Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Add Paperless Replacements and Producer Authorization Service Offerings to I&RS and Make Certain Clarification Changes in the Rules, 58205-58209 [2024-15677]
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Federal Register / Vol. 89, No. 137 / Wednesday, July 17, 2024 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100507; File No. SR–
NSCC–2024–005]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Add Paperless
Replacements and Producer
Authorization Service Offerings to
I&RS and Make Certain Clarification
Changes in the Rules
July 11, 2024.
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 July 3,
2024, 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 Rule
19b–4(f)(2) 4 and Rule 19b–4(f)(4)
thereunder.5 The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
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I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
modifications to Insurance & Retirement
Services (‘‘I&RS’’) in order to (i) provide
for two new service offerings relating to
replacements of insurance contracts and
producer authorizations, and related
fees for each new service offering, (ii)
update the descriptions of I&RS service
offerings and certain defined terms in
Rule 57 and Addendum A of NSCC’s
Rules & Procedures (‘‘Rules’’). and (iii)
make other clarification changes, as
described in greater detail below.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
1 15
U.S.C. 78s(b)(1).
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).
6 Terms not defined herein are defined in the
Rules, available at www.dtcc.com/legal/rules-andprocedures.
2 17
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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 the Rules in order to (i)
provide for two new service offerings
relating to replacements of insurance
contracts and producer authorizations,
and related fees for each new service
offering, (ii) update the descriptions of
I&RS offerings and certain defined terms
in Rule 57 and Addendum A, and (iii)
make other clarification changes, as
described in greater detail below.
The objectives and expected impacts
of the proposed rule change to I&RS
Members 7 would be to make available
two new optional service offerings that
would provide more efficient methods
for I&RS Members to choose to transmit,
view and retrieve I&RS Data and
improve Members’ understanding of the
Rules relating to I&RS.
The proposed new service offerings
discussed below were developed at the
request of and in consultation with
industry participants, and the proposed
fees for such service offerings were
designed to pay for the costs of
developing and maintaining such
offerings in a manner that would fulfill
the requirements expected from
industry participants consistent with
NSCC’s cost-based plus markup fee
model.8 Based on financial projections
of development and maintenance costs
and anticipated participation by I&RS
Members, it is anticipated that the costs
and revenues would result in a slight
increase in the overall operating margin
percentage of I&RS. NSCC anticipates
7 I&RS Members 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’’).
8 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 www.dtcc.com/-/media/
Files/Downloads/legal/policy-and-compliance/
NSCC_Disclosure_Framework.pdf, at 124.
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recouping the costs of building the
service offerings within approximately
two years of implementing the fees.
I&RS Services
I&RS allows I&RS Members to
transmit I&RS Data 9 among each other,
including data relating to 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.
I&RS also allows certain I&RS Members
to settle payments relating to I&RS
Eligible Products. NSCC does not act as
a central counterparty with respect to
I&RS and I&RS are not guaranteed by
NSCC.
Paperless Replacements Processing
(RPL)
NSCC is proposing to establish a new
service offering intended to support the
transmission of I&RS Data regarding the
transfer, exchange or replacement of
existing insurance or annuity contracts
(‘‘Paperless Replacements’’). Clients of
I&RS Members holding insurance or
annuity contracts replace existing
contracts with new contracts from time
to time. These replacements involve
transfer of asset forms such as 1035
forms 10 and other such forms or
documents to document the requests
and the authorization for a replacement.
Currently, for Carriers, there is no
centralized automated process for
replacements and such replacements are
a manual process involving exchanging
paperwork often between different
Carriers using facsimile, mail, email or
other means. Paperless Replacements
would provide for a data-only
transmission relating to such
replacements between Carriers,
automating the current manual process
and decreasing the administrative
burden on and risk to Carriers of
processing these replacements.
There also may be movement of funds
associated with these replacements.
Settlement Processing for Insurance, an
existing settlement feature of I&RS
supporting the settlements of payments
9 ‘‘I&RS Data’’ means data and information
relating to I&RS Eligible Products. See Rule 57,
supra note 6. ‘‘I&RS Eligible Product’’ means 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 of the
Rules. See definition of I&RS Eligible Product, Rule
1, supra note 6.
10 1035 forms are forms required to process a 1035
exchange which is an exchange made pursuant to
a provision in the Internal Revenue Service tax code
allowing for a tax-free transfer of certain insurance
and annuity products.
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relating to I&RS Eligible Products,11
currently supports the settlement of
payments related to such replacements
and would continue to do so following
the addition of Paperless Replacements.
The settlement feature, together with
Paperless Replacements, would provide
for an automated process for processing
forms and documents for replacements
of such contracts and associated funds.
In order to adopt this service offering,
NSCC would amend Rule 57 to describe
Paperless Replacements, as described
below.
NSCC would also amend Addendum
A to adopt a fee for Paperless
Replacements of $1.85 per request. The
fee would only be charged to the I&RS
Member submitting the replacement
request.
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Producer Authorization (PAR)
NSCC is proposing to establish a new
feature (‘‘Producer Authorization’’) to
allow I&RS Members to confirm
credentials of insurance producers.
Insurance producers are insurance
agents or brokers that are licensed by
state insurance authorities to sell
insurance related products on behalf of
Carriers. In the process of selling
insurance related products, Distributors
must ensure that producers they use to
distribute products are licensed,
appointed and trained to sell such
products in the markets the Distributors
are targeting. Carriers that issue the
products maintain data reflecting the
licensing information relating to
producers that are licensed to sell their
products. Currently, there is no
standardized method for Distributors to
communicate with Carriers to
authenticate that producers are
authorized to sell the Carriers’ products
in particular markets. Producer
Authorization would provide a
standardized data transmission to allow
Distributors to confirm with Carriers the
credentials of insurance producers to
sell specific products. NSCC would
amend Rule 57, as described below, to
describe the Producer Authorization
service.
