5
designates March 16, 2020 as the date
by which the Commission shall either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–Nasdaq–2019–089).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–02186 Filed 2–4–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88092; File No. SR–NSCC–
2020–001]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Enhance National
Securities Clearing Corporation’s
Automated Customer Account
Transfer Service (ACATS) Transfer
Processes and Make Certain
Clarifications in Rule 50
January 30, 2020.
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 January
24, 2020, National Securities Clearing
Corporation (‘‘NSCC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
1 15
2 17
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6655
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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Federal Register / Vol. 85, No. 24 / Wednesday, February 5, 2020 / Notices
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
19b–4(f)(4) thereunder.4 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
amendments to NSCC’s Rules &
Procedures (‘‘Rules’’) in order to (i)
make proposed enhancements to
NSCC’s Automated Customer Account
Transfer Service (‘‘ACATS’’) transfer
processes relating to acceleration,
Reclaims, Residual Credits and Partial
Accounts and (ii) make certain
clarifications to the Rules, as described
in greater detail 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.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
(1) Purpose
The proposed rule change consists of
modifications to NSCC’s Rules in order
to (i) make proposed enhancements to
ACATS transfer processes relating to
acceleration, Reclaims, Residual Credits
and Partial Accounts and (ii) make
certain clarifications to the Rules, as
described in greater detail below.
(a) Background—ACATS
ACATS is a non-guaranteed service
that enables Members to effect
automated transfers of customer
accounts among themselves.6 Pursuant
3 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(4).
5 Capitalized terms not defined herein are defined
in the Rules, available at https://dtcc.com/∼/media/
Files/Downloads/legal/rules/nscc_rules.pdf.
6 ACATS complements Financial Industry
Regulatory Authority (‘‘FINRA’’) Rule 11870
(‘‘FINRA Rule 11870’’) regarding customer account
transfers, which requires FINRA members to use
automated clearing agency customer account
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to Rule 50, an NSCC Member to whom
a customer’s full account will be
transferred (the ‘‘Receiving Member’’)
will initiate the transfer by submitting a
transfer initiation request to NSCC,
which contains the customer detail
information that the NSCC Member who
currently has the account (the
‘‘Delivering Member’’) requires to
transfer the account. Delivering
Members that have not rejected the
account transfer request or requested
corrections to the request within the
allotted time must submit to NSCC
certain detailed customer account asset
data.
Generally, under current practice, a
full account transfer through ACATS
completes in five business days or, if
‘‘accelerated’’, four business days, as
follows:
• Day 1—Receiving Member sends
request for transfer of a customer
account 7
• Day 2—Delivering Member submits
customer account asset data list to
NSCC 8
• Day 3—Receiving Member has one
business day to review the customer
account asset data list 9
• Day 4—NSCC prepares to settle 10
• Day 5—NSCC settles the transfer
through ACATS and generates
reports11
Except as noted with respect to the
Receiving Member’s review day on Day
3 above, which specifies one business
day to review, the five-day timing set
forth above reflects NSCC’s and the
Members’ current practice and is not
specifically set forth in the Rules. The
timing and procedures with respect to
customer account transfers is intended
to be consistent with the timing set forth
in FINRA Rule 11870. While the fiveday timing is illustrative of typical
timing, variations may occur if the
Members that are party to the transfer
agree. For instance, the Delivering
Member may deliver the asset list on
Day 1 rather than Day 2, or, as discussed
below, the Receiving Member may
accept the assets on Day 2 rather than
Day 3.
Under current practice, a Receiving
Member may accept all or a portion of
the assets prior to the end of the review
period and forego its right to review the
asset list for the remaining review
transfer services and to effect customer account
transfers within specified time frames. See FINRA
Rule 11870, available at https://www.finra.org/
rules-guidance/rulebooks/finra-rules/11870.
7 See Section 2 of Rule 50, supra note 5.
8 See Section 5 of Rule 50, supra note 5.
9 See Section 8 of Rule 50, supra note 5.
10 See Section 9 of Rule 50, supra note 5.
11 See Sections 9(ii) and 10 of Rule 50, supra note
5.
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period, which is referred to as
‘‘accelerating the transfer’’. For instance,
in the above five-day example, if a
Receiving Member accepts all or a
portion of the assets in Day 2, when it
receives the asset data list, it is choosing
not to review the assets on Day 3 and
removing a day from the overall timing
of a customer account transfer process.
This acceleration process is not
explicitly stated in the Rules, except for
a reference to an ‘‘acceleration
instruction’’ in Section 8 of Rule 50
which is referring to an instruction by
the Receiving Member that the
Receiving Member accepts all or a
portion of the assets and wishes to
accelerate the transfer.12
During the Receiving Member’s
review period, the Delivering Member
can add, delete or change an item on the
asset list which, in each case, adds
another business day to the transfer
cycle by giving the Receiving Member
one additional business day to review.13
During the transfer period, an
investor’s assets will remain invested in
the market but trading may be
restricted.14 The inability to trade may
expose the investor to additional market
risk. Currently there is an industry
initiative underway to shorten the
ACATS settlement cycle and create a
more streamlined ACATS process.15 In
conjunction with the industry initiative,
NSCC is proposing to modify the Rules
to formalize the acceleration process by
explicitly stating the right of the
Receiving Member to accelerate a
transfer, and to restrict the ability of
Members to adjust accounts that are
being transferred once an ACATS
transfer in accelerated status in order to
reduce delays in transfers in accelerated
status. In addition, NSCC is proposing
to modify the Rules relating to transfers
upon Reclaims,16 Residual Credits 17
12 Section
8 of Rule 50, supra note 5.
13 Id.
14 During the period when an account transfer is
pending, some firms will freeze trading on the
client account until the account transfer is
complete. Firms regulated by FINRA are required to
freeze the account, by cancelling all open orders
with the exception of option positions that expire
within seven (7) business days, upon validation of
an instruction to transfer securities account assets
in whole. See FINRA Rule 11870(d), supra note 6.
