Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Enhance the Insurance and Retirement Processing Services To Provide for a New Centralized Repository and Transactional Platform Called “Insurance Information Exchange” and Make Certain Clarification Changes to the NSCC Rules & Procedures, 64182-64186 [2020-22379]

Download as PDF 64182 Federal Register / Vol. 85, No. 197 / Friday, October 9, 2020 / Notices (‘‘Order’’) granting the requested exemption. Due to a clerical error, the Notice was not published in the Federal Register and, therefore, the Commission is now publishing this notice in the Federal Register. The Commission is also stating, as provided below, a related position with respect to this matter. FILING DATES: The application was filed on January 22, 2020, and amended on March 23, 2020 (‘‘Application’’). HEARING OR NOTIFICATION OF HEARING: Interested persons may request a hearing by emailing the Commission’s Secretary at Secretarys-Office@sec.gov and serving Applicant with a copy of the request by email. Hearing requests should be received by the Commission by 5:30 p.m. on October 21, 2020, and should be accompanied by proof of service on the Applicant, in the form of an affidavit or, for lawyers, a certificate of service. Pursuant to rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons may request notification of a hearing by emailing the Commission’s Secretary. ADDRESSES: The Commission: Secretarys-Office@sec.gov. Applicant: D.B. Fitzpatrick & Co., Inc. at dbfitzpatrick@dbfitzpatrick.com. FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at (202) 551–6811 or Kaitlin C. Bottock, Branch Chief, at (202) 551–6825 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s website at https://www.sec.gov/rules/ iareleases.shtml or by calling (202) 551– 8090. Publication of Notice in the Federal Register 1. Applicant filed the Application to request an order pursuant to Section 206A of the Act and rule 206(4)–5(e) thereunder exempting Applicant from rule 206(4)–5(a)(1) under the Act to permit the Applicant to receive compensation from a government entity within the two-year period following contributions by a covered associate of the Applicant to an official of the government entity. The Commission published the Application on its public website shortly thereafter. 2. Based on the representations provided by the Applicant in the Application, the Commission issued the Notice on April 9, 2020, and published VerDate Sep<11>2014 17:26 Oct 08, 2020 Jkt 253001 it on the Commission’s public website on the same day. The Commission did not receive a hearing request. On May 5, 2020, the Commission issued the Order and published it on the Commission’s public website on the same day. The Commission understands that the Applicant is relying on the Order. 3. Because of a clerical error, the Notice was not published in the Federal Register. The Commission is thus publishing this notice in the Federal Register. Commission Position The Commission takes the position that it would not provide a basis for a Commission enforcement action under Section 206(4) of the Act and rule 206(4)–5(e) under the Act against the Applicant if, in reliance on the Order and subject to its conditions, the Applicant receives compensation from the government entity identified in the Application within the two-year period following the contributions addressed in the application. This position will apply with respect to payments received, or released from escrow, from May 5, 2020 until the notice period for hearing requests has expired. Applicant has represented that since May 5, 2020, it has complied with the conditions of the Order. By the Commission. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–22455 Filed 10–8–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–90092; File No. SR–NSCC– 2020–017] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Enhance the Insurance and Retirement Processing Services To Provide for a New Centralized Repository and Transactional Platform Called ‘‘Insurance Information Exchange’’ and Make Certain Clarification Changes to the NSCC Rules & Procedures 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 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00075 Fmt 4703 I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would amend NSCC’s Rules & Procedures (‘‘Rules’’) 6 to enhance existing Insurance and Retirement Processing Services (‘‘I&RS’’) to (i) provide for a new centralized repository and transactional platform called ‘‘Insurance Information Exchange’’ (‘‘IIEX’’) for transmission of data relating to IPS Eligible Products (‘‘I&RS Data’’) 7 and (ii) update certain defined terms and the name of I&RS services in the Rules and make certain other clarification changes. II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the clearing agency included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose NSCC is proposing to provide a centralized repository and transactional platform to transmit and receive data relating to I&RS Data. NSCC is also proposing to update certain defined 3 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 5 17 CFR 240.19b–4(f)(4). 6 Capitalized terms not defined herein are defined in the Rules, available at https://www.dtcc.com/∼/ media/Files/Downloads/legal/rules/nscc_rules.pdf. 7 An ‘‘IPS Eligible Product’’ is currently defined in the Rules and includes such insurance products, retirement or other benefit plans, or programs that are identified by NSCC as eligible for processing through its I&RS. See Rule 1, supra note 6. 4 17 October 5, 2020. 1 15 September 28, 2020, National Securities Clearing Corporation (‘‘NSCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the clearing agency. NSCC filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and subparagraphs (f)(2) 4 and (f)(4) 5 of Rule 19b–4 thereunder. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. Sfmt 4703 E:\FR\FM\09OCN1.SGM 09OCN1 Federal Register / Vol. 85, No. 197 / Friday, October 9, 2020 / Notices terms and the name of the I&RS services in the Rules to reflect conventional use of such terms and make certain other clarification changes. (i) Background IIEX NSCC is proposing to provide I&RS Members (as defined below) and their service providers with a centralized data repository to transmit and receive I&RS Data. Such I&RS Members would include (i) insurance companies that are Insurance Carrier/Retirement Services Members (‘‘Carriers’’); and (ii) Carriers’ intermediaries, such as broker-dealers, banks and insurance agencies, that are Members, Mutual Fund/Insurance Services Members and Data Services Only Members that distribute participating Carriers’ insurance products (collectively, ‘‘Distributors,’’ and, together with ‘‘Carriers,’’ collectively referred to herein as ‘‘I&RS Members’’). Some I&RS Members use third-party service providers to send or receive I&RS Data on their behalf. Such third-party service providers are not typically I&RS Members. I&RS Members authorize NSCC to send I&RS Data to the service providers or receive I&RS Data from the service providers on the I&RS Members’ behalf. I&RS provides for transmission of I&RS Data, including annuity and life insurance policy applications and premiums, licensing and appointments, commission payments, reporting of client positions and valuations, asset pricing, financial activity reporting and annuity customer account transfers.8 I&RS also provides settlement of postissue money/funding activities between Carriers and Distributors as well as between Carriers. The aim of these services is to automate and provide seamless end-to-end communication between Carriers, Distributors and their service providers for the