NSCC would also amend Addendum
A to adopt fees for the Producer
Authorization. The fees would consist
of a monthly fee, ranging from $250 to
$5,000 per month, that is based on the
number of messages received during the
month. The fees would only be charged
to the Carriers receiving the Producer
Authorization requests.
11 See subsections (k) and (l) of Section 1 of Rule
57, supra note 6.
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Clarifications to Rule 57 and Addendum
A
NSCC would reorganize and clarify
Rule 57 and Addendum A to more
clearly describe the existing service
offerings and incorporate descriptions
for Paperless Replacements and
Producer Authorization, as described
above. Rule 57 is currently organized
such that Section 1 of Rule 57 applies
to all I&RS and Sections 2 through 10
of Rule 57 list out the separate service
offerings within I&RS. Some service
offerings, such as I&RS settlement, are
only described in Section 1 and some
service offerings are not specifically
named in Rule 57 or are described
within other named service offerings.
NSCC is proposing to reorganize the
sections of Rule 57 such that each
service offering is separately listed in
alphabetical order in newly numbered
sections 2 through 17. The proposed list
of such service offerings would include
certain service offerings that are
currently described within sections for
other service offerings in the Rules.
NSCC would move these descriptions
into stand-alone sections of Rule 57 to
better align the descriptions of all the
service offerings with current NSCC
marketing of such service offerings.
NSCC is also proposing to update the
descriptions of I&RS features and
certain defined terms in Rule 57 and
Addendum A to align the Rules with
conventional descriptions used by
NSCC and I&RS Members and make
other clarification changes. NSCC would
update Rule 57 to ensure that consistent
defined terms are used to describe I&RS
Members and I&RS features.
NSCC is also proposing to update
Rule 57 and Addendum A to add a
three-letter designation for certain
service offerings and fees to match
descriptions of such service offerings
and fees in current NSCC marketing
descriptions.
Proposed Rule Changes
In order to implement the proposal,
NSCC would move the defined term
‘‘I&RS Members’’, which describes all
membership types that can use I&RS,
from Section 10 to Section 1(a) of Rule
57 and consistently use the defined term
throughout Rule 57 to describe all
membership types that can use I&RS. In
addition, NSCC would add a definition
of ‘‘I&RS Payments’’ in Section 1(a) of
Rule 57 to mean payments related to I&S
Eligible Products to better describe the
payments that that are processed in
I&RS.
NSCC would also reorganize
description of I&RS to align the
description of such services with
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conventional uses and current
marketing descriptions. Specifically,
NSCC would make the following
changes:
• move the description of settlement
services provided by I&RS, currently
primarily in subsections (k) and (l) of
Section 1 of Rule 57, to a new Section
16, entitled ‘‘Settlement Processing for
Insurance (STL)’’ to clarify the name of
the settlement services provided by
I&RS and reflect that it is marketed as
a separate service offering.
• reorganize the descriptions of the
service offerings of I&RS in alphabetical
order in Rule 57.
• add three -letter abbreviations in
the title of each service offering
consistent with current conventional
descriptions.
• remove the phrase ‘‘I&RS Data
regarding’’ in the ACAT/Transfers
section that is being moved because the
phrase is redundant.
• capitalize the word ‘‘Premiums’’ in
the phrase ‘‘Applications and
premiums’’ in part (b) of the
Applications and Premiums section to
refer to the correct defined term
‘‘Applications and Premiums’’ used in
part (a) of that section.
• move a description of transmission
of Subaccount Data, currently in Section
8 of Rule 57 in the Financial Activity
Reporting description, to a new Section
7 and refer to that service offering as
‘‘Financial Activity For Asset Managers
(FAM)’’ consistent with current
descriptions of that service offering and
make a corresponding change to the fee
description of the service in Addendum
A.12
• add descriptions for Paperless
Replacements and Producer
Authorization consistent with the
descriptions above in new Sections 12
and 14, respectively.
• remove the quotes around ‘‘IIEX’’ in
the title Insurance Information
Exchange in Section 10 and add a
defined term ‘‘IIEX’’ into the body of
Section 10 to conform the listing of the
four-letter abbreviation of the service in
the title with listing of the abbreviations
of other services in Rule 57.
• Add a description of the Producer
Management Portal (PMP) as a separate
service offering in a new Section 15 of
Rule 57.13
12 Transactions relating to subaccount data were
added to I&RS as part of Financial Activity
Reporting in 2018 as a method for financial
managers to get access to subaccount data relating
to variable products. See Securities Exchange Act
Release No. 83774 (Aug. 3, 2018), 83 FR 39481
(Aug. 9, 2018) (SR–NSCC–2018–005). That service
offering is now being marketed as ‘‘Financial
Activity for Asset Managers.’’
13 Licensing and Appointments (‘‘LNA’’) is a
service offering that allows I&RS Members to
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• Add a description of Subsequent
Premiums (SUB) as a separate service
offering in a new Section 17 of Rule 57
and change the description from
‘‘Subsequent Activity’’ to ‘‘Subsequent
Premiums’’ in Section IV.H.2.e of
Addendum A consistent with current
descriptions of that service offering 14
NSCC would also clarify the Rules by
deleting a provision currently in Section
3 of Rule 57 ‘‘Applications and
Premiums’’ that refers to the ability of
Members and Mutual Fund/Insurance
Services Member to submit a cancel
instruction. The Applications and
Premiums section currently provides
that if such I&RS Members submit a
cancellation instruction prior to a time
established by NSCC for such purposes,
the settlement transaction will be
canceled and removed from I&RS. When
Applications and Premiums was
implemented, NSCC included
functionality to allow I&RS Members to
submit a cancel instruction. However,
I&RS Members never use the instruction
and instead have developed functions
outside of NSCC to provide for such
cancellations. I&RS Members have not
indicated plans to use the cancellation
instruction and so NSCC removed the
functionality. NSCC would remove the
cancellation instruction language in
Applications and Premiums to reflect
that the cancellation instruction
functionality has been removed from
Applications and Premiums.