15 The industry initiative to shorten the ACATS
settlement cycle and streamline the ACATS process
is being led by the Customer Account Transfer
forum (‘‘SIFMA CAT Forum’’) of the Securities
Industry and Financial Markets Association, an
industry trade group representing securities firms,
banks, and asset management companies.
16 A Reclaim is a non-standard transfer initiated
by a Delivering Member requesting the transfer of
assets that were mistakenly delivered as part of
ACATS. See Section 12(iv) of Rule 50, supra note
5.
17 Residual Credits are residual credit positions
which are received for the benefit of a customer’s
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Federal Register / Vol. 85, No. 24 / Wednesday, February 5, 2020 / Notices
and Partial Accounts 18 to provide for a
more efficient process for ACATS
account transfers. NSCC is also
proposing to modify the Rules to make
some clarifications to improve
readability of the Rules.
(b) Proposed Rule Change
NSCC is proposing to modify the
Rules to add a provision providing for
the right of the Receiving Member to
accelerate the transfer by either (a)
providing an acceleration instruction to
NSCC upon receipt of the customer
account asset data list from NSCC and
accepting all assets or (b) deleting
MF/IPS Products 19 and accepting the
remaining assets. NSCC is proposing to
add that the transfer that has been
accelerated will be in accelerated status.
NSCC is also proposing to modify the
Rules to (i) reduce the adjustments that
Delivering Members can make during an
ACATS transfer in accelerated status,
(ii) provide that Reclaims may be
initiated with respect to transfers where
a non-Member ACATS participant is a
party to the delivery, (iii) add a
provision allowing Receiving Members
to delete Fund/Serv Eligible Fund 20
assets upon transfer requests for
Residual Credits and Partial Accounts
and (iv) make certain clarifications
described below.
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(i) Acceleration
Acceleration is a current practice
pursuant to which a Receiving Member
will accept all or a portion of the assets
in a transfer and choose not to use its
right to review during the remaining
review period. When a Receiving
Member accelerates on the same day
that a Delivering Member loads the asset
list with respect to a transfer request,
the transfer cycle is reduced by one day.
Currently, after a Receiving Member
account by the Delivering Member after the ACAT
process is completed or which, due to a restriction,
were not included in the original asset transfer. See
Section 12 of Rule 50, supra note 5.
18 Partial Accounts are partial accounts held by a
Delivering Member (in the form of cash or
securities). Id. For instance, if a Delivering Member
held four asset classes on behalf of a client, a Partial
Account could be a transfer of one of the asset
classes.
19 Section 8 of Rule 50 provides that the
Receiving Member may delete ‘‘MF/IPS Products’’
upon receipt of an asset list. See Section 8 of Rule
50, supra note 5. MF/IPS Products are defined as
Fund/Serv Eligible Fund assets and/or IPS Eligible
Products. Id. IPS Eligible Products are defined as an
insurance product or a retirement or other benefit
plan or program included in the list for which
provision is made in Section 1.(d) of Rule 3. See
definition of ‘‘IPS Eligible Products’’ in Rule 1,
supra note 5.
20 A Fund/Serv Eligible Fund is a fund or other
pooled investment entity included in the list for
which provision is made in Section 1.(c) of Rule 3
of the Rules. See definition of ‘‘Fund/Serv Eligible
Fund’’ in Rule 1, supra note 5.
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accelerates the transfer, ACATS allows
a Delivering Member to adjust the asset
list, which results in the extension of
the review period for an additional
day.21 For example, if a Delivering
Member adjusts assets after acceleration
by a Receiving Member, ACATS adds
back a review day to the transfer
timeline. To restore the acceleration and
maintain the same timeline, the
Receiving Member must accelerate again
on that same day.
NSCC is proposing to formalize the
current acceleration process by
providing a right of the Receiving
Member to accelerate the transfer which
will place the transfer in accelerated
status. A Receiving Member would
accelerate a transfer of a customer
account by either (i) providing an
acceleration instruction to NSCC upon
receipt of the customer account asset
data list from NSCC and accepting all
assets or (ii) deleting MF/IPS Products
and accepting the remaining assets.
In addition, NSCC is proposing to
change the adjustment process for
transfers such that once a transfer is in
accelerated status, no additional
adjustments would be allowed to be
made by either the Delivering Member
or the Receiving Member, except for
deletions of MF/IPS Products 22 by the
Receiving Member. The proposed
change has been requested by SIFMA
CAT Forum, on behalf of the industry,
which believes the change would make
the acceleration process more certain by
preventing adjustments during the
accelerated status by a Delivering
Member. Preventing adjustments for
account transfers in accelerated status
would put the onus on Delivering
Members to ensure that the asset list
they are initially providing is accurate.
If an asset list is incorrect, and a
Receiving Member accelerates, a
Delivering Member would be able to
initiate a Reclaim (discussed below) to
retrieve any assets that were mistakenly
added to the initial asset list and
transferred to the Receiving Member.
NSCC is proposing to effect the
proposed change by (i) adding in a right
of the Receiving Member to accelerate in
Section 8 of Rule 50 and to place a
transfer in accelerated status and (ii)
modifying three provisions of Section 8
of Rule 50 to restrict the Delivering
Member from making additional
modifications once a transfer is in
accelerated status.
21 See Section 8 of Rule 50, supra note 5,
providing that ‘‘[e]ach business day that a
Delivering Member causes an adjustment to be
made to the account will give the Receiving
Member an additional one (1) business day to
review the account.’’
