Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Add Activity Status Tracking to I&RS and Make Certain Clarification Changes in the Rules, 92978-92981 [2024-27478]
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92978
Federal Register / Vol. 89, No. 227 / Monday, November 25, 2024 / Notices
for investigations of individuals holding
low risk non-sensitive positions.
As a result of a new fiscal year
beginning after the posting of the 60 Day
Notice on September 11, 2024, the
number of respondents in the analysis
has been updated from the average of
55,000 respondents in FY18, 19 and 20
to 239,900, which was the number of
respondents in FY24. The actual
estimated time per respondent has not
changed and remains 120 minutes.
Analysis
Agency: Office of Personnel
Management.
Title: Questionnaire for Non-Sensitive
Positions, Standard Form 85 (SF 85).
OMB Number: 3206–0261.
Frequency: On occasion.
Affected Public: Individuals.
Number of Respondents: 239,200.
Estimated Time per Respondent: 120
minutes.
Total Burden Hours: 478,400.
Alexys Stanley,
Federal Register Liaison.
[FR Doc. 2024–27464 Filed 11–22–24; 8:45 am]
BILLING CODE 6325–66–P
SECURITIES AND EXCHANGE
COMMISSION
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
modifications to NSCC’s Insurance &
Retirement Services (‘‘I&RS’’) in order to
provide for Activity Status Tracking
(‘‘Activity Status’’), a new service
offering designed to allow I&RS
members to communicate with each
other relating to activity status of I&RS
transactions, and to make other
clarification changes to the Rules, 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
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
[Release No. 34–101656; File No. SR–
NSCC–2024–009]
1. Purpose
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Add Activity Status
Tracking to I&RS and Make Certain
Clarification Changes in the Rules
khammond on DSK9W7S144PROD with NOTICES
November 19, 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 November
14, 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 and Rule
19b–4(f)(2) 4 and Rule 19b–4(f)(4)
thereunder.5 The Commission is
publishing this notice to solicit
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).
2 17
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The proposed rule change consists of
modifications to I&RS in order to
provide for Activity Status, a new
service offering designed to allow I&RS
members to communicate with each
other relating to activity status of I&RS
transactions, and to make other
clarification changes to the Rules, 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
a new optional service offering that
would provide a more efficient method
for I&RS Members to choose to transmit,
view and retrieve I&RS Data and to
improve the Member’s understanding of
the Rules relating to I&RS.
6 Terms not defined herein are defined in the
NSCC Rules & Procedures (‘‘Rules’’), available at
www.dtcc.com/legal/rules-and-procedures.
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’’).
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Activity Status was developed at the
request of and in consultation with
industry participants, and the proposed
fees for the service offering were
designed to pay for the costs of
developing and maintaining such
offering 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 offering within approximately
3.5 years of implementing the fees. In
addition to the building cost of Activity
Status, NSCC incurs a run-cost based on
use and maintenance of its staffing and
technology resources to operate I&RS.
NSCC would continue to evaluate the
costs and revenues of Activity Status
after implementation to determine if its
fees for the service are consistent with
NSCC’s overall pricing methodology.
As with its other services, if NSCC
determines that its operating margin is
too high or too low, NSCC could change
pricing levels of Activity Status to be
consistent with its overall pricing
methodology.
I&RS
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
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 118.
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.
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Federal Register / Vol. 89, No. 227 / Monday, November 25, 2024 / Notices
NSCC would add the following
description of Activity Status in a new
Section 3 in Rule 57:
I&RS and I&RS are not guaranteed by
NSCC.
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Activity Status Tracking (ACT)
NSCC is proposing to establish
Activity Status which is intended to
allow I&RS Members to communicate
the status of business transactions
involving I&RS Eligible Products.
Currently, there is not a standardized
method for I&RS Members to
communicate with each other relating to
the status of transactions involving I&RS
Eligible Products from the beginning of
the application process until the
applicable contracts are in force.