sale, processing and money settlement of insurance products nationwide. NSCC does not act as a central counterparty with respect to I&RS services and I&RS services are not guaranteed by NSCC. Current processing of I&RS Data through I&RS consists of large batch files transmitted and received by I&RS Members and their service providers through I&RS. I&RS acts as a pass through receiving the batch files from I&RS Members and sending them to 8 The Rules require NSCC to maintain a list of insurance products and retirement or other benefit plans or programs which may be the subject of orders processed through I&RS and may from time to time add IPS Eligible Products to such list or remove IPS Eligible Products therefrom. An IPS Eligible Product must have been assigned a CUSIP number. Section 1(d) of Rule 3, supra note 6. VerDate Sep<11>2014 17:26 Oct 08, 2020 Jkt 253001 their counterparts. While effective and efficient, the sheer volume of records processed daily can make it challenging for I&RS Members to pinpoint specific information needed. For example, using Positions & Valuations (‘‘POV’’), Carriers send individual and group annuity, life insurance long-term care and retirement income/immediate annuities contract details on a daily, weekly, monthly or other periodic basis to Distributors, giving the Distributors a current snapshot of their entire book of business. Often, depending on the life cycle of a contract or the purpose for the POV data, Distributors will need only a subset of the I&RS Data provided through I&RS by the Carriers. At the request of and in consultation with industry participants, NSCC developed IIEX, a data repository, that would provide for a centralized collection of I&RS Data, which I&RS Members and their service providers could access and query to gather meaningful information. The data in the IIEX repository would be derived from I&RS Data that is currently being sent by batch files. I&RS Members and their service providers would be able to view and retrieve all or a subset of the information. In IIEX, I&RS will continue to act as a pass through for I&RS Data but will also start storing the I&RS Data in a data repository and allow I&RS Members to transmit, view and retrieve I&RS Data using a user interface and allow I&RS Members and their service providers to transmit, view and retrieve I&RS Data using Application Programming Interfaces (‘‘APIs) specifically for use with IIEX.9 IIEX would be an addition to existing services, its use would be voluntary and existing services for Members or their service providers would not be affected by the implementation of IIEX. I&RS Members that subscribe to IIEX could access IIEX using their same connections that they currently utilize to connect to I&RS or download an API and access IIEX through the API. Service providers that are authorized by I&RS Members to receive data will have access to IIEX using APIs. The APIs could be specifically tailored to help I&RS Members and service providers to make certain types of queries and for different uses. Currently, each I&RS Member indicates which other I&RS Members and service providers should receive the I&RS Data relating to that I&RS Member and also the type of I&RS Data that 9 An API is a code that allows two software programs to communicate. APIs for IIEX will allow software programs used by I&RS Member and their service providers to communicate with the IIEX repository to transmit, view and retrieve I&RS Data. PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 64183 should be sent to other I&RS Members and service providers. This process would not change as a result of IIEX and IIEX would not change which parties receive or have access to I&RS Data. As with existing I&RS services, under IIEX only I&RS Members or their designated service providers would have access to an I&RS Member’s I&RS Data and IIEX would contain secure entitlements that would allow only I&RS Members and their service providers to view and download only that I&RS Data from IIEX that they are entitled to receive as indicated by the I&RS Member whose I&RS Data they are receiving. Changes to the Name of I&RS and Certain Defined Terms NSCC is also proposing to update certain defined terms and the name of the I&RS services in the Rules to reflect conventional use of such terms. NSCC is proposing to change the name of I&RS from ‘‘Insurance and Retirement Processing Services’’ to ‘‘Insurance & Retirement Services’’. In addition, NSCC is proposing to change the term ‘‘IPS Data’’ to ‘‘I&RS Data’’, change the term ‘‘IPS Eligible Products’’ to ‘‘I&RS Eligible Products’’, and change the term ‘‘MF/IPS Products’’ to MF/I&RS Products’’. NSCC is also proposing to remove the footnote in Rule 57 that states the I&RS was formerly known as the Insurance Processing Service as such information is not necessary. (ii) Proposed Rule Changes NSCC proposes to amend Rule 57 to add a new feature within I&RS, called Insurance Information Exchange or IIEX, that would enable I&RS Members and their service providers to transmit, view and retrieve I&RS Data using a centralized data repository.10 IIEX would be an optional feature, and I&RS Members would have access to the repository through their existing connection to NSCC or using APIs being developed in connection with the feature. Service providers would have access to IIEX using APIs only, based on authorization by I&RS Members. The subscription would allow for multiple intraday transmission, viewing, and retrieval of I&RS Data to which the I&RS Member or service provider is entitled to receive in the data repository. The proposed rule change would also provide that service providers would be 10 Rule 57 generally provides that NSCC will not be responsible for the completeness or accuracy of any data transmitted between NSCC Members through I&RS, nor for any errors, omissions or delays which may occur in the absence of gross negligence on NSCC’s part, in the transmission of such data between NSCC Members. See Rule 57, Section 1(j), supra note 6. The proposed changes to Rule 57 would be subject to these limitations. E:\FR\FM\09OCN1.SGM 09OCN1 64184 Federal Register / Vol. 85, No. 197 / Friday, October 9, 2020 / Notices required to enter into such agreements as determined by NSCC to gain access to IIEX, which agreements will include an agreement to pay the fees set forth in the Rules for IIEX. NSCC also proposes to amend Addendum A of the Rules to include the fees for subscription to IIEX. IIEX Fees for I&RS Members IIEX was developed at the request of and in consultation with industry participants and the proposed fees for IIEX were created to pay for the costs of developing IIEX and maintaining IIEX in a manner that would fulfill the requirements for IIEX expected from industry participants consistent with NSCC’s cost-based plus markup fee model.11 Based on financial projections of development and maintenance costs and anticipated participation by I&RS Members and service providers, it is not anticipated that the IIEX costs and revenues will change the overall operating margin percentage of I&RS. The proposed fee for I&RS Members would be a monthly subscription based on the number of policies an I&RS Member would be able to access in the data repository consistent with the current fee structure for I&RS Data. For instance, transaction fees for Positions are currently based on the number of policies accessed by each side (i.e., the side delivering and the side receiving).12 Also consistent with the current fee structure, the fees for IIEX will be tiered based on the number of policies to which a participant has access through IIEX.13 Those I&RS Members or service providers that have access to more policies will pay a higher monthly fee but will pay a reduced fee per policy. For instance, an I&RS Member that has access to 50,000 policies through IIEX will pay a monthly fee of $1,500 which would be 3 cents per policy ($1,500/ 50,000). An I&RS Member that has access to 200,000 policies through IIEX would pay a higher fee of $2,000 per month which would be 1 cent per policy ($2,000/200,000). As the number 11 NSCC has in place procedures to control costs and to regularly review pricing levels against costs of operation. NSCC’s fees are cost-based plus a markup as approved by its Board of Directors. This markup is applied to recover development costs and operating expenses, and to accumulate capital sufficient to meet regulatory and economic requirements. See NSCC Disclosure Framework for Covered Clearing Agencies and Financial Market Infrastructures, available at https://www.dtcc.com//media/Files/Downloads/legal/policy-andcompliance/NSCC_Disclosure_Framework.pdf, at 121. 