22 See supra note 19.
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6657
(ii) Reclaims
A Reclaim is a non-standard transfer
initiated by a Delivering Member
requesting the transfer of assets that
were mistakenly delivered as part of
ACATS.23 Reclaims provide a process
through ACATS by which Delivering
Members can retrieve assets that were
incorrectly sent to the Receiving Firm
through ACATS. The Rules currently
provide that a Reclaim may only be
initiated to the extent that the delivery
is between a Member and another
Member.24 NSCC is proposing to modify
the Rules to provide that a Reclaim may
be initiated even if a party to the
delivery is not a Member but is a
participant of The Depository Trust
Company (‘‘DTC’’).
In 1998, NSCC modified ACATS to
allow DTC participants that are not
Members to participate in ACATS.25 As
a result of the 1998 change, entities that
are not Members, but that are DTC
participants, can participate in ACATS
through the use of DTC’s services;
however, DTC participants were
precluded from using certain nonstandard processes, such as Fail
Reversals and Reclaims during its initial
implementation. As usage by DTC
participants has increased and matured,
the industry has provided feedback
indicating the desire to allow additional
capabilities such as Reclaims to be used
for DTC participants.
In response to client requests, NSCC
is proposing to modify Section 12(iv) of
Rule 50 to remove the requirement that
Reclaims may only be initiated to the
extent the delivery is between a Member
and another Member. This proposed
change would provide that Reclaims
could be made for assets being delivered
to or from DTC participants that
participate in ACATS as well as
deliveries to or from Members. Based on
industry feedback, it is believed that
allowing Reclaims for deliveries where
a DTC participant is a party to the
delivery would improve the efficiency
of the account transfer process by
allowing such parties requesting such
Reclaims to use the already established
automated ACATS process currently
available for Reclaims between
Members and Members.
(iii) Deletion of Fund/Serv Eligible Fund
Assets Upon Residual Credits/Partial
Accounts Transfer Request
ACATS allows the Delivering Member
to initiate a transfer of, among other
23 See
supra note 16.
24 Id.
25 Securities Exchange Act Release No. 40657
(November 10, 1998), 63 FR 63952 (November 17,
1998) (SR–NSCC–98–06).
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Federal Register / Vol. 85, No. 24 / Wednesday, February 5, 2020 / Notices
things, Residual Credits and Partial
Accounts. If a Delivering Member
initiates a transfer of Residual Credits or
Partial Accounts, the Receiving Member
may either reject or accept the transfer
request but may not submit corrections
to the transfer request.26 For full
account transfer requests, in addition to
rejecting or accepting the transfer
request, Receiving Members may delete
mutual fund products and insurance
products from the transfer request.27
Receiving Members may delete such
assets in situations where the Receiving
Member is unable to hold the assets,
such as when it is in violation of its
credit policy to hold such assets. NSCC
is proposing to add a provision allowing
Receiving Members to delete mutual
fund products, or Fund/Serv Eligible
Fund assets, from a transfer request for
Partial Accounts and Residual Credits
consistent with the ability to delete such
assets from a full account transfer
request.
The proposed Rule change would
modify clause 2, Section 12 of Rule 50
to provide an exception allowing a
Receiving Member to delete Fund/Serv
Eligible Fund assets upon a transfer
request for Partial Accounts and
Residual Credits. The proposed change
would align the transfer requests for
Partial Accounts and Residual Credits
with full account transfer requests with
respect to deleting Fund/Serv Eligible
Fund assets from the transfer requests.
Allowing Receiving Members to delete
Fund/Serv Eligible Fund assets would
allow Receiving Members to reject
specific assets that they are unable to
hold rather than rejecting the entire
transfer request.
Allowing a partial rejection of mutual
fund products in a transfer request is
consistent with full transfer requests
and would increase efficiency in the
account transfer process. Without the
proposed change, Receiving Firms that
receive a request for transfer that
contains mutual fund products that
cannot be held by the Receiving Firm
must reject the transfer request. The
Delivering Firm would then be required
to send another transfer request for
transfer of Partial Accounts and
Residual Credits through ACATS
containing only assets that can be held
by the Receiving Member which would
delay the process or require the transfer
of assets outside of the ACATS process.
Allowing the Receiving Members to
delete the assets that they are unable to
hold from the transfer requests would
prevent unnecessary delay in the
(iv) Clarifications
NSCC is also proposing to make the
following clarifications to the Rules.
NSCC is proposing to change the
defined term ‘‘ACAT Service’’ to
‘‘ACATS’’ and replace the phrase ‘‘the
ACAT Service’’ with ‘‘ACATS’’ in
several places to reflect current
conventional use of the name of the
service. NSCC is proposing to add
‘‘Receiving’’ in the first sentence of
Section 8 of Rule 50 in order to clarify
that the Member referenced in that
clause is a Receiving Member. NSCC is
proposing to delete ‘‘(as defined below)’’
after MF/IPS Products in Section 8 of
Rule 50 because the new proposed
language relating to a Receiving
Member’s ability to accelerate a transfer
would first reference that the defined
term MF/IPS Products is defined below.
NSCC is proposing to move the defined
term ‘‘Reclaims’’ in Section 12(iv) of
Rule 50 to make it clear that Reclaims
refer to transfers of ‘‘cash or securities
mistakenly delivered as part of
ACATS.’’ NSCC is proposing to replace
‘‘Fund/SERV eligible assets’’ with
‘‘Fund/Serv Eligible Fund assets’’ in
Section 12(3)(ii) and Section 13 of Rule
50, and replace ‘‘Fund/SERV Eligible
Fund asset’’ with ‘‘Fund/Serv Eligible
Fund asset’’ in footnote 4 of Rule 50, in
each case, in order to use the correct
defined term for Fund/Serv Eligible
Fund. NSCC is also proposing to delete
‘‘(as defined in Section 8)’’ in footnote
4 of Rule 50 as the definition of Fund/
Serv Eligible Fund asset is not
contained in Section 8.