Applications that are submitted to
Carriers may take weeks to process
before a position is sent back to a
Distributor. During the processing time,
there is currently no standardized way
to communicate the status of the order.
Overseeing the statuses of new business
across different Carriers can be difficult
and inefficient, with many
communications existing across
multiple mediums, like paper
applications, Carrier websites and
phone calls. For instance, some Carriers
offer activity status of new business via
their public website which requires
Distributors to go to multiple Carrier
websites to get a complete view of their
outstanding business.
Clients have requested a feature that
would allow I&RS Members to update
each other on the status of transactions
in I&RS Eligible Products beginning at
the application stage including such
information as the applicable Carrier,
product type, product CUSIP (if
applicable), the producer involved in
the transaction and similar information.
Activity Status would provide the
ability of I&RS Members to
communicate with each other using
standardized messages relating to the
status of transactions in I&RS Eligible
Products from the start of such
transactions beginning at the
application stage. Activity Status is
designed to standardize messages
relating to providing real-time activity
across platforms and planning tools.
I&RS Members would be able to track
electronic applications through the
underwriting process, participating in
standardized communication.
As with other I&RS service offerings,
Activity Status was built to be
accessible by an Application
Programming Interface (‘‘API’’)
specifically for use for users of Activity
Status. Using the Activity Status API,
I&RS Members will be able to send
messages in a standard file format
containing information relating to the
activity status of each transaction.
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Activity Status Tracking (ACT)
SEC. 3. The Corporation may provide
a service to enable I&RS Members to
transmit status information to other
I&RS Members relating to transactions
involving I&RS Eligible Products.
NSCC would also renumber the
sections following Activity Status to
reflect the addition of Activity Status as
a new Section 3.
NSCC would also amend Addendum
A to provide for fees for Activity Status.
The fees would be $0.35 per transaction,
per side. NSCC would add a fee
description for Activity Status in a
Section IV.H.3. in Addendum A.
Additional Clarification Changes
NSCC would also modify the names
of two services in Addendum A for
clarity. In Section IV.H.2.c. of
Addendum A, NSCC would change the
description of ‘‘Commissions (COM)’’ to
‘‘Commissions and Compensation
(COM)’’ and in Section IV.H.2.d. of
Addendum A, NSCC would change the
description of ‘‘Initial Application
Information (APP)’’ to ‘‘Applications
and Premiums (APP)’’. In each case,
NSCC would be changing the
descriptions to match the formal name
of those services and to match the
description of those services in Rule 57
for consistency and to make the Rules
easier to understand for I&RS Members.
Implementation Timeframe
NSCC would implement the proposed
changes on November 21, 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.10
The proposed addition of the Activity
Status service offering would provide a
standardized method to communicate
I&RS Data among I&RS Members
relating to the activity status of
transactions in I&RS Eligible Products
beginning at the application stage, as
discussed above. The addition of
Activity Status would enhance I&RS
Members’ ability to communicate with
each other relating to ongoing
transactions starting at the application
stage 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.11
The renumbering of the Sections in
Rule 57 and the renaming of two
services in Addendum A discussed
above is consistent with this provision
because the proposed change 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. 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.12
Section 17A(b)(3)(D) of the Act 13
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 Activity Status would
align with the cost of building and
delivering the proposed service offering,
consistent with the 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
offering. 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
offering. 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. 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
11 Id.
12 Id.
10 15
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U.S.C. 78q–1(b)(3)(F).
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U.S.C. 78q–1(b)(3)(D).
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Federal Register / Vol. 89, No. 227 / Monday, November 25, 2024 / Notices
consistent with the requirements of
Section 17A(b)(3)(D) of the Act.14
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(B) Clearing Agency’s Statement on
Burden on Competition
NSCC does not believe that the
proposed rule change would have any
adverse impact, or impose any burden,
on competition.