12 See Section K.2. of Addendum A of the Rules, supra note 6. 13 See e.g., Positions fees which are tiered based on the number of items (i.e., policies) are sent or delivered. Id. VerDate Sep<11>2014 17:26 Oct 08, 2020 Jkt 253001 of policies a participant has access to increases, the monthly fee increases by tier but the price per policy decreases as more policies are accessed through each tier level. This is consistent with the anticipated costs of developing and maintaining IIEX. The incremental costs to NSCC of adding a policy to the IIEX repository is not exactly linear. For instance, while it will cost more to house 100,000 policies than it does to house 50,000 policies in the IIEX repository, it will not cost twice as much. In addition, as discussed above the fees were intended to cover the costs of developing and maintaining IIEX in accordance with NSCC’s cost-based plus markup fee model.14 The fee structure for existing services will not be affected by the new fees for IIEX. This fee structure is designed to cover the costs of developing and maintaining IIEX. Fees for I&RS Members that subscribe to IIEX would be as follows: provided access only to such Carrier’s 49,000 policies, the monthly fee for the service provider would be $750. Proposed Name Changes and Clarification Changes NSCC would also amend NSCC’s Rules to reflect the proposed name change of I&RS to Insurance & Retirement Services and change the term ‘‘IPS Data’’ to ‘‘I&RS Data’’, change the term ‘‘IPS Eligible Products’’ to ‘‘I&RS Eligible Products’’, and change the term ‘‘MF/IPS Products’’ to MF/ I&RS Products’’. NSCC would also remove the footnote in Rule 57 that states the I&RS was formerly known as the Insurance Processing Service as such information is not necessary. Such changes would be made in several places in the Rules. (iii) Implementation Timeframe NSCC would implement the proposed changes by no later than November 30, 2020. In connection with the development of IIEX, NSCC worked Number of policies Monthly fee with a group of I&RS Members (the 0–50,000 ............................... $1,500 ‘‘Pilot Group’’) to determine the 50,001–200,000 .................... 2,000 requirements for IIEX that would be 200,001–400,000 .................. 3,000 expected from industry participants. Greater than 400,000 ........... 5,000 IIEX would initially be offered only to I&RS Members that are members of the IIEX Fees for Service Providers Pilot Group in November 2020 in order The proposed fee for service to finalize testing in a production providers, that would only have access environment. For their assistance in the to IIEX through APIs, would be half the development of IIEX and assistance in fees charged to I&RS Members and the initial testing in production data, would also be based on the number of NSCC would not charge members of the policies the service providers would be Pilot Group for IIEX until the first full able to access in the data repository. month that IIEX is available to the Pilot Service providers are being charged half Group in a production environment, of the fees of I&RS Members for IIEX which is anticipated to be December because they will only have access to 2020. IIEX would be offered to all I&RS APIs and the costs for developing and Members and their service providers maintaining APIs is less than the costs beginning January 1, 2021. for developing and maintaining IIEX for As proposed, legends would be added direct access for I&RS Members. Fees for to the Rules stating there are changes service providers that subscribe to IIEX that became effective upon filing with would be as follows: the Securities and Exchange Commission but have not yet been Number of policies Monthly fee implemented. Each proposed legend 0–50,000 ............................... $750 also would include a date by which 50,001–200,000 .................... 1,000 such changes would be implemented 200,001–400,000 .................. 1,500 and the file number of this proposal, Greater than 400,000 ........... 2,500 and state that, once this proposal is implemented, the legend would For instance, if a Carrier subscribes automatically be removed from the and has access to 49,000 policies, the Rules & Procedures. monthly fee for that Carrier would In addition, a footnote would be $1,500 because it is an I&RS Member. If added to the description of IIEX in Rule a Distributor subscribes and is provided 57 that states that IIEX will initially be access only to such Carrier’s 49,000 offered only to I&RS Members that are policies, the monthly fee for the members of the Pilot Group, that NSCC Distributor would also be $1,500 will offer IIEX to members of the Pilot because it is an I&RS Member. If a Group in November 2020 in order to service provider subscribes and is finalize testing in a production environment, that NSCC will not charge 14 See supra note 11. the members of the Pilot Group until the PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 E:\FR\FM\09OCN1.SGM 09OCN1 Federal Register / Vol. 85, No. 197 / Friday, October 9, 2020 / Notices first full month that IIEX is available to the Pilot Group in a production environment which is anticipated to be December 2020 and that on January 1, 2021, IIEX will be offered to all I&RS Members and their service providers pursuant to Rule 57 and the footnote will automatically be removed from Rule 57. 2. Statutory Basis Section 17A(b)(3)(F) of the Act 15 requires, in part, that the Rules be designed to promote the prompt and accurate clearance and settlement of securities transactions. The changes to the name of I&RS to ‘‘Insurance & Retirement Services’’, the change of the defined terms discussed above and the removal of the footnote relating to the former name of I&RS are consistent with this provision because the proposed clarification changes would enhance clarity and transparency for participants with respect to services offered by NSCC allowing I&RS Members to have a better understanding of the Rules relating to I&RS. The name changes would reflect current uses of the terms used within I&RS and removing unnecessary language will help to clarify the Rules. Having clear and accurate Rules would help I&RS Members to better understand their rights and obligations regarding NSCC’s services. NSCC believes that when I&RS Members better understand their rights and obligations regarding NSCC’s services, they can act in accordance with the Rules. NSCC believes that better enabling I&RS 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.16 Section 17A(b)(3)(D) of the Act 17 requires that the Rules provide for the equitable allocation of reasonable dues, fees, and other charges among its participants. NSCC believes that the proposed rule