(c) Implementation Timeframe
NSCC expects to implement the
proposed rule changes on February 21,
2020. As proposed, a legend would be
added to Rule 50 stating there are
changes that became effective upon
filing with the Commission but have not
yet been implemented. The proposed
legend also would include February 21,
2020, as the date on which such changes
would be implemented and the file
number of this proposal, and state that,
once this proposal is implemented, the
legend would automatically be removed
from Rule 50.
(2) Statutory Basis
Section 17A(b)(3)(F) of the Act
requires, in part, that the Rules be
designed to promote the prompt and
accurate clearance and settlement of
securities transactions.28 NSCC believes
that each of the proposed rule changes
26 Clause
27 See
2, Section 12 of Rule 50, supra note 5.
supra note 19.
transfer process for Partial Accounts and
Residual Credits.
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28 15
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Frm 00162
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set forth above are consistent with this
provision.
First, providing for a right of a
Receiving Member to accelerate a
transfer and to shorten its review period
after it has agreed to accept assets and
no longer needs to review would reduce
delays in the transfer cycle by removing
unnecessary review time from the
process. In addition, reducing the
adjustments that Delivering Members
can make during an ACATS transfer in
accelerated status would further reduce
delays caused by such adjustments in a
transfer that is in accelerated status.
Reducing delays in the transfer cycle is
consistent with the industry initiative to
reduce the ACATS settlement cycle and
to streamline the ACATS process and
would bring greater efficiencies to the
account transfer process.
Second, providing that Reclaims of
assets may be initiated for transfers
where a non-Member participant is a
party to the delivery would allow
ACATS participants to initiate Reclaims
using ACATS for deliveries where a
DTC participant is a party. Allowing
such Reclaims to be processed through
the automated ACATS system would be
a more streamlined method of
processing the delivery of such assets as
opposed to manually delivering such
assets not using ACATS and as such
would bring greater efficiencies to the
account transfer process.
Third, adding a provision allowing
Receiving Members to delete Fund/Serv
Eligible Fund assets upon transfer
requests for Residual Credits and Partial
Accounts would align such rights with
the rights Receiving Members have to
delete such assets in full account
transfers. In addition, the ability to
delete such assets would make the
process more efficient by allowing
Receiving Members to make such
deletions in the ACATS system rather
than having to reject such transfer
requests, requiring the Delivering
Member to either resend another
transfer request through ACATS or to
manually transfer assets without such
mutual fund products not using ACATS.
As such, allowing Receiving Members to
delete Fund/Serv Eligible Fund assets
upon transfer requests for Residual
Credits and Partial Accounts would
bring greater efficiencies to the account
transfer process.
Therefore, by bringing greater
efficiencies to the account transfer
process as set forth above, NSCC
believes the proposed rule change
would promote the prompt and accurate
clearance and settlement of securities
transactions, consistent with the
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jbell on DSKJLSW7X2PROD with NOTICES
requirements of the Act, in particular
Section 17A(b)(3)(F) of the Act.29
The clarification changes set forth in
II(A)(i)(b)(iv) above are also consistent
with this provision because the
proposed clarification changes would
enhance clarity and transparency for
participants with respect to services
offered by NSCC allowing ACATS
participants to have a better
understanding of the Rules relating to
ACATS and the customer account
transfer process. Having clear and
accurate Rules would help Members to
better understand their rights and
obligations regarding NSCC’s clearance
and settlement services. NSCC believes
that when Members better understand
their rights and obligations regarding
NSCC’s services, they can act in
accordance with the Rules. NSCC
believes that better enabling Members to
comply with the Rules would promote
the prompt and accurate clearance and
settlement of securities transactions by
NSCC consistent with the requirements
of the Act, in particular Section
17A(b)(3)(F) of the Act.30
(B) Clearing Agency’s Statement on
Burden on Competition
NSCC does not believe that the
proposed rule change would have any
adverse impact, or impose any burden,
on competition. NSCC believes that the
proposed changes set forth in
II(A)(1)(b)(i)–(iii) above would bring
greater efficiencies to the account
transfer process as discussed above
consistent with the industry initiatives
to streamline ACATS and would
promote competition by allowing
ACATS participants to process account
transfers in a faster, more efficient
manner. Allowing ACATS participants
to process account transfers in a more
efficient manner would result in client
assets being transferred to the
appropriate Members and DTC
participants more quickly. NSCC
believes that reducing the time it takes
to transfer account assets to the
appropriate Member or DTC participant
using ACATS would allow the
Members’ or DTC participants’
respective clients to transfer securities
in their transferred accounts more
quickly, promoting the ability to trade
such securities and therefore promoting
competition in the marketplace.
NSCC does not believe that the
proposed clarification changes set forth
in II(A)(1)(b)(iv) above would have any
impact on competition because such
changes are clarifications of the Rules
which would improve the Member’s
understanding of the Rules and would
not otherwise affect the rights or
obligations of NSCC Members.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
NSCC has not received or solicited
any written comments relating to this
proposal. NSCC will notify the
Commission of any written comments
received by NSCC.
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) 31 of the Act and paragraph
(f) 32 of Rule 19b 4 thereunder. At any
time within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NSCC–2020–001 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–NSCC–2020–001. 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 DTCC’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–
2020–001 and should be submitted on
or before February 26, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–02185 Filed 2–4–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88102; File No. SR–
CboeEDGA–2020–003]
Self-Regulatory Organizations; Cboe
EDGA Exchange, Inc.; Notice of Filing
of a Proposed Rule Change Relating
To Amend Certain Rules Within Rules
4.5 Through 4.16, Which Contain the
Exchange’s Compliance Rule
(‘‘Compliance Rule’’) Regarding the
National Market System Plan
Governing the Consolidated Audit Trail
(the ‘‘CAT NMS Plan’’ or ‘‘Plan’’), To Be
Consistent With Certain Proposed
Amendments to and Exemptions From
the CAT NMS Plan as Well as To
Facilitate the Retirement of Certain
Existing Regulatory Systems
January 30, 2020.