NSCC would also clarify the Rules by
more clearly stating which fees are per
transaction and per side. Currently,
footnote 6 of Addendum A states that
unless otherwise noted, transaction fees
are per side, and both sides are charged
for each item. However, in the
description of certain fees, there is also
a note that fees are per side. This note
is repetitive of footnote 6, which states
that all fees are per side unless
otherwise noted. In addition, certain fee
descriptions contain a note that such
fees are ‘‘per transaction’’, ‘‘per inquiry’’
or ‘‘per request’’ or similar designations
and such usage is not consistent. NSCC
transmit data among themselves regarding licensing
and appointment authorizations and activity
relating to producers. See Section 4 of Rule 57,
supra note 6. In 2014, NSCC broadened LNA’s
scope to specify that LNA authorization and
activities included insurance-related training of a
licensee or appointee in connection with a new
feature being added, the Producer Management
Portal. See Securities Exchange Act Release No.
72488 (June 27, 2014), 79 FR 38098 (July 3, 2014)
(SR–NSCC–2014–08). Producer Management Portal
is now marketed as a separate service offering.
14 Subsequent Premiums is a service offering that
enables Distributors to transmit I&RS Data to
Carriers regarding subsequent premiums.
Previously, it has been part of Applications and
Premiums but is now marketed as a separate service
offering as ‘‘Subsequent Premiums (SUB).’’
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would add in footnote 6 of Addendum
A that unless otherwise noted, all fees
for I&RS are per transaction, per side
and remove the similar descriptions in
each fee description where the general
designation applies for consistency.
NSCC would change the title in
Section IV.H.3 of Addendum A from
‘‘Other Service Fees’’ to ‘‘Other
Transaction Fees’’ to conform to the
description of transaction fees in
Section IV.H.2 of Addendum A and
would change the heading ‘‘TIER’’ listed
in Section IV.H.3 to ‘‘PRICE TIER’’ to
conform how those pricing tiers are
described in other marketing materials
and to avoid confusion that those tiers
are related to transaction volumes.
NSCC would change the three-letter
designation for Licensing and
Appointments from ‘‘L&A’’ to ‘‘LNA’’ in
Section IV.H.3 of Addendum A to
reflect current marketing descriptions.
NSCC would also delete a reference to
‘‘Producer Management Portal (per
inquiry)’’ currently listed under TIER 4
in Section IV.H.3 of Addendum A. The
description of the fees for Producer
Management Portal were moved from
Section IV.H.3 to Section IV.H.2.h of
Addendum A and the reference to
Producer Management Portal was
intended to be deleted from Section
IV.H.3 in 2019 from a rule filing filed in
2018 (‘‘2018 Filing’’) 15 but due to a
clerical mistake the change was not
made in the Rules. NSCC would delete
the reference from Section IV.H.3 as
contemplated by the 2018 Filing.
Implementation Timeframe
NSCC would implement the proposed
changes in three phases. NSCC would
implement the clarifications to Rule 57
and Addendum A discussed above upon
filing. NSCC would adopt the Producer
Authorization service offering,
associated fees and related changes to
the Rules by no later than July 31, 2024.
NSCC would implement the Paperless
Replacements service offering,
associated fees and related changes to
the Rules by no later than September 30,
2024.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act,
requires, that the Rules be designed to,
among other things, promote the prompt
and accurate clearance and settlement of
securities transactions.16
The proposed addition of Paperless
Replacements and Producer
Authorization service offerings would
15 See Securities Exchange Act Release No. 84771
(Dec. 10, 2018), 83 FR 64393 (Dec. 14, 2018) (SR–
NSCC–2018–002).
16 15 U.S.C. 78q–1(b)(3)(F).
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58207
provide a standardized method to
communicate I&RS Data among I&RS
Members relating to (i) replacements of
insurance and annuity contracts and
related settlement of funds and (ii)
producer credentials related to specific
products, each as discussed above. The
addition of Paperless Replacements
discussed above would enhance
Carriers’ ability to send and receive
required information relating to
replacements of insurance or annuity
contracts and related settlement of
funds by providing an automated data
only transmission relating to such
replacements between Carriers and
bring greater efficiency to the transfer
and settlement of those products as set
forth above. The addition of Producer
Authorization discussed above would
enhance Distributors’ ability to confirm
with Carriers the credentials of
insurance producers to sell specific
products by providing a standardized
method to communicate such
information and bring greater efficiency
and expediency to the buying, selling
and settlement of such I&RS Eligible
Products among I&RS Members.
Providing a more efficient and
streamlined process with respect to
transmitting and receiving such I&RS
Data would promote the prompt and
accurate clearance and settlement of
securities transactions, consistent with
the requirements of Section 17A(b)(3)(F)
of the Act.17
The clarifications to Rule 57 and
Addendum A would enhance the clarity
and transparency of the Rules with
respect to services offered by NSCC.