change to Addendum A is consistent with this provision of the Act because the proposed fees would align with the cost of building and delivering the proposed IIEX repository to I&RS Members and their service providers consistent with NSCC’s costbased plus markup fee model.18 NSCC believes the proposed changes to the fee are equitable because they would apply uniformly to all Members and service providers that utilize the services. NSCC 15 15 believes the proposed changes are reasonable because they would be commensurate with the costs of resources allocated by NSCC in developing and maintaining IIEX. Based on financial projections of development and maintenance costs and anticipated participation by I&RS Members and service providers, it is not anticipated that the IIEX costs and revenues will change the overall operating margin percentage of I&RS. Therefore, by establishing fees that align with the cost of delivery of this feature and allocating those fees equitably among the subscribing users, the proposed rule change would provide for the equitable allocation of reasonable dues, fees and other charges among its participants consistent with the requirements of Section 17A(b)(3)(D) of the Act.19 In addition, the proposed rule change is designed to comply with Rule 17Ad 22(e)(21) promulgated under the Act.20 Rule 17Ad–22(e)(21) under the Act requires NSCC to, inter alia, 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. The proposed rule change would enhance the ability of I&RS Members and their service providers to transmit, view and retrieve I&RS Data in a secure, centralized location. IIEX would provide I&RS Members and their service providers a more efficient method of transmitting, viewing and retrieving I&RS Data and enable I&RS Members and their service providers to provide data necessary for transacting business more quickly and in a more streamlined manner. Therefore, by establishing a more efficient and effective process for data providers to deliver, and data receivers to receive, I&RS Data, NSCC believes that the proposed change is consistent with the requirements of Rule 17Ad–22(e)(21), promulgated under the Act.21 (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 because the proposed rule change would add an optional function to NSCC’s services that would provide a more efficient method by which subscribing Carriers and Distributors and their service providers may transmit, view and retrieve I&RS Data. IIEX would not affect the type of U.S.C. 78q–1(b)(3)(F). 16 Id. 19 15 17 15 20 17 U.S.C. 78q–1(b)(3)(D). 18 See supra note 11. VerDate Sep<11>2014 17:26 Oct 08, 2020 U.S.C. 78q–1(b)(3)(D). CFR 240.17Ad–22(e)(21). 21 Id. Jkt 253001 PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 64185 I&RS Data that I&RS Members or their service providers are able to transmit, view and retrieve pursuant to I&RS, it would only affect the manner in which I&RS Members and service providers may transmit, view and retrieve I&RS Data. IIEX would not affect services for I&RS Members or service providers that do not subscribe to IIEX and they would transmit, view and retrieve I&RS Data in the same manner as they currently transmit, view and retrieve I&RS Data. The fees for IIEX were designed to be reasonable and align with the projected cost of building and operating the IIEX repository and APIs. Therefore, as an optional feature available for subscription, the proposed rule change would not disproportionally impact any NSCC Members, have any effect on existing NSCC services other than to add a new method of transmitting, viewing and retrieving I&RS Data, nor have any adverse impact on competition. Moreover, because the proposed rule change would improve the efficiency by which subscribing I&RS Members and their service providers may view, transmit and retrieve I&RS Data, the proposed rule change may have a positive effect on competition among Carriers and Distributors. The proposed feature would provide these firms with a faster, more streamlined method of transmitting and receiving I&RS Data, and therefore could enable IPS Eligible Products to be marketed more quickly. Specifically, Distributors could have the ability to distribute IPS Eligible Products into the market to consumers more quickly because Distributors would have the ability to obtain information with respect to these products in a quicker, more efficient manner. NSCC does not believe that offering early access to IIEX to members of the Pilot Group for testing in the production environment will have any impact on competition. While such members will be able to access data in IIEX earlier than other I&RS Members, NSCC does not believe the early access to the data in the new repository for less than two months will have any appreciable effect on the market for such data or competition. NSCC does not believe that the proposed changes to the name of I&RS or to the defined terms as described above, or the removal of the footnote explaining the former name of I&RS, 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 I&RS Members. E:\FR\FM\09OCN1.SGM 09OCN1 64186 Federal Register / Vol. 85, No. 197 / Friday, October 9, 2020 / Notices (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 it receives. III. Date of Effectiveness of the Proposed Rule Change, and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 22 and paragraph (f) of Rule 19b–4 thereunder.23 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–2020–017 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–2020–017. 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– 2020–017 and should be submitted on or before October 30, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–22379 Filed 10–8–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–90088; File No. SR– NYSEARCA–2020–85] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Harmonize Rules 10.9261 and 10.9830 With Recent Changes by the Financial Industry Regulatory Authority, Inc. October 5, 2020. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on September 23, 2020, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 24 17 CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 22 15 23 17 U.S.C 78s(b)(3)(A). CFR 240.19b–4(f). VerDate Sep<11>2014 17:26 Oct 08, 2020 Jkt 253001 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to harmonize Rules 10.9261 and 10.9830 with recent changes by the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) that temporarily grants the Chief or Deputy Chief Hearing Officer the authority to order that hearings be conducted by video conference if warranted by public health risks posed by in-person hearings during the ongoing novel coronavirus (‘‘COVID– 19’’) pandemic. As proposed, these temporary amendments would be in effect through December 31, 2020. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to harmonize Rules 10.9261 (Evidence and Procedure in Hearing) and 10.9830 (Hearing) with recent changes by FINRA to its Rules 9261 and 9830 that temporarily grants to the Chief or Deputy Chief Hearing Officer the authority to order that hearings be conducted by video conference if warranted by public health risks posed by in-person hearings during the ongoing COVID–19 pandemic. As proposed, these temporary amendments would be in effect through December 31, 2020.4 4 The Exchange may submit a separate rule filing to extend the expiration date of the proposed temporary amendments if the Exchange requires temporary relief from the rule requirements identified in this proposal beyond December 31, 2020. The amended NYSE Arca rules will revert back to their current state at the conclusion of the temporary relief period and any extension thereof. E:\FR\FM\09OCN1.SGM 09OCN1