The proposed changes to adopt
Activity Status 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 offering 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 for Activity Status were
designed to be reasonable and align
with the projected cost of building and
operating such service offering and
would be charged ratably based on each
I&RS Members’ use of such service
offering. Therefore, the proposed
changes to implement such optional
service offerings 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
renumbering of the section numbers in
Rule 57 in connection with the addition
of Activity Status or the renaming of
two services in Addendum A discussed
above would impact competition. Such
changes would help to ensure that the
Rules remain clear and 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 the proposed rule change
would not have any impact on
competition.
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:
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
• Use the Commission’s internet
comment form
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-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.
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NSCC–2024–009 on the subject line.
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) 15 of the Act and paragraph
(f) 16 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
15 15
14 Id.
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U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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Electronic Comments
(https://www.sec.gov/rules/sro.shtml);
or
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–2024–009. 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). 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–2024–009 and
should be submitted on or before
December 16, 2024.
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Federal Register / Vol. 89, No. 227 / Monday, November 25, 2024 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–27478 Filed 11–22–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101654; File No. SR–LCH
SA–2024–002]
Self-Regulatory Organizations; LCH
SA; Order Granting Accelerated
Approval of Proposed Rule Change, as
Modified by Amendment No. 1 and
Partial Amendment No. 1, Relating to
the CDSClear Select Membership
Model
November 19, 2024.
I. Introduction
On March 13, 2024, Banque Centrale
de Compensation, which conducts
business under the name LCH SA (‘‘LCH
SA’’), filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 a
proposed rule change (the ‘‘Proposed
Rule Change’’) to amend its CDS
Clearing Rule Book (the ‘‘Rule Book’’)
and CDS Clearing Procedures
(‘‘Procedures’’). The Proposed Rule
Change was published for comment in
the Federal Register on March 28,
2024.3
On May 9, 2024, pursuant to Section
19(b)(2) of the Exchange Act,4 the
Commission designated a longer period
within which to approve, disapprove, or
institute proceedings to determine
whether to approve or disapprove the
Proposed Rule Change, until June 26,
2024.5 On June 21, 2024, the
Commission instituted proceedings,
pursuant to Section 19(b)(2)(B) of the
Exchange Act,6 to determine whether to
approve or disapprove the Proposed
Rule Change.7 On September 18, 2024,
the Commission designated a longer
period for commission action on
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 99847
(Mar. 22, 2024), 89 FR 21579 (Mar. 28, 2024) (File
No. SR–LCH SA–2024–002) (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
5 Securities Exchange Act Release No. 100094
(May 9, 2024), 89 FR 42515 (May 15, 2024) (File No.
SR–LCH SA–2024–002).
6 15 U.S.C. 78s(b)(2)(B).
7 Securities Exchange Act Release No. 100394
(June 21, 2024), 89 FR 53685 (June 27, 2024) (File
No. SR–LCH SA–2024–002).
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proceedings to determine whether to
approve or disapprove the Proposed
Rule Change, until November 23, 2024.8
On October 11, 2024, LCH SA filed
Amendment No. 1 to the Proposed Rule
Change.9 On October 17, 2024, LCH SA
filed Partial Amendment No. 1 to the
Proposed Rule Change.10 Notice of
Amendment No.1 and Partial
Amendment No. 1 were published in
the Federal Register on October 24,
2024.11 The Commission has not
received any comments on the Proposed
Rule Change, as modified by
Amendment No. 1 and Partial
Amendment 1. For the reasons
discussed below, the Commission is
approving the Proposed Rule Change, as
modified by Amendment No. 1 and
Partial Amendment No. 1 (hereinafter
defined as ‘‘Proposed Rule Change’’) on
an accelerated basis.
II. Description of the Proposed Rule
Change
LCH SA is a clearing agency
registered with the Commission.