Specifically, these rule changes would
allow I&RS Members to have a better
understanding of the Rules relating to
I&RS. The use of the defined terms
‘‘I&RS Members’’ and ‘‘I&RS Payments’’
throughout the rules and the
reorganization of Section 1 of Rule 57
and the descriptions of the service
offerings discussed above would reflect
current uses of the terms used within
I&RS. Removing the language regarding
the ability of I&RS Members to submit
a cancel instruction in the Applications
and Premiums section which is no
longer applicable would remove
unnecessary language in 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
17 Id.
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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.18
Section 17A(b)(3)(D) of the Act 19
requires that the Rules provide for the
equitable allocation of reasonable dues,
fees, and other charges among its
participants. NSCC believes the
proposed fees for Paperless
Replacements and Producer
Authorization would align with the cost
of building and delivering the proposed
service offerings, consistent with this
provision of the Act. NSCC believes the
proposed changes to the fees are
equitable because they would apply
uniformly to all I&RS Members that
utilize the service offerings. NSCC
believes the proposed changes are
reasonable because they would be
commensurate with the costs of
resources allocated by NSCC in
developing and maintaining the service
offerings. Based on financial projections
of development and maintenance costs
and anticipated participation by I&RS
Members, it is anticipated that the
Paperless Replacements and Producer
Authorization costs and revenues would
result in a slight increase in the overall
operating margin percentage of I&RS
and allow NSCC to recoup the costs of
building the enhancements within
approximately two years of
implementing the fees. Therefore, by
establishing fees that align with the cost
of delivery of these service offerings 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.20
(B) Clearing Agency’s Statement on
Burden on Competition
NSCC does not believe that the
proposed rule changes would have any
adverse impact, or impose any burden,
on competition.
The proposed changes to adopt the
Paperless Replacements and Producer
Authorization service offerings would
add optional functions to NSCC’s
services to provide more efficient
methods by which subscribing Carriers
and Distributors may transmit, view and
retrieve I&RS Data. Such changes would
not affect services for I&RS Members
that do not subscribe to such service
offerings and non-subscribing I&RS
18 Id.
19 15
U.S.C. 78q–1(b)(3)(D).
20 Id.
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Members would transmit, view and
retrieve I&RS Data in the same manner
as they currently transmit, view and
retrieve I&RS Data. The fees proposed
for each of these service offerings were
designed to be reasonable and align
with the projected cost of building and
operating such service offerings and
would be charged ratably based on each
I&RS Members’ use of such service
offerings. Therefore, the proposed
changes to implement such optional
service offerings and the associated fees
would not disproportionally impact any
I&RS 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
changes would improve the efficiency
by which subscribing I&RS Members
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 features would provide these
firms with a faster, more streamlined
method of transmitting and receiving
I&RS Data, and therefore could enable
I&RS Eligible Products to be marketed
more quickly. Specifically, I&RS
Members could have the ability to
distribute I&RS Eligible Products into
the market to consumers more quickly
because I&RS Members would have the
ability to obtain information with
respect to these products in a quicker,
more efficient manner.
NSCC does not believe the
clarifications to Rule 57 and Addendum
A would impact competition. Such
changes would help clarify the Rules. In
addition, the changes would facilitate
I&RS Members’ understanding of the
Rules and their obligations thereunder.
The proposed changes would not affect
NSCC’s operations or the rights and
obligations of the membership. As such,
NSCC believes these proposed rule
changes would not have any impact on
competition.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
NSCC has not received or solicited
any written comments relating to this
proposal. If any written comments are
received, they will be publicly filed as
an Exhibit 2 to this filing, as required by
Form 19b–4 and the General
Instructions thereto.
Persons submitting comments are
cautioned that, according to Section IV
(Solicitation of Comments) of the
Exhibit 1A in the General Instructions to
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Form 19b–4, the Commission does not
edit personal identifying information
from comment submissions.
Commenters should submit only
information that they wish to make
available publicly, including their
name, email address, and any other
identifying information.
All prospective commenters should
follow the Commission’s instructions on
how to submit comments, available at
www.sec.gov/regulatory-actions/how-tosubmit-comments. General questions
regarding the rule filing process or
logistical questions regarding this filing
should be directed to the Main Office of
the Commission’s Division of Trading
and Markets at tradingandmarkets@
sec.gov or 202–551–5777.
NSCC reserves the right not to
respond to any comments received.
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) 21 of the Act and paragraph
(f) 22 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 (www.sec.gov/rules/
sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NSCC–2024–005 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–2024–005. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
21 15
22 17
E:\FR\FM\17JYN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
17JYN1
Federal Register / Vol. 89, No. 137 / Wednesday, July 17, 2024 / Notices
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
(dtcc.com/legal/sec-rule-filings). Do not
include personal identifiable
information in submissions; you should
submit only information that you wish
to make available publicly. We may
redact in part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–NSCC–2024–005
and should be submitted on or before
August 7, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024–15677 Filed 7–16–24; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–100496; File No. SR–
CboeEDGX–2024–041]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule To Introduce New
Transaction Fee Tiers
ddrumheller on DSK120RN23PROD with NOTICES1
July 11, 2024.
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 July 1,
2024, Cboe EDGX Exchange, Inc.
(‘‘Exchange’’ or ‘‘EDGX’’) filed with the
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
19:21 Jul 16, 2024
Jkt 262001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) proposes to
amend its Fee Schedule. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
at the Exchange’s Office of the
Secretary, 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
Exchange 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
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
23 17
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
The Exchange proposes to amend its
Fee Schedule applicable to its equities
trading platform (‘‘EDGX Equities’’) by:
(1) introducing a new Add Volume Tier
and (2) introducing a new Market
Quality Tier. The Exchange proposes to
implement these changes effective July
1, 2024.
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 registered equities exchanges, as well
as a number of alternative trading
systems and other off-exchange venues
that do not have similar self-regulatory
responsibilities under the Securities
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
58209
Exchange Act of 1934 (the ‘‘Act’’), to
which market participants may direct
their order flow. Based on publicly
available information,3 no single
registered equities exchange has more
than 17% of the market share. Thus, in
such a low-concentrated and highly
competitive market, no single equities
exchange possesses significant pricing
power in the execution of order flow.
The Exchange in particular operates a
‘‘Maker-Taker’’ model whereby it pays
rebates to members that add liquidity
and assesses fees to those that remove
liquidity. The Exchange’s Fee Schedule
sets forth the standard rebates and rates
applied per share for orders that provide
and remove liquidity, respectively.