Agencies

[Federal Register Volume 85, Number 197 (Friday, October 9, 2020)]
[Notices]
[Pages 64182-64186]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22379]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90092; File No. SR-NSCC-2020-017]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change To Enhance the Insurance and Retirement Processing Services 
To Provide for a New Centralized Repository and Transactional Platform 
Called ``Insurance Information Exchange'' and Make Certain 
Clarification Changes to the NSCC Rules & Procedures

October 5, 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 September 28, 2020, National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the clearing agency. 
NSCC filed the proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act \3\ and subparagraphs (f)(2) \4\ and (f)(4) \5\ of Rule 19b-4 
thereunder. 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)(2).
    \5\ 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 would amend NSCC's Rules & Procedures 
(``Rules'') \6\ to enhance existing Insurance and Retirement Processing 
Services (``I&RS'') to (i) provide for a new centralized repository and 
transactional platform called ``Insurance Information Exchange'' 
(``IIEX'') for transmission of data relating to IPS Eligible Products 
(``I&RS Data'') \7\ and (ii) update certain defined terms and the name 
of I&RS services in the Rules and make certain other clarification 
changes.
---------------------------------------------------------------------------

    \6\ Capitalized terms not defined herein are defined in the 
Rules, available at https://www.dtcc.com/~/media/Files/Downloads/
legal/rules/nscc_rules.pdf.
    \7\ An ``IPS Eligible Product'' is currently defined in the 
Rules and includes such insurance products, retirement or other 
benefit plans, or programs that are identified by NSCC as eligible 
for processing through its I&RS. See Rule 1, supra note 6.
---------------------------------------------------------------------------

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. The clearing agency has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    NSCC is proposing to provide a centralized repository and 
transactional platform to transmit and receive data relating to I&RS 
Data. NSCC is also proposing to update certain defined

[[Page 64183]]

terms and the name of the I&RS services in the Rules to reflect 
conventional use of such terms and make certain other clarification 
changes.
(i) Background
IIEX
    NSCC is proposing to provide I&RS Members (as defined below) and 
their service providers with a centralized data repository to transmit 
and receive I&RS Data. Such I&RS Members would include (i) insurance 
companies that are Insurance Carrier/Retirement Services Members 
(``Carriers''); and (ii) Carriers' intermediaries, such as broker-
dealers, banks and insurance agencies, that are Members, Mutual Fund/
Insurance Services Members and Data Services Only Members that 
distribute participating Carriers' insurance products (collectively, 
``Distributors,'' and, together with ``Carriers,'' collectively 
referred to herein as ``I&RS Members''). Some I&RS Members use third-
party service providers to send or receive I&RS Data on their behalf. 
Such third-party service providers are not typically I&RS Members. I&RS 
Members authorize NSCC to send I&RS Data to the service providers or 
receive I&RS Data from the service providers on the I&RS Members' 
behalf.
    I&RS provides for transmission of I&RS Data, including annuity and 
life insurance policy applications and premiums, licensing and 
appointments, commission payments, reporting of client positions and 
valuations, asset pricing, financial activity reporting and annuity 
customer account transfers.\8\ I&RS also provides settlement of post-
issue money/funding activities between Carriers and Distributors as 
well as between Carriers. The aim of these services is to automate and 
provide seamless end-to-end communication between Carriers, 
Distributors and their service providers for the sale, processing and 
money settlement of insurance products nationwide. NSCC does not act as 
a central counterparty with respect to I&RS services and I&RS services 
are not guaranteed by NSCC.
---------------------------------------------------------------------------

    \8\ The Rules require NSCC to maintain a list of insurance 
products and retirement or other benefit plans or programs which may 
be the subject of orders processed through I&RS and may from time to 
time add IPS Eligible Products to such list or remove IPS Eligible 
Products therefrom. An IPS Eligible Product must have been assigned 
a CUSIP number. Section 1(d) of Rule 3, supra note 6.
---------------------------------------------------------------------------