Through its CDSClear business unit,
LCH SA provides central counterparty
services for security-based swaps,
including credit default swaps, and
options on credit default swaps.12 LCH
SA provides these central counterparty
services to its Clearing Members.13
Some of these Clearing Members
provide clearing services for clients.
LCH SA has two different types of
Clearing Members, General Members
and Select Members, with different
obligations to LCH SA. General
Members must participate in
competitive bidding for auction
packages, must submit prices to LCH
SA, and may provide client clearing
8 Securities Exchange Act Release No. 101094
(Sept. 18, 2024), 89 FR 77919 (Sept. 24, 2024) (File
No. SR–LCH SA–2024–002).
9 Amendment No. 1 modified the Proposed Rule
Change to require a Select Member to participate in
competitive bidding in default auctions and
contribute end-of-day prices should its margins
exceed a predetermined threshold over a designated
time. This requirement is discussed in Part II of this
Order. It also included an Exhibit 3.3 to the filing
showing LCH SA’s responses to an SEC request for
information related to the Select Membership
model.
10 Partial Amendment No. 1 fixed errors in the
Exhibit 1A filed with Amendment No. 1 by
replacing the Statutory Basis and Burden on
Competition sections of the amended Exhibit 1A
with the text of the Statutory Basis and Burden on
Competition sections of the amended 19b–4
narrative.
11 Securities Exchange Act Release No. 101383
(Oct. 18, 2024), 89 FR 84972 (Oct. 24, 2024) (File
No. SR–LCH SA–2024–002) (‘‘Amended Notice’’).
12 What We Clear, https://www.lch.com/services/
cdsclear/what-we-clear (last visited Sept. 27, 2024).
13 Capitalized terms not otherwise defined herein
have the meanings assigned to them in the
CDSClear Rule Book or CDS Clearing Procedures, as
applicable.
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92981
services to Affiliated Firms 14 and nonAffiliated Firms.15 General Members
also must nominate representatives for
the CDS Default Management
Committee and CDS Default
Management Group.16
Select Members, on the other hand,
must participate in competitive bidding
only for a subset of Auction Packages
and may opt out of submitting prices.17
Select Members also may provide client
clearing services,18 but only for
Affiliated Firms. Finally, while Select
Members also must nominate
representatives for the CDS Default
Management Committee and CDS
Default Management Group,19 as noted,
their participation in competitive
bidding is limited to a subset of Auction
Packages.20
The obligations of General Members
and Select Members differ because LCH
SA designed the two membership
categories with different potential
members in mind. LCH SA created the
14 The Rule Book defines an Affiliated Firm as
any Affiliate or any entity that is otherwise member
to the same institutional protection scheme (as
defined in the CRR) as the Clearing Member. The
CRR is defined in the Rule Book as Regulation (EU)
No. 575/2013 and certain related regulations and
standards. LCH SA CDS Clearing Rule Book Chapter
1 Article 1.1.1 An institutional protection scheme
under the CRR is a contractual or statutory liability
arrangement that protects those institutions and in
particular ensures their liquidity and solvency to
avoid bankruptcy where necessary. Regulation (EU)
No 575/2013 of the European Parliament and of the
Council of 26 June 2013 on prudential requirements
for credit institutions and investment firms and
amending Regulation (EU) No 648/2012, Article
113(7), available at https://eur-lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:32013R0575.
15 Notice, 89 FR at 21579.
16 Id. at 21581.
17 Notice, 89 FR at 21579, 81.
18 Select Members originally were not allowed to
offer client clearing services. See LCH SA, Self
Certification Letter, Select Membership, available
at, https://www.cftc.gov/sites/default/files/filings/
orgrules/16/07/rule070816lchsadco001.pdf. In
2019, the Commission approved amendments to the
Rule Book and Procedures to allow Select Members
to provide client clearing services to Affiliated
Firms. See Securities Exchange Act Release No.