Currently, for orders in securities priced
at or above $1.00, the Exchange
provides a standard rebate of $0.00160
per share for orders that add liquidity
and assesses a fee of $0.0030 per share
for orders that remove liquidity.4 For
orders in securities priced below $1.00,
the Exchange provides a standard rebate
of $0.00003 per share for orders that add
liquidity and assesses a fee of 0.30% of
the total dollar value for orders that
remove liquidity.5 Additionally, in
response to the competitive
environment, the Exchange also offers
tiered pricing which provides Members
opportunities to qualify for higher
rebates or reduced fees where certain
volume criteria and thresholds are met.
Tiered pricing provides an incremental
incentive for Members to strive for
higher tier levels, which provides
increasingly higher benefits or discounts
for satisfying increasingly more
stringent criteria.
Market Quality Tier
Under footnote 1 of the Fee Schedule,
the Exchange currently offers various
Add/Remove Volume Tiers that provide
enhanced rebates for orders yielding fee
codes B,6 V,7 Y,8 3,9 and 4.10 In
particular, the Exchange offers one
Market Quality Tier that provides an
enhanced rebate where a Member
3 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (May 22, 2024),
available at https://www.cboe.com/us/equities/
market_statistics/.
4 See EDGX Equities Fee Schedule, Standard
Rates.
5 Id.
6 Fee code B is appended to orders that add
liquidity to EDGX in Tape B securities.
7 Fee code V is appended to orders that add
liquidity to EDGX in Tape A securities.
8 Fee code Y is appended to orders that add
liquidity to EDGX in Tape C securities.
9 Fee code 3 is appended to orders that add
liquidity to EDGX in Tape A or Tape C securities
during the pre and post market.
10 Fee code 4 is appended to orders that add
liquidity to EDGX in Tape B securities during the
pre and post market.
E:\FR\FM\17JYN1.SGM
17JYN1
]]>Agencies
[Federal Register Volume 89, Number 137 (Wednesday, July 17, 2024)]
[Notices]
[Pages 58205-58209]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15677]
[[Page 58205]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100507; File No. SR-NSCC-2024-005]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Add Paperless Replacements and Producer Authorization
Service Offerings to I&RS and Make Certain Clarification Changes in the
Rules
July 11, 2024.
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 July 3, 2024, 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\
Rule 19b-4(f)(2) \4\ and Rule 19b-4(f)(4) thereunder.\5\ 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 consists of modifications to Insurance &
Retirement Services (``I&RS'') in order to (i) provide for two new
service offerings relating to replacements of insurance contracts and
producer authorizations, and related fees for each new service
offering, (ii) update the descriptions of I&RS service offerings and
certain defined terms in Rule 57 and Addendum A of NSCC's Rules &
Procedures (``Rules''). and (iii) make other clarification changes, as
described in greater detail below.\6\
---------------------------------------------------------------------------
\6\ Terms not defined herein are defined in the Rules, available
at www.dtcc.com/legal/rules-and-procedures.
---------------------------------------------------------------------------
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the clearing agency included
statements concerning the purpose of and basis for the proposed rule
change and discussed any comments it received on the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. The clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
The proposed rule change consists of modifications to the Rules in
order to (i) provide for two new service offerings relating to
replacements of insurance contracts and producer authorizations, and
related fees for each new service offering, (ii) update the
descriptions of I&RS offerings and certain defined terms in Rule 57 and
Addendum A, and (iii) make other clarification changes, as described in
greater detail below.
The objectives and expected impacts of the proposed rule change to
I&RS Members \7\ would be to make available two new optional service
offerings that would provide more efficient methods for I&RS Members to
choose to transmit, view and retrieve I&RS Data and improve Members'
understanding of the Rules relating to I&RS.
---------------------------------------------------------------------------
\7\ I&RS Members 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'').
---------------------------------------------------------------------------
The proposed new service offerings discussed below were developed
at the request of and in consultation with industry participants, and
the proposed fees for such service offerings were designed to pay for
the costs of developing and maintaining such offerings in a manner that
would fulfill the requirements expected from industry participants
consistent with NSCC's cost-based plus markup fee model.\8\ Based on
financial projections of development and maintenance costs and
anticipated participation by I&RS Members, it is anticipated that the
costs and revenues would result in a slight increase in the overall
operating margin percentage of I&RS. NSCC anticipates recouping the
costs of building the service offerings within approximately two years
of implementing the fees.
---------------------------------------------------------------------------
\8\ 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 www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf, at 124.
---------------------------------------------------------------------------
I&RS Services
I&RS allows I&RS Members to transmit I&RS Data \9\ among each
other, including data relating to 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.
I&RS also allows certain I&RS Members to settle payments relating to
I&RS Eligible Products. NSCC does not act as a central counterparty
with respect to I&RS and I&RS are not guaranteed by NSCC.
---------------------------------------------------------------------------
\9\ ``I&RS Data'' means data and information relating to I&RS
Eligible Products. See Rule 57, supra note 6. ``I&RS Eligible
Product'' means 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 of the Rules. See definition of I&RS
Eligible Product, Rule 1, supra note 6.
---------------------------------------------------------------------------
Paperless Replacements Processing (RPL)
NSCC is proposing to establish a new service offering intended to
support the transmission of I&RS Data regarding the transfer, exchange
or replacement of existing insurance or annuity contracts (``Paperless
Replacements''). Clients of I&RS Members holding insurance or annuity
contracts replace existing contracts with new contracts from time to
time. These replacements involve transfer of asset forms such as 1035
forms \10\ and other such forms or documents to document the requests
and the authorization for a replacement. Currently, for Carriers, there
is no centralized automated process for replacements and such
replacements are a manual process involving exchanging paperwork often
between different Carriers using facsimile, mail, email or other means.