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 January
22, 2020, Cboe EDGA Exchange, Inc.
33 17
29 Id.
U.S.C 78s(b)(3)(A).
32 17 CFR 240.19b–4(f).
30 Id.
VerDate Sep<11>2014
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
31 15
18:54 Feb 04, 2020
Jkt 250001
PO 00000
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]]>Agencies
[Federal Register Volume 85, Number 24 (Wednesday, February 5, 2020)]
[Notices]
[Pages 6655-6659]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02185]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88092; File No. SR-NSCC-2020-001]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change To Enhance National Securities Clearing Corporation's
Automated Customer Account Transfer Service (ACATS) Transfer Processes
and Make Certain Clarifications in Rule 50
January 30, 2020.
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 January 24, 2020, National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule
[[Page 6656]]
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 19b-4(f)(4)
thereunder.\4\ 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 amendments to NSCC's Rules &
Procedures (``Rules'') in order to (i) make proposed enhancements to
NSCC's Automated Customer Account Transfer Service (``ACATS'') transfer
processes relating to acceleration, Reclaims, Residual Credits and
Partial Accounts and (ii) make certain clarifications to the Rules, as
described in greater detail below.\5\
---------------------------------------------------------------------------
\5\ Capitalized terms not defined herein are defined in the
Rules, available at https://dtcc.com/~/media/Files/Downloads/legal/
rules/nscc_rules.pdf.
---------------------------------------------------------------------------
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
The proposed rule change consists of modifications to NSCC's Rules
in order to (i) make proposed enhancements to ACATS transfer processes
relating to acceleration, Reclaims, Residual Credits and Partial
Accounts and (ii) make certain clarifications to the Rules, as
described in greater detail below.
(a) Background--ACATS
ACATS is a non-guaranteed service that enables Members to effect
automated transfers of customer accounts among themselves.\6\ Pursuant
to Rule 50, an NSCC Member to whom a customer's full account will be
transferred (the ``Receiving Member'') will initiate the transfer by
submitting a transfer initiation request to NSCC, which contains the
customer detail information that the NSCC Member who currently has the
account (the ``Delivering Member'') requires to transfer the account.
Delivering Members that have not rejected the account transfer request
or requested corrections to the request within the allotted time must
submit to NSCC certain detailed customer account asset data.
---------------------------------------------------------------------------
\6\ ACATS complements Financial Industry Regulatory Authority
(``FINRA'') Rule 11870 (``FINRA Rule 11870'') regarding customer
account transfers, which requires FINRA members to use automated
clearing agency customer account transfer services and to effect
customer account transfers within specified time frames. See FINRA
Rule 11870, available at https://www.finra.org/rules-guidance/rulebooks/finra-rules/11870.
---------------------------------------------------------------------------
Generally, under current practice, a full account transfer through
ACATS completes in five business days or, if ``accelerated'', four
business days, as follows:
Day 1--Receiving Member sends request for transfer of a
customer account \7\
---------------------------------------------------------------------------
\7\ See Section 2 of Rule 50, supra note 5.
---------------------------------------------------------------------------
Day 2--Delivering Member submits customer account asset data
list to NSCC \8\
---------------------------------------------------------------------------
\8\ See Section 5 of Rule 50, supra note 5.
---------------------------------------------------------------------------
Day 3--Receiving Member has one business day to review the
customer account asset data list \9\
---------------------------------------------------------------------------
\9\ See Section 8 of Rule 50, supra note 5.
---------------------------------------------------------------------------
Day 4--NSCC prepares to settle \10\
---------------------------------------------------------------------------
\10\ See Section 9 of Rule 50, supra note 5.
---------------------------------------------------------------------------
Day 5--NSCC settles the transfer through ACATS and generates
reports\11\
---------------------------------------------------------------------------
\11\ See Sections 9(ii) and 10 of Rule 50, supra note 5.
Except as noted with respect to the Receiving Member's review day
on Day 3 above, which specifies one business day to review, the five-
day timing set forth above reflects NSCC's and the Members' current
practice and is not specifically set forth in the Rules. The timing and
procedures with respect to customer account transfers is intended to be
consistent with the timing set forth in FINRA Rule 11870. While the
five-day timing is illustrative of typical timing, variations may occur
if the Members that are party to the transfer agree. For instance, the
Delivering Member may deliver the asset list on Day 1 rather than Day
2, or, as discussed below, the Receiving Member may accept the assets
on Day 2 rather than Day 3.
Under current practice, a Receiving Member may accept all or a
portion of the assets prior to the end of the review period and forego
its right to review the asset list for the remaining review period,
which is referred to as ``accelerating the transfer''. For instance, in
the above five-day example, if a Receiving Member accepts all or a
portion of the assets in Day 2, when it receives the asset data list,
it is choosing not to review the assets on Day 3 and removing a day
from the overall timing of a customer account transfer process. This
acceleration process is not explicitly stated in the Rules, except for
a reference to an ``acceleration instruction'' in Section 8 of Rule 50
which is referring to an instruction by the Receiving Member that the
Receiving Member accepts all or a portion of the assets and wishes to
accelerate the transfer.\12\
---------------------------------------------------------------------------
\12\ Section 8 of Rule 50, supra note 5.
---------------------------------------------------------------------------
During the Receiving Member's review period, the Delivering Member
can add, delete or change an item on the asset list which, in each
case, adds another business day to the transfer cycle by giving the
Receiving Member one additional business day to review.\13\
---------------------------------------------------------------------------
\13\ Id.