    Current processing of I&RS Data through I&RS consists of large 
batch files transmitted and received by I&RS Members and their service 
providers through I&RS. I&RS acts as a pass through receiving the batch 
files from I&RS Members and sending them to their counterparts. While 
effective and efficient, the sheer volume of records processed daily 
can make it challenging for I&RS Members to pinpoint specific 
information needed. For example, using Positions & Valuations 
(``POV''), Carriers send individual and group annuity, life insurance 
long-term care and retirement income/immediate annuities contract 
details on a daily, weekly, monthly or other periodic basis to 
Distributors, giving the Distributors a current snapshot of their 
entire book of business. Often, depending on the life cycle of a 
contract or the purpose for the POV data, Distributors will need only a 
subset of the I&RS Data provided through I&RS by the Carriers.
    At the request of and in consultation with industry participants, 
NSCC developed IIEX, a data repository, that would provide for a 
centralized collection of I&RS Data, which I&RS Members and their 
service providers could access and query to gather meaningful 
information. The data in the IIEX repository would be derived from I&RS 
Data that is currently being sent by batch files. I&RS Members and 
their service providers would be able to view and retrieve all or a 
subset of the information. In IIEX, I&RS will continue to act as a pass 
through for I&RS Data but will also start storing the I&RS Data in a 
data repository and allow I&RS Members to transmit, view and retrieve 
I&RS Data using a user interface and allow I&RS Members and their 
service providers to transmit, view and retrieve I&RS Data using 
Application Programming Interfaces (``APIs) specifically for use with 
IIEX.\9\ IIEX would be an addition to existing services, its use would 
be voluntary and existing services for Members or their service 
providers would not be affected by the implementation of IIEX.
---------------------------------------------------------------------------

    \9\ An API is a code that allows two software programs to 
communicate. APIs for IIEX will allow software programs used by I&RS 
Member and their service providers to communicate with the IIEX 
repository to transmit, view and retrieve I&RS Data.
---------------------------------------------------------------------------

    I&RS Members that subscribe to IIEX could access IIEX using their 
same connections that they currently utilize to connect to I&RS or 
download an API and access IIEX through the API. Service providers that 
are authorized by I&RS Members to receive data will have access to IIEX 
using APIs. The APIs could be specifically tailored to help I&RS 
Members and service providers to make certain types of queries and for 
different uses.
    Currently, each I&RS Member indicates which other I&RS Members and 
service providers should receive the I&RS Data relating to that I&RS 
Member and also the type of I&RS Data that should be sent to other I&RS 
Members and service providers. This process would not change as a 
result of IIEX and IIEX would not change which parties receive or have 
access to I&RS Data. As with existing I&RS services, under IIEX only 
I&RS Members or their designated service providers would have access to 
an I&RS Member's I&RS Data and IIEX would contain secure entitlements 
that would allow only I&RS Members and their service providers to view 
and download only that I&RS Data from IIEX that they are entitled to 
receive as indicated by the I&RS Member whose I&RS Data they are 
receiving.
Changes to the Name of I&RS and Certain Defined Terms
    NSCC is also proposing to update certain defined terms and the name 
of the I&RS services in the Rules to reflect conventional use of such 
terms. NSCC is proposing to change the name of I&RS from ``Insurance 
and Retirement Processing Services'' to ``Insurance & Retirement 
Services''. In addition, NSCC is proposing to change the term ``IPS 
Data'' to ``I&RS Data'', change the term ``IPS Eligible Products'' to 
``I&RS Eligible Products'', and change the term ``MF/IPS Products'' to 
MF/I&RS Products''. NSCC is also proposing to remove the footnote in 
Rule 57 that states the I&RS was formerly known as the Insurance 
Processing Service as such information is not necessary.
(ii) Proposed Rule Changes
    NSCC proposes to amend Rule 57 to add a new feature within I&RS, 
called Insurance Information Exchange or IIEX, that would enable I&RS 
Members and their service providers to transmit, view and retrieve I&RS 
Data using a centralized data repository.\10\ IIEX would be an optional 
feature, and I&RS Members would have access to the repository through 
their existing connection to NSCC or using APIs being developed in 
connection with the feature. Service providers would have access to 
IIEX using APIs only, based on authorization by I&RS Members. The 
subscription would allow for multiple intraday transmission, viewing, 
and retrieval of I&RS Data to which the I&RS Member or service provider 
is entitled to receive in the data repository. The proposed rule change 
would also provide that service providers would be

[[Page 64184]]

required to enter into such agreements as determined by NSCC to gain 
access to IIEX, which agreements will include an agreement to pay the 
fees set forth in the Rules for IIEX.
---------------------------------------------------------------------------

    \10\ Rule 57 generally provides that NSCC will not be 
responsible for the completeness or accuracy of any data transmitted 
between NSCC Members through I&RS, nor for any errors, omissions or 
delays which may occur in the absence of gross negligence on NSCC's 
part, in the transmission of such data between NSCC Members. See 
Rule 57, Section 1(j), supra note 6. The proposed changes to Rule 57 
would be subject to these limitations.
---------------------------------------------------------------------------

    NSCC also proposes to amend Addendum A of the Rules to include the 
fees for subscription to IIEX.
IIEX Fees for I&RS Members
    IIEX was developed at the request of and in consultation with 
industry participants and the proposed fees for IIEX were created to 
pay for the costs of developing IIEX and maintaining IIEX in a manner 
that would fulfill the requirements for IIEX expected from industry 
participants consistent with NSCC's cost-based plus markup fee 
model.\11\ Based on financial projections of development and 
maintenance costs and anticipated participation by I&RS Members and 
service providers, it is not anticipated that the IIEX costs and 
revenues will change the overall operating margin percentage of I&RS.
---------------------------------------------------------------------------

    \11\ NSCC has in place procedures to control costs and to 
regularly review pricing levels against costs of operation. NSCC's 
fees are cost-based plus a markup as approved by its Board of 
Directors. This markup is applied to recover development costs and 
operating expenses, and to accumulate capital sufficient to meet 
regulatory and economic requirements. See NSCC Disclosure Framework 
for Covered Clearing Agencies and Financial Market Infrastructures, 
available at https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf, at 121.
---------------------------------------------------------------------------