Paperless Replacements would provide for a data-only transmission
relating to such replacements between Carriers, automating the current
manual process and decreasing the administrative burden on and risk to
Carriers of processing these replacements.
---------------------------------------------------------------------------
\10\ 1035 forms are forms required to process a 1035 exchange
which is an exchange made pursuant to a provision in the Internal
Revenue Service tax code allowing for a tax-free transfer of certain
insurance and annuity products.
---------------------------------------------------------------------------
There also may be movement of funds associated with these
replacements. Settlement Processing for Insurance, an existing
settlement feature of I&RS supporting the settlements of payments
[[Page 58206]]
relating to I&RS Eligible Products,\11\ currently supports the
settlement of payments related to such replacements and would continue
to do so following the addition of Paperless Replacements. The
settlement feature, together with Paperless Replacements, would provide
for an automated process for processing forms and documents for
replacements of such contracts and associated funds. In order to adopt
this service offering, NSCC would amend Rule 57 to describe Paperless
Replacements, as described below.
---------------------------------------------------------------------------
\11\ See subsections (k) and (l) of Section 1 of Rule 57, supra
note 6.
---------------------------------------------------------------------------
NSCC would also amend Addendum A to adopt a fee for Paperless
Replacements of $1.85 per request. The fee would only be charged to the
I&RS Member submitting the replacement request.
Producer Authorization (PAR)
NSCC is proposing to establish a new feature (``Producer
Authorization'') to allow I&RS Members to confirm credentials of
insurance producers. Insurance producers are insurance agents or
brokers that are licensed by state insurance authorities to sell
insurance related products on behalf of Carriers. In the process of
selling insurance related products, Distributors must ensure that
producers they use to distribute products are licensed, appointed and
trained to sell such products in the markets the Distributors are
targeting. Carriers that issue the products maintain data reflecting
the licensing information relating to producers that are licensed to
sell their products. Currently, there is no standardized method for
Distributors to communicate with Carriers to authenticate that
producers are authorized to sell the Carriers' products in particular
markets. Producer Authorization would provide a standardized data
transmission to allow Distributors to confirm with Carriers the
credentials of insurance producers to sell specific products. NSCC
would amend Rule 57, as described below, to describe the Producer
Authorization service.
NSCC would also amend Addendum A to adopt fees for the Producer
Authorization. The fees would consist of a monthly fee, ranging from
$250 to $5,000 per month, that is based on the number of messages
received during the month. The fees would only be charged to the
Carriers receiving the Producer Authorization requests.
Clarifications to Rule 57 and Addendum A
NSCC would reorganize and clarify Rule 57 and Addendum A to more
clearly describe the existing service offerings and incorporate
descriptions for Paperless Replacements and Producer Authorization, as
described above. Rule 57 is currently organized such that Section 1 of
Rule 57 applies to all I&RS and Sections 2 through 10 of Rule 57 list
out the separate service offerings within I&RS. Some service offerings,
such as I&RS settlement, are only described in Section 1 and some
service offerings are not specifically named in Rule 57 or are
described within other named service offerings. NSCC is proposing to
reorganize the sections of Rule 57 such that each service offering is
separately listed in alphabetical order in newly numbered sections 2
through 17. The proposed list of such service offerings would include
certain service offerings that are currently described within sections
for other service offerings in the Rules. NSCC would move these
descriptions into stand-alone sections of Rule 57 to better align the
descriptions of all the service offerings with current NSCC marketing
of such service offerings.
NSCC is also proposing to update the descriptions of I&RS features
and certain defined terms in Rule 57 and Addendum A to align the Rules
with conventional descriptions used by NSCC and I&RS Members and make
other clarification changes. NSCC would update Rule 57 to ensure that
consistent defined terms are used to describe I&RS Members and I&RS
features.
NSCC is also proposing to update Rule 57 and Addendum A to add a
three-letter designation for certain service offerings and fees to
match descriptions of such service offerings and fees in current NSCC
marketing descriptions.
Proposed Rule Changes
In order to implement the proposal, NSCC would move the defined
term ``I&RS Members'', which describes all membership types that can
use I&RS, from Section 10 to Section 1(a) of Rule 57 and consistently
use the defined term throughout Rule 57 to describe all membership
types that can use I&RS. In addition, NSCC would add a definition of
``I&RS Payments'' in Section 1(a) of Rule 57 to mean payments related
to I&S Eligible Products to better describe the payments that that are
processed in I&RS.
NSCC would also reorganize description of I&RS to align the
description of such services with conventional uses and current
marketing descriptions. Specifically, NSCC would make the following
changes:
move the description of settlement services provided by
I&RS, currently primarily in subsections (k) and (l) of Section 1 of
Rule 57, to a new Section 16, entitled ``Settlement Processing for
Insurance (STL)'' to clarify the name of the settlement services
provided by I&RS and reflect that it is marketed as a separate service
offering.
reorganize the descriptions of the service offerings of
I&RS in alphabetical order in Rule 57.
add three -letter abbreviations in the title of each
service offering consistent with current conventional descriptions.
remove the phrase ``I&RS Data regarding'' in the ACAT/
Transfers section that is being moved because the phrase is redundant.
capitalize the word ``Premiums'' in the phrase
``Applications and premiums'' in part (b) of the Applications and
Premiums section to refer to the correct defined term ``Applications
and Premiums'' used in part (a) of that section.
move a description of transmission of Subaccount Data,
currently in Section 8 of Rule 57 in the Financial Activity Reporting
description, to a new Section 7 and refer to that service offering as
``Financial Activity For Asset Managers (FAM)'' consistent with current
descriptions of that service offering and make a corresponding change
to the fee description of the service in Addendum A.\12\
---------------------------------------------------------------------------
\12\ Transactions relating to subaccount data were added to I&RS
as part of Financial Activity Reporting in 2018 as a method for
financial managers to get access to subaccount data relating to
variable products. See Securities Exchange Act Release No. 83774
(Aug. 3, 2018), 83 FR 39481 (Aug. 9, 2018) (SR-NSCC-2018-005). That
service offering is now being marketed as ``Financial Activity for
Asset Managers.''