---------------------------------------------------------------------------
During the transfer period, an investor's assets will remain
invested in the market but trading may be restricted.\14\ The inability
to trade may expose the investor to additional market risk. Currently
there is an industry initiative underway to shorten the ACATS
settlement cycle and create a more streamlined ACATS process.\15\ In
conjunction with the industry initiative, NSCC is proposing to modify
the Rules to formalize the acceleration process by explicitly stating
the right of the Receiving Member to accelerate a transfer, and to
restrict the ability of Members to adjust accounts that are being
transferred once an ACATS transfer in accelerated status in order to
reduce delays in transfers in accelerated status. In addition, NSCC is
proposing to modify the Rules relating to transfers upon Reclaims,\16\
Residual Credits \17\
[[Page 6657]]
and Partial Accounts \18\ to provide for a more efficient process for
ACATS account transfers. NSCC is also proposing to modify the Rules to
make some clarifications to improve readability of the Rules.
---------------------------------------------------------------------------
\14\ During the period when an account transfer is pending, some
firms will freeze trading on the client account until the account
transfer is complete. Firms regulated by FINRA are required to
freeze the account, by cancelling all open orders with the exception
of option positions that expire within seven (7) business days, upon
validation of an instruction to transfer securities account assets
in whole. See FINRA Rule 11870(d), supra note 6.
\15\ The industry initiative to shorten the ACATS settlement
cycle and streamline the ACATS process is being led by the Customer
Account Transfer forum (``SIFMA CAT Forum'') of the Securities
Industry and Financial Markets Association, an industry trade group
representing securities firms, banks, and asset management
companies.
\16\ A Reclaim is a non-standard transfer initiated by a
Delivering Member requesting the transfer of assets that were
mistakenly delivered as part of ACATS. See Section 12(iv) of Rule
50, supra note 5.
\17\ Residual Credits are residual credit positions which are
received for the benefit of a customer's account by the Delivering
Member after the ACAT process is completed or which, due to a
restriction, were not included in the original asset transfer. See
Section 12 of Rule 50, supra note 5.
\18\ Partial Accounts are partial accounts held by a Delivering
Member (in the form of cash or securities). Id. For instance, if a
Delivering Member held four asset classes on behalf of a client, a
Partial Account could be a transfer of one of the asset classes.
---------------------------------------------------------------------------
(b) Proposed Rule Change
NSCC is proposing to modify the Rules to add a provision providing
for the right of the Receiving Member to accelerate the transfer by
either (a) providing an acceleration instruction to NSCC upon receipt
of the customer account asset data list from NSCC and accepting all
assets or (b) deleting MF/IPS Products \19\ and accepting the remaining
assets. NSCC is proposing to add that the transfer that has been
accelerated will be in accelerated status. NSCC is also proposing to
modify the Rules to (i) reduce the adjustments that Delivering Members
can make during an ACATS transfer in accelerated status, (ii) provide
that Reclaims may be initiated with respect to transfers where a non-
Member ACATS participant is a party to the delivery, (iii) add a
provision allowing Receiving Members to delete Fund/Serv Eligible Fund
\20\ assets upon transfer requests for Residual Credits and Partial
Accounts and (iv) make certain clarifications described below.
---------------------------------------------------------------------------
\19\ Section 8 of Rule 50 provides that the Receiving Member may
delete ``MF/IPS Products'' upon receipt of an asset list. See
Section 8 of Rule 50, supra note 5. MF/IPS Products are defined as
Fund/Serv Eligible Fund assets and/or IPS Eligible Products. Id. IPS
Eligible Products are defined as an insurance product or a
retirement or other benefit plan or program included in the list for
which provision is made in Section 1.(d) of Rule 3. See definition
of ``IPS Eligible Products'' in Rule 1, supra note 5.
\20\ A Fund/Serv Eligible Fund is a fund or other pooled
investment entity included in the list for which provision is made
in Section 1.(c) of Rule 3 of the Rules. See definition of ``Fund/
Serv Eligible Fund'' in Rule 1, supra note 5.
---------------------------------------------------------------------------
(i) Acceleration
Acceleration is a current practice pursuant to which a Receiving
Member will accept all or a portion of the assets in a transfer and
choose not to use its right to review during the remaining review
period. When a Receiving Member accelerates on the same day that a
Delivering Member loads the asset list with respect to a transfer
request, the transfer cycle is reduced by one day. Currently, after a
Receiving Member accelerates the transfer, ACATS allows a Delivering
Member to adjust the asset list, which results in the extension of the
review period for an additional day.\21\ For example, if a Delivering
Member adjusts assets after acceleration by a Receiving Member, ACATS
adds back a review day to the transfer timeline. To restore the
acceleration and maintain the same timeline, the Receiving Member must
accelerate again on that same day.
---------------------------------------------------------------------------
\21\ See Section 8 of Rule 50, supra note 5, providing that
``[e]ach business day that a Delivering Member causes an adjustment
to be made to the account will give the Receiving Member an
additional one (1) business day to review the account.''
---------------------------------------------------------------------------
NSCC is proposing to formalize the current acceleration process by
providing a right of the Receiving Member to accelerate the transfer
which will place the transfer in accelerated status. A Receiving Member
would accelerate a transfer of a customer account by either (i)
providing an acceleration instruction to NSCC upon receipt of the
customer account asset data list from NSCC and accepting all assets or
(ii) deleting MF/IPS Products and accepting the remaining assets.
In addition, NSCC is proposing to change the adjustment process for
transfers such that once a transfer is in accelerated status, no
additional adjustments would be allowed to be made by either the
Delivering Member or the Receiving Member, except for deletions of MF/
IPS Products \22\ by the Receiving Member. The proposed change has been
requested by SIFMA CAT Forum, on behalf of the industry, which believes
the change would make the acceleration process more certain by
preventing adjustments during the accelerated status by a Delivering
Member. Preventing adjustments for account transfers in accelerated
status would put the onus on Delivering Members to ensure that the
asset list they are initially providing is accurate. If an asset list
is incorrect, and a Receiving Member accelerates, a Delivering Member
would be able to initiate a Reclaim (discussed below) to retrieve any
assets that were mistakenly added to the initial asset list and
transferred to the Receiving Member.