    The proposed fee for I&RS Members would be a monthly subscription 
based on the number of policies an I&RS Member would be able to access 
in the data repository consistent with the current fee structure for 
I&RS Data. For instance, transaction fees for Positions are currently 
based on the number of policies accessed by each side (i.e., the side 
delivering and the side receiving).\12\ Also consistent with the 
current fee structure, the fees for IIEX will be tiered based on the 
number of policies to which a participant has access through IIEX.\13\ 
Those I&RS Members or service providers that have access to more 
policies will pay a higher monthly fee but will pay a reduced fee per 
policy. For instance, an I&RS Member that has access to 50,000 policies 
through IIEX will pay a monthly fee of $1,500 which would be 3 cents 
per policy ($1,500/50,000). An I&RS Member that has access to 200,000 
policies through IIEX would pay a higher fee of $2,000 per month which 
would be 1 cent per policy ($2,000/200,000). As the number of policies 
a participant has access to increases, the monthly fee increases by 
tier but the price per policy decreases as more policies are accessed 
through each tier level. This is consistent with the anticipated costs 
of developing and maintaining IIEX. The incremental costs to NSCC of 
adding a policy to the IIEX repository is not exactly linear. For 
instance, while it will cost more to house 100,000 policies than it 
does to house 50,000 policies in the IIEX repository, it will not cost 
twice as much. In addition, as discussed above the fees were intended 
to cover the costs of developing and maintaining IIEX in accordance 
with NSCC's cost-based plus markup fee model.\14\ The fee structure for 
existing services will not be affected by the new fees for IIEX.
---------------------------------------------------------------------------

    \12\ See Section K.2. of Addendum A of the Rules, supra note 6.
    \13\ See e.g., Positions fees which are tiered based on the 
number of items (i.e., policies) are sent or delivered. Id.
    \14\ See supra note 11.
---------------------------------------------------------------------------

    This fee structure is designed to cover the costs of developing and 
maintaining IIEX.
    Fees for I&RS Members that subscribe to IIEX would be as follows:

------------------------------------------------------------------------
                   Number of policies                       Monthly fee
------------------------------------------------------------------------
0-50,000................................................          $1,500
50,001-200,000..........................................           2,000
200,001-400,000.........................................           3,000
Greater than 400,000....................................           5,000
------------------------------------------------------------------------

IIEX Fees for Service Providers
    The proposed fee for service providers, that would only have access 
to IIEX through APIs, would be half the fees charged to I&RS Members 
and would also be based on the number of policies the service providers 
would be able to access in the data repository. Service providers are 
being charged half of the fees of I&RS Members for IIEX because they 
will only have access to APIs and the costs for developing and 
maintaining APIs is less than the costs for developing and maintaining 
IIEX for direct access for I&RS Members. Fees for service providers 
that subscribe to IIEX would be as follows:

------------------------------------------------------------------------
                   Number of policies                       Monthly fee
------------------------------------------------------------------------
0-50,000................................................            $750
50,001-200,000..........................................           1,000
200,001-400,000.........................................           1,500
Greater than 400,000....................................           2,500
------------------------------------------------------------------------

    For instance, if a Carrier subscribes and has access to 49,000 
policies, the monthly fee for that Carrier would $1,500 because it is 
an I&RS Member. If a Distributor subscribes and is provided access only 
to such Carrier's 49,000 policies, the monthly fee for the Distributor 
would also be $1,500 because it is an I&RS Member. If a service 
provider subscribes and is provided access only to such Carrier's 
49,000 policies, the monthly fee for the service provider would be 
$750.
Proposed Name Changes and Clarification Changes
    NSCC would also amend NSCC's Rules to reflect the proposed name 
change of I&RS to Insurance & Retirement Services and change the term 
``IPS Data'' to ``I&RS Data'', change the term ``IPS Eligible 
Products'' to ``I&RS Eligible Products'', and change the term ``MF/IPS 
Products'' to MF/I&RS Products''. NSCC would also remove the footnote 
in Rule 57 that states the I&RS was formerly known as the Insurance 
Processing Service as such information is not necessary. Such changes 
would be made in several places in the Rules.
(iii) Implementation Timeframe
    NSCC would implement the proposed changes by no later than November 
30, 2020. In connection with the development of IIEX, NSCC worked with 
a group of I&RS Members (the ``Pilot Group'') to determine the 
requirements for IIEX that would be expected from industry 
participants. IIEX would initially be offered only to I&RS Members that 
are members of the Pilot Group in November 2020 in order to finalize 
testing in a production environment. For their assistance in the 
development of IIEX and assistance in the initial testing in production 
data, NSCC would not charge members of the Pilot Group for IIEX until 
the first full month that IIEX is available to the Pilot Group in a 
production environment, which is anticipated to be December 2020. IIEX 
would be offered to all I&RS Members and their service providers 
beginning January 1, 2021.
    As proposed, legends would be added to the Rules stating there are 
changes that became effective upon filing with the Securities and 
Exchange Commission but have not yet been implemented. Each proposed 
legend also would include a date by 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 the Rules & Procedures.
    In addition, a footnote would be added to the description of IIEX 
in Rule 57 that states that IIEX will initially be offered only to I&RS 
Members that are members of the Pilot Group, that NSCC will offer IIEX 
to members of the Pilot Group in November 2020 in order to finalize 
testing in a production environment, that NSCC will not charge the 
members of the Pilot Group until the