---------------------------------------------------------------------------
add descriptions for Paperless Replacements and Producer
Authorization consistent with the descriptions above in new Sections 12
and 14, respectively.
remove the quotes around ``IIEX'' in the title Insurance
Information Exchange in Section 10 and add a defined term ``IIEX'' into
the body of Section 10 to conform the listing of the four-letter
abbreviation of the service in the title with listing of the
abbreviations of other services in Rule 57.
Add a description of the Producer Management Portal (PMP)
as a separate service offering in a new Section 15 of Rule 57.\13\
---------------------------------------------------------------------------
\13\ Licensing and Appointments (``LNA'') is a service offering
that allows I&RS Members to transmit data among themselves regarding
licensing and appointment authorizations and activity relating to
producers. See Section 4 of Rule 57, supra note 6. In 2014, NSCC
broadened LNA's scope to specify that LNA authorization and
activities included insurance-related training of a licensee or
appointee in connection with a new feature being added, the Producer
Management Portal. See Securities Exchange Act Release No. 72488
(June 27, 2014), 79 FR 38098 (July 3, 2014) (SR-NSCC-2014-08).
Producer Management Portal is now marketed as a separate service
offering.
---------------------------------------------------------------------------
[[Page 58207]]
Add a description of Subsequent Premiums (SUB) as a
separate service offering in a new Section 17 of Rule 57 and change the
description from ``Subsequent Activity'' to ``Subsequent Premiums'' in
Section IV.H.2.e of Addendum A consistent with current descriptions of
that service offering \14\
---------------------------------------------------------------------------
\14\ Subsequent Premiums is a service offering that enables
Distributors to transmit I&RS Data to Carriers regarding subsequent
premiums. Previously, it has been part of Applications and Premiums
but is now marketed as a separate service offering as ``Subsequent
Premiums (SUB).''
---------------------------------------------------------------------------
NSCC would also clarify the Rules by deleting a provision currently
in Section 3 of Rule 57 ``Applications and Premiums'' that refers to
the ability of Members and Mutual Fund/Insurance Services Member to
submit a cancel instruction. The Applications and Premiums section
currently provides that if such I&RS Members submit a cancellation
instruction prior to a time established by NSCC for such purposes, the
settlement transaction will be canceled and removed from I&RS. When
Applications and Premiums was implemented, NSCC included functionality
to allow I&RS Members to submit a cancel instruction. However, I&RS
Members never use the instruction and instead have developed functions
outside of NSCC to provide for such cancellations. I&RS Members have
not indicated plans to use the cancellation instruction and so NSCC
removed the functionality. NSCC would remove the cancellation
instruction language in Applications and Premiums to reflect that the
cancellation instruction functionality has been removed from
Applications and Premiums.
NSCC would also clarify the Rules by more clearly stating which
fees are per transaction and per side. Currently, footnote 6 of
Addendum A states that unless otherwise noted, transaction fees are per
side, and both sides are charged for each item. However, in the
description of certain fees, there is also a note that fees are per
side. This note is repetitive of footnote 6, which states that all fees
are per side unless otherwise noted. In addition, certain fee
descriptions contain a note that such fees are ``per transaction'',
``per inquiry'' or ``per request'' or similar designations and such
usage is not consistent. NSCC would add in footnote 6 of Addendum A
that unless otherwise noted, all fees for I&RS are per transaction, per
side and remove the similar descriptions in each fee description where
the general designation applies for consistency.
NSCC would change the title in Section IV.H.3 of Addendum A from
``Other Service Fees'' to ``Other Transaction Fees'' to conform to the
description of transaction fees in Section IV.H.2 of Addendum A and
would change the heading ``TIER'' listed in Section IV.H.3 to ``PRICE
TIER'' to conform how those pricing tiers are described in other
marketing materials and to avoid confusion that those tiers are related
to transaction volumes. NSCC would change the three-letter designation
for Licensing and Appointments from ``L&A'' to ``LNA'' in Section
IV.H.3 of Addendum A to reflect current marketing descriptions.
NSCC would also delete a reference to ``Producer Management Portal
(per inquiry)'' currently listed under TIER 4 in Section IV.H.3 of
Addendum A. The description of the fees for Producer Management Portal
were moved from Section IV.H.3 to Section IV.H.2.h of Addendum A and
the reference to Producer Management Portal was intended to be deleted
from Section IV.H.3 in 2019 from a rule filing filed in 2018 (``2018
Filing'') \15\ but due to a clerical mistake the change was not made in
the Rules. NSCC would delete the reference from Section IV.H.3 as
contemplated by the 2018 Filing.
---------------------------------------------------------------------------
\15\ See Securities Exchange Act Release No. 84771 (Dec. 10,
2018), 83 FR 64393 (Dec. 14, 2018) (SR-NSCC-2018-002).