---------------------------------------------------------------------------
\22\ See supra note 19.
---------------------------------------------------------------------------
NSCC is proposing to effect the proposed change by (i) adding in a
right of the Receiving Member to accelerate in Section 8 of Rule 50 and
to place a transfer in accelerated status and (ii) modifying three
provisions of Section 8 of Rule 50 to restrict the Delivering Member
from making additional modifications once a transfer is in accelerated
status.
(ii) Reclaims
A Reclaim is a non-standard transfer initiated by a Delivering
Member requesting the transfer of assets that were mistakenly delivered
as part of ACATS.\23\ Reclaims provide a process through ACATS by which
Delivering Members can retrieve assets that were incorrectly sent to
the Receiving Firm through ACATS. The Rules currently provide that a
Reclaim may only be initiated to the extent that the delivery is
between a Member and another Member.\24\ NSCC is proposing to modify
the Rules to provide that a Reclaim may be initiated even if a party to
the delivery is not a Member but is a participant of The Depository
Trust Company (``DTC'').
---------------------------------------------------------------------------
\23\ See supra note 16.
\24\ Id.
---------------------------------------------------------------------------
In 1998, NSCC modified ACATS to allow DTC participants that are not
Members to participate in ACATS.\25\ As a result of the 1998 change,
entities that are not Members, but that are DTC participants, can
participate in ACATS through the use of DTC's services; however, DTC
participants were precluded from using certain non-standard processes,
such as Fail Reversals and Reclaims during its initial implementation.
As usage by DTC participants has increased and matured, the industry
has provided feedback indicating the desire to allow additional
capabilities such as Reclaims to be used for DTC participants.
---------------------------------------------------------------------------
\25\ Securities Exchange Act Release No. 40657 (November 10,
1998), 63 FR 63952 (November 17, 1998) (SR-NSCC-98-06).
---------------------------------------------------------------------------
In response to client requests, NSCC is proposing to modify Section
12(iv) of Rule 50 to remove the requirement that Reclaims may only be
initiated to the extent the delivery is between a Member and another
Member. This proposed change would provide that Reclaims could be made
for assets being delivered to or from DTC participants that participate
in ACATS as well as deliveries to or from Members. Based on industry
feedback, it is believed that allowing Reclaims for deliveries where a
DTC participant is a party to the delivery would improve the efficiency
of the account transfer process by allowing such parties requesting
such Reclaims to use the already established automated ACATS process
currently available for Reclaims between Members and Members.
(iii) Deletion of Fund/Serv Eligible Fund Assets Upon Residual Credits/
Partial Accounts Transfer Request
ACATS allows the Delivering Member to initiate a transfer of, among
other
[[Page 6658]]
things, Residual Credits and Partial Accounts. If a Delivering Member
initiates a transfer of Residual Credits or Partial Accounts, the
Receiving Member may either reject or accept the transfer request but
may not submit corrections to the transfer request.\26\ For full
account transfer requests, in addition to rejecting or accepting the
transfer request, Receiving Members may delete mutual fund products and
insurance products from the transfer request.\27\ Receiving Members may
delete such assets in situations where the Receiving Member is unable
to hold the assets, such as when it is in violation of its credit
policy to hold such assets. NSCC is proposing to add a provision
allowing Receiving Members to delete mutual fund products, or Fund/Serv
Eligible Fund assets, from a transfer request for Partial Accounts and
Residual Credits consistent with the ability to delete such assets from
a full account transfer request.
---------------------------------------------------------------------------
\26\ Clause 2, Section 12 of Rule 50, supra note 5.
\27\ See supra note 19.
---------------------------------------------------------------------------
The proposed Rule change would modify clause 2, Section 12 of Rule
50 to provide an exception allowing a Receiving Member to delete Fund/
Serv Eligible Fund assets upon a transfer request for Partial Accounts
and Residual Credits. The proposed change would align the transfer
requests for Partial Accounts and Residual Credits with full account
transfer requests with respect to deleting Fund/Serv Eligible Fund
assets from the transfer requests. Allowing Receiving Members to delete
Fund/Serv Eligible Fund assets would allow Receiving Members to reject
specific assets that they are unable to hold rather than rejecting the
entire transfer request.
Allowing a partial rejection of mutual fund products in a transfer
request is consistent with full transfer requests and would increase
efficiency in the account transfer process. Without the proposed
change, Receiving Firms that receive a request for transfer that
contains mutual fund products that cannot be held by the Receiving Firm
must reject the transfer request. The Delivering Firm would then be
required to send another transfer request for transfer of Partial
Accounts and Residual Credits through ACATS containing only assets that
can be held by the Receiving Member which would delay the process or
require the transfer of assets outside of the ACATS process. Allowing
the Receiving Members to delete the assets that they are unable to hold
from the transfer requests would prevent unnecessary delay in the
transfer process for Partial Accounts and Residual Credits.