86376 (July 15, 2019), 84 FR 34955, 34957 (July 19,
2019) (File No. SR–LCH SA–2019–003). LCH SA
proposed these to allow client clearing limited in
this manner because a Select Member requested the
ability to offer client clearing to an affiliate. LCH SA
provided background and analysis related to the
Select Membership model in confidential Exhibit
3.3 to the Proposed Rule Change, which LCH SA
added to the Proposed Rule change with
Amendment No. 1.
19 Notice, 89 FR at 21581.
20 Currently, Select Members and General
Members must nominate representatives for the
CDS Default Management Committee and CDS
Default Management Group because both Select
Members and General Members currently must
participate in auctions to some extent. Notice, 89
FR at 21581; LCH SA provided background and
analysis related to the Select Membership model in
confidential Exhibit 3.3 to the Proposed Rule
Change, which LCH SA added to the Proposed Rule
change with Amendment No. 1.
E:\FR\FM\25NON1.SGM
25NON1
Agencies
[Federal Register Volume 89, Number 227 (Monday, November 25, 2024)]
[Notices]
[Pages 92978-92981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27478]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101656; File No. SR-NSCC-2024-009]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Add Activity Status Tracking to I&RS and Make Certain
Clarification Changes in the Rules
November 19, 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 November 14, 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\ and 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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\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).
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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 NSCC's
Insurance & Retirement Services (``I&RS'') in order to provide for
Activity Status Tracking (``Activity Status''), a new service offering
designed to allow I&RS members to communicate with each other relating
to activity status of I&RS transactions, and to make other
clarification changes to the Rules, as described in greater detail
below.\6\
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\6\ Terms not defined herein are defined in the NSCC Rules &
Procedures (``Rules''), available at www.dtcc.com/legal/rules-and-procedures.
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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 I&RS in order
to provide for Activity Status, a new service offering designed to
allow I&RS members to communicate with each other relating to activity
status of I&RS transactions, and to make other clarification changes to
the Rules, 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 a new optional service
offering that would provide a more efficient method for I&RS Members to
choose to transmit, view and retrieve I&RS Data and to improve the
Member's understanding of the Rules relating to I&RS.
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\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'').
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Activity Status was developed at the request of and in consultation
with industry participants, and the proposed fees for the service
offering were designed to pay for the costs of developing and
maintaining such offering 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 offering
within approximately 3.5 years of implementing the fees. In addition to
the building cost of Activity Status, NSCC incurs a run-cost based on
use and maintenance of its staffing and technology resources to operate
I&RS. NSCC would continue to evaluate the costs and revenues of
Activity Status after implementation to determine if its fees for the
service are consistent with NSCC's overall pricing methodology.
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\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 118.
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As with its other services, if NSCC determines that its operating
margin is too high or too low, NSCC could change pricing levels of
Activity Status to be consistent with its overall pricing methodology.
I&RS
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
[[Page 92979]]
I&RS and I&RS are not guaranteed by NSCC.
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\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.
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Activity Status Tracking (ACT)
NSCC is proposing to establish Activity Status which is intended to
allow I&RS Members to communicate the status of business transactions
involving I&RS Eligible Products. Currently, there is not a
standardized method for I&RS Members to communicate with each other
relating to the status of transactions involving I&RS Eligible Products
from the beginning of the application process until the applicable
contracts are in force. Applications that are submitted to Carriers may
take weeks to process before a position is sent back to a Distributor.
During the processing time, there is currently no standardized way to
communicate the status of the order. Overseeing the statuses of new
business across different Carriers can be difficult and inefficient,
with many communications existing across multiple mediums, like paper
applications, Carrier websites and phone calls. For instance, some
Carriers offer activity status of new business via their public website
which requires Distributors to go to multiple Carrier websites to get a
complete view of their outstanding business.
Clients have requested a feature that would allow I&RS Members to
update each other on the status of transactions in I&RS Eligible
Products beginning at the application stage including such information
as the applicable Carrier, product type, product CUSIP (if applicable),
the producer involved in the transaction and similar information.