[[Page 64185]]

first full month that IIEX is available to the Pilot Group in a 
production environment which is anticipated to be December 2020 and 
that on January 1, 2021, IIEX will be offered to all I&RS Members and 
their service providers pursuant to Rule 57 and the footnote will 
automatically be removed from Rule 57.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act \15\ requires, in part, that the 
Rules be designed to promote the prompt and accurate clearance and 
settlement of securities transactions. The changes to the name of I&RS 
to ``Insurance & Retirement Services'', the change of the defined terms 
discussed above and the removal of the footnote relating to the former 
name of I&RS are consistent with this provision because the proposed 
clarification changes would enhance clarity and transparency for 
participants with respect to services offered by NSCC allowing I&RS 
Members to have a better understanding of the Rules relating to I&RS. 
The name changes would reflect current uses of the terms used within 
I&RS and removing unnecessary language will help to clarify the Rules. 
Having clear and accurate Rules would help I&RS Members to better 
understand their rights and obligations regarding NSCC's services. NSCC 
believes that when I&RS Members better understand their rights and 
obligations regarding NSCC's services, they can act in accordance with 
the Rules. NSCC believes that better enabling I&RS 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.\16\
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78q-1(b)(3)(F).
    \16\ Id.
---------------------------------------------------------------------------

    Section 17A(b)(3)(D) of the Act \17\ requires that the Rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its participants. NSCC believes that the proposed 
rule change to Addendum A is consistent with this provision of the Act 
because the proposed fees would align with the cost of building and 
delivering the proposed IIEX repository to I&RS Members and their 
service providers consistent with NSCC's cost-based plus markup fee 
model.\18\ NSCC believes the proposed changes to the fee are equitable 
because they would apply uniformly to all Members and service providers 
that utilize the services. NSCC believes the proposed changes are 
reasonable because they would be commensurate with the costs of 
resources allocated by NSCC in developing and maintaining IIEX. Based 
on financial projections of development and maintenance costs and 
anticipated participation by I&RS Members and service providers, it is 
not anticipated that the IIEX costs and revenues will change the 
overall operating margin percentage of I&RS. Therefore, by establishing 
fees that align with the cost of delivery of this feature and 
allocating those fees equitably among the subscribing users, the 
proposed rule change would provide for the equitable allocation of 
reasonable dues, fees and other charges among its participants 
consistent with the requirements of Section 17A(b)(3)(D) of the 
Act.\19\
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78q-1(b)(3)(D).
    \18\ See supra note 11.
    \19\ 15 U.S.C. 78q-1(b)(3)(D).
---------------------------------------------------------------------------

    In addition, the proposed rule change is designed to comply with 
Rule 17Ad 22(e)(21) promulgated under the Act.\20\ Rule 17Ad-22(e)(21) 
under the Act requires NSCC to, inter alia, 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. The proposed rule change 
would enhance the ability of I&RS Members and their service providers 
to transmit, view and retrieve I&RS Data in a secure, centralized 
location. IIEX would provide I&RS Members and their service providers a 
more efficient method of transmitting, viewing and retrieving I&RS Data 
and enable I&RS Members and their service providers to provide data 
necessary for transacting business more quickly and in a more 
streamlined manner. Therefore, by establishing a more efficient and 
effective process for data providers to deliver, and data receivers to 
receive, I&RS Data, NSCC believes that the proposed change is 
consistent with the requirements of Rule 17Ad-22(e)(21), promulgated 
under the Act.\21\
---------------------------------------------------------------------------

    \20\ 17 CFR 240.17Ad-22(e)(21).
    \21\ Id.
---------------------------------------------------------------------------

(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 because the 
proposed rule change would add an optional function to NSCC's services 
that would provide a more efficient method by which subscribing 
Carriers and Distributors and their service providers may transmit, 
view and retrieve I&RS Data. IIEX would not affect the type of I&RS 
Data that I&RS Members or their service providers are able to transmit, 
view and retrieve pursuant to I&RS, it would only affect the manner in 
which I&RS Members and service providers may transmit, view and 
retrieve I&RS Data. IIEX would not affect services for I&RS Members or 
service providers that do not subscribe to IIEX and they would 
transmit, view and retrieve I&RS Data in the same manner as they 
currently transmit, view and retrieve I&RS Data. The fees for IIEX were 
designed to be reasonable and align with the projected cost of building 
and operating the IIEX repository and APIs. Therefore, as an optional 
feature available for subscription, the proposed rule change would not 
disproportionally impact any NSCC Members, have any effect on existing 
NSCC services other than to add a new method of transmitting, viewing 
and retrieving I&RS Data, nor have any adverse impact on competition.
    Moreover, because the proposed rule change would improve the 
efficiency by which subscribing I&RS Members and their service 
providers may view, transmit and retrieve I&RS Data, the proposed rule 
change may have a positive effect on competition among Carriers and 
Distributors. The proposed feature would provide these firms with a 
faster, more streamlined method of transmitting and receiving I&RS 
Data, and therefore could enable IPS Eligible Products to be marketed 
more quickly. Specifically, Distributors could have the ability to 
distribute IPS Eligible Products into the market to consumers more 
quickly because Distributors would have the ability to obtain 
information with respect to these products in a quicker, more efficient 
manner. NSCC does not believe that offering early access to IIEX to 
members of the Pilot Group for testing in the production environment 
will have any impact on competition. While such members will be able to 
access data in IIEX earlier than other I&RS Members, NSCC does not 
believe the early access to the data in the new repository for less 
than two months will have any appreciable effect on the market for such 
data or competition.
    NSCC does not believe that the proposed changes to the name of I&RS 
or to the defined terms as described above, or the removal of the 
footnote explaining the former name of I&RS, 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 I&RS Members.

[[Page 64186]]

(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 
it receives.

III. Date of Effectiveness of the Proposed Rule Change, and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \22\ and paragraph (f) of Rule 19b-4 
thereunder.\23\ 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.
---------------------------------------------------------------------------

    \22\ 15 U.S.C 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2020-017 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-2020-017. 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-2020-017 and should be submitted on 
or before October 30, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22379 Filed 10-8-20; 8:45 am]
BILLING CODE 8011-01-P
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