(iv) Clarifications
NSCC is also proposing to make the following clarifications to the
Rules. NSCC is proposing to change the defined term ``ACAT Service'' to
``ACATS'' and replace the phrase ``the ACAT Service'' with ``ACATS'' in
several places to reflect current conventional use of the name of the
service. NSCC is proposing to add ``Receiving'' in the first sentence
of Section 8 of Rule 50 in order to clarify that the Member referenced
in that clause is a Receiving Member. NSCC is proposing to delete ``(as
defined below)'' after MF/IPS Products in Section 8 of Rule 50 because
the new proposed language relating to a Receiving Member's ability to
accelerate a transfer would first reference that the defined term MF/
IPS Products is defined below. NSCC is proposing to move the defined
term ``Reclaims'' in Section 12(iv) of Rule 50 to make it clear that
Reclaims refer to transfers of ``cash or securities mistakenly
delivered as part of ACATS.'' NSCC is proposing to replace ``Fund/SERV
eligible assets'' with ``Fund/Serv Eligible Fund assets'' in Section
12(3)(ii) and Section 13 of Rule 50, and replace ``Fund/SERV Eligible
Fund asset'' with ``Fund/Serv Eligible Fund asset'' in footnote 4 of
Rule 50, in each case, in order to use the correct defined term for
Fund/Serv Eligible Fund. NSCC is also proposing to delete ``(as defined
in Section 8)'' in footnote 4 of Rule 50 as the definition of Fund/Serv
Eligible Fund asset is not contained in Section 8.
(c) Implementation Timeframe
NSCC expects to implement the proposed rule changes on February 21,
2020. As proposed, a legend would be added to Rule 50 stating there are
changes that became effective upon filing with the Commission but have
not yet been implemented. The proposed legend also would include
February 21, 2020, as the date on which such changes would be
implemented and the file number of this proposal, and state that, once
this proposal is implemented, the legend would automatically be removed
from Rule 50.
(2) Statutory Basis
Section 17A(b)(3)(F) of the Act requires, in part, that the Rules
be designed to promote the prompt and accurate clearance and settlement
of securities transactions.\28\ NSCC believes that each of the proposed
rule changes set forth above are consistent with this provision.
---------------------------------------------------------------------------
\28\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
First, providing for a right of a Receiving Member to accelerate a
transfer and to shorten its review period after it has agreed to accept
assets and no longer needs to review would reduce delays in the
transfer cycle by removing unnecessary review time from the process. In
addition, reducing the adjustments that Delivering Members can make
during an ACATS transfer in accelerated status would further reduce
delays caused by such adjustments in a transfer that is in accelerated
status. Reducing delays in the transfer cycle is consistent with the
industry initiative to reduce the ACATS settlement cycle and to
streamline the ACATS process and would bring greater efficiencies to
the account transfer process.
Second, providing that Reclaims of assets may be initiated for
transfers where a non-Member participant is a party to the delivery
would allow ACATS participants to initiate Reclaims using ACATS for
deliveries where a DTC participant is a party. Allowing such Reclaims
to be processed through the automated ACATS system would be a more
streamlined method of processing the delivery of such assets as opposed
to manually delivering such assets not using ACATS and as such would
bring greater efficiencies to the account transfer process.
Third, adding a provision allowing Receiving Members to delete
Fund/Serv Eligible Fund assets upon transfer requests for Residual
Credits and Partial Accounts would align such rights with the rights
Receiving Members have to delete such assets in full account transfers.
In addition, the ability to delete such assets would make the process
more efficient by allowing Receiving Members to make such deletions in
the ACATS system rather than having to reject such transfer requests,
requiring the Delivering Member to either resend another transfer
request through ACATS or to manually transfer assets without such
mutual fund products not using ACATS. As such, allowing Receiving
Members to delete Fund/Serv Eligible Fund assets upon transfer requests
for Residual Credits and Partial Accounts would bring greater
efficiencies to the account transfer process.
Therefore, by bringing greater efficiencies to the account transfer
process as set forth above, NSCC believes the proposed rule change
would promote the prompt and accurate clearance and settlement of
securities transactions, consistent with the
[[Page 6659]]
requirements of the Act, in particular Section 17A(b)(3)(F) of the
Act.\29\
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\29\ Id.
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The clarification changes set forth in II(A)(i)(b)(iv) above are
also consistent with this provision because the proposed clarification
changes would enhance clarity and transparency for participants with
respect to services offered by NSCC allowing ACATS participants to have
a better understanding of the Rules relating to ACATS and the customer
account transfer process. Having clear and accurate Rules would help
Members to better understand their rights and obligations regarding
NSCC's clearance and settlement services. NSCC believes that when
Members better understand their rights and obligations regarding NSCC's
services, they can act in accordance with the Rules. NSCC believes that
better enabling Members to comply with the Rules would promote the
prompt and accurate clearance and settlement of securities transactions
by NSCC consistent with the requirements of the Act, in particular
Section 17A(b)(3)(F) of the Act.\30\
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\30\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
NSCC does not believe that the proposed rule change would have any
adverse impact, or impose any burden, on competition. NSCC believes
that the proposed changes set forth in II(A)(1)(b)(i)-(iii) above would
bring greater efficiencies to the account transfer process as discussed
above consistent with the industry initiatives to streamline ACATS and
would promote competition by allowing ACATS participants to process
account transfers in a faster, more efficient manner. Allowing ACATS
participants to process account transfers in a more efficient manner
would result in client assets being transferred to the appropriate
Members and DTC participants more quickly. NSCC believes that reducing
the time it takes to transfer account assets to the appropriate Member
or DTC participant using ACATS would allow the Members' or DTC
participants' respective clients to transfer securities in their
transferred accounts more quickly, promoting the ability to trade such
securities and therefore promoting competition in the marketplace.
NSCC does not believe that the proposed clarification changes set
forth in II(A)(1)(b)(iv) above would have any impact on competition
because such changes are clarifications of the Rules which would
improve the Member's understanding of the Rules and would not otherwise
affect the rights or obligations of NSCC Members.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
NSCC has not received or solicited any written comments relating to
this proposal. NSCC will notify the Commission of any written comments
received by NSCC.
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) \31\ of the Act and paragraph (f) \32\ of Rule 19b 4
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\31\ 15 U.S.C 78s(b)(3)(A).
\32\ 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-2020-001 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-NSCC-2020-001. 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 DTCC'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-2020-001 and should be submitted on
or before February 26, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-02185 Filed 2-4-20; 8:45 am]
BILLING CODE 8011-01-P