---------------------------------------------------------------------------
Implementation Timeframe
NSCC would implement the proposed changes in three phases. NSCC
would implement the clarifications to Rule 57 and Addendum A discussed
above upon filing. NSCC would adopt the Producer Authorization service
offering, associated fees and related changes to the Rules by no later
than July 31, 2024. NSCC would implement the Paperless Replacements
service offering, associated fees and related changes to the Rules by
no later than September 30, 2024.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act, requires, that the Rules be
designed to, among other things, promote the prompt and accurate
clearance and settlement of securities transactions.\16\
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The proposed addition of Paperless Replacements and Producer
Authorization service offerings would provide a standardized method to
communicate I&RS Data among I&RS Members relating to (i) replacements
of insurance and annuity contracts and related settlement of funds and
(ii) producer credentials related to specific products, each as
discussed above. The addition of Paperless Replacements discussed above
would enhance Carriers' ability to send and receive required
information relating to replacements of insurance or annuity contracts
and related settlement of funds by providing an automated data only
transmission relating to such replacements between Carriers and bring
greater efficiency to the transfer and settlement of those products as
set forth above. The addition of Producer Authorization discussed above
would enhance Distributors' ability to confirm with Carriers the
credentials of insurance producers to sell specific products by
providing a standardized method to communicate such information and
bring greater efficiency and expediency to the buying, selling and
settlement of such I&RS Eligible Products among I&RS Members. Providing
a more efficient and streamlined process with respect to transmitting
and receiving such I&RS Data would promote the prompt and accurate
clearance and settlement of securities transactions, consistent with
the requirements of Section 17A(b)(3)(F) of the Act.\17\
---------------------------------------------------------------------------
\17\ Id.
---------------------------------------------------------------------------
The clarifications to Rule 57 and Addendum A would enhance the
clarity and transparency of the Rules with respect to services offered
by NSCC. Specifically, these rule changes would allow I&RS Members to
have a better understanding of the Rules relating to I&RS. The use of
the defined terms ``I&RS Members'' and ``I&RS Payments'' throughout the
rules and the reorganization of Section 1 of Rule 57 and the
descriptions of the service offerings discussed above would reflect
current uses of the terms used within I&RS. Removing the language
regarding the ability of I&RS Members to submit a cancel instruction in
the Applications and Premiums section which is no longer applicable
would remove unnecessary language in 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
[[Page 58208]]
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.\18\
---------------------------------------------------------------------------
\18\ Id.
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Section 17A(b)(3)(D) of the Act \19\ requires that the Rules
provide for the equitable allocation of reasonable dues, fees, and
other charges among its participants. NSCC believes the proposed fees
for Paperless Replacements and Producer Authorization would align with
the cost of building and delivering the proposed service offerings,
consistent with this provision of the Act. NSCC believes the proposed
changes to the fees are equitable because they would apply uniformly to
all I&RS Members that utilize the service offerings. NSCC believes the
proposed changes are reasonable because they would be commensurate with
the costs of resources allocated by NSCC in developing and maintaining
the service offerings. Based on financial projections of development
and maintenance costs and anticipated participation by I&RS Members, it
is anticipated that the Paperless Replacements and Producer
Authorization costs and revenues would result in a slight increase in
the overall operating margin percentage of I&RS and allow NSCC to
recoup the costs of building the enhancements within approximately two
years of implementing the fees. Therefore, by establishing fees that
align with the cost of delivery of these service offerings 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.\20\
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\19\ 15 U.S.C. 78q-1(b)(3)(D).
\20\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
NSCC does not believe that the proposed rule changes would have any
adverse impact, or impose any burden, on competition.
The proposed changes to adopt the Paperless Replacements and
Producer Authorization service offerings would add optional functions
to NSCC's services to provide more efficient methods by which
subscribing Carriers and Distributors may transmit, view and retrieve
I&RS Data. Such changes would not affect services for I&RS Members that
do not subscribe to such service offerings and non-subscribing I&RS
Members would transmit, view and retrieve I&RS Data in the same manner
as they currently transmit, view and retrieve I&RS Data. The fees
proposed for each of these service offerings were designed to be
reasonable and align with the projected cost of building and operating
such service offerings and would be charged ratably based on each I&RS
Members' use of such service offerings. Therefore, the proposed changes
to implement such optional service offerings and the associated fees
would not disproportionally impact any I&RS 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 changes would improve the
efficiency by which subscribing I&RS Members 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 features
would provide these firms with a faster, more streamlined method of
transmitting and receiving I&RS Data, and therefore could enable I&RS
Eligible Products to be marketed more quickly. Specifically, I&RS
Members could have the ability to distribute I&RS Eligible Products
into the market to consumers more quickly because I&RS Members would
have the ability to obtain information with respect to these products
in a quicker, more efficient manner.
NSCC does not believe the clarifications to Rule 57 and Addendum A
would impact competition. Such changes would help clarify the Rules. In
addition, the changes would facilitate I&RS Members' understanding of
the Rules and their obligations thereunder. The proposed changes would
not affect NSCC's operations or the rights and obligations of the
membership. As such, NSCC believes these proposed rule changes would
not have any impact on competition.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
NSCC has not received or solicited any written comments relating to
this proposal. If any written comments are received, they will be
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to
Section IV (Solicitation of Comments) of the Exhibit 1A in the General
Instructions to Form 19b-4, the Commission does not edit personal
identifying information from comment submissions. Commenters should
submit only information that they wish to make available publicly,
including their name, email address, and any other identifying
information.
All prospective commenters should follow the Commission's
instructions on how to submit comments, available at www.sec.gov/regulatory-actions/how-to-submit-comments. General questions regarding
the rule filing process or logistical questions regarding this filing
should be directed to the Main Office of the Commission's Division of
Trading and Markets at [email protected] or 202-551-5777.
NSCC reserves the right not to respond to any comments received.
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) \21\ of the Act and paragraph (f) \22\ 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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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 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 (www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NSCC-2024-005 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-2024-005. This
file number should be included on the subject line if email is used. To
help the Commission process and review your
[[Page 58209]]
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 (dtcc.com/legal/sec-rule-filings). Do not include personal identifiable information in
submissions; you should submit only information that you wish to make
available publicly. We may redact in part or withhold entirely from
publication submitted material that is obscene or subject to copyright
protection. All submissions should refer to File Number SR-NSCC-2024-
005 and should be submitted on or before August 7, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-15677 Filed 7-16-24; 8:45 am]
BILLING CODE 8011-01-P