Activity Status would provide the ability of I&RS Members to
communicate with each other using standardized messages relating to the
status of transactions in I&RS Eligible Products from the start of such
transactions beginning at the application stage. Activity Status is
designed to standardize messages relating to providing real-time
activity across platforms and planning tools. I&RS Members would be
able to track electronic applications through the underwriting process,
participating in standardized communication.
As with other I&RS service offerings, Activity Status was built to
be accessible by an Application Programming Interface (``API'')
specifically for use for users of Activity Status. Using the Activity
Status API, I&RS Members will be able to send messages in a standard
file format containing information relating to the activity status of
each transaction.
NSCC would add the following description of Activity Status in a
new Section 3 in Rule 57:
Activity Status Tracking (ACT)
SEC. 3. The Corporation may provide a service to enable I&RS
Members to transmit status information to other I&RS Members relating
to transactions involving I&RS Eligible Products.
NSCC would also renumber the sections following Activity Status to
reflect the addition of Activity Status as a new Section 3.
NSCC would also amend Addendum A to provide for fees for Activity
Status. The fees would be $0.35 per transaction, per side. NSCC would
add a fee description for Activity Status in a Section IV.H.3. in
Addendum A.
Additional Clarification Changes
NSCC would also modify the names of two services in Addendum A for
clarity. In Section IV.H.2.c. of Addendum A, NSCC would change the
description of ``Commissions (COM)'' to ``Commissions and Compensation
(COM)'' and in Section IV.H.2.d. of Addendum A, NSCC would change the
description of ``Initial Application Information (APP)'' to
``Applications and Premiums (APP)''. In each case, NSCC would be
changing the descriptions to match the formal name of those services
and to match the description of those services in Rule 57 for
consistency and to make the Rules easier to understand for I&RS
Members.
Implementation Timeframe
NSCC would implement the proposed changes on November 21, 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.\10\
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\10\ 15 U.S.C. 78q-1(b)(3)(F).
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The proposed addition of the Activity Status service offering would
provide a standardized method to communicate I&RS Data among I&RS
Members relating to the activity status of transactions in I&RS
Eligible Products beginning at the application stage, as discussed
above. The addition of Activity Status would enhance I&RS Members'
ability to communicate with each other relating to ongoing transactions
starting at the application stage 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.\11\
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\11\ Id.
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The renumbering of the Sections in Rule 57 and the renaming of two
services in Addendum A discussed above is consistent with this
provision because the proposed change 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. 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.\12\
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\12\ Id.
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Section 17A(b)(3)(D) of the Act \13\ 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 Activity Status would align with the cost of building and
delivering the proposed service offering, consistent with the 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 offering. 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
offering. 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. 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
[[Page 92980]]
consistent with the requirements of Section 17A(b)(3)(D) of the
Act.\14\
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\13\ 15 U.S.C. 78q-1(b)(3)(D).
\14\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
NSCC does not believe that the proposed rule change would have any
adverse impact, or impose any burden, on competition.
The proposed changes to adopt Activity Status 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 offering 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 for
Activity Status were designed to be reasonable and align with the
projected cost of building and operating such service offering and
would be charged ratably based on each I&RS Members' use of such
service offering. Therefore, the proposed changes to implement such
optional service offerings 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 renumbering of the section numbers in
Rule 57 in connection with the addition of Activity Status or the
renaming of two services in Addendum A discussed above would impact
competition. Such changes would help to ensure that the Rules remain
clear and 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 the proposed rule change 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) \15\ of the Act and paragraph (f) \16\ 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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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form
(https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NSCC-2024-009 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-2024-009. 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). 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-2024-009 and should be
submitted on or before December 16, 2024.
[[Page 92981]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-27478 Filed 11-22-24; 8:45 am]
BILLING CODE 8011-01-P