[Federal Register: October 22, 1999 (Volume 64, Number 204)]
[Notices]               
[Page 57171-57172]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22oc99-110]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42014; File No. SR-NSCC-99-07]

 
Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving a Proposed Rule Change Relating to 
Liability With Respect to Affiliated Entities

October 15, 1999.
    On May 13, 1999, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-NSCC-99-07) 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'').\1\ Notice of the proposal was published in the Federal 
Register on August 3, 1999.\2\ On August 10, 1999, NSCC amended the 
proposed rule change.\3\ No comment letters were received. For the 
reasons discussed below, the Commission is approving the proposed rule 
change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 41662 (July 27, 1999), 
64 FR 42160.
    \3\ The amendment represented technical amendments to the 
proposed rule change and as such did not require republication of 
notice.
---------------------------------------------------------------------------

I. Description

    The Boards of Directors of NSCC and The Depository Trust Company 
(``DTC'') have initiated a plan to integrate NSCC and DTC. As a step in 
the integration plan, a holding company has been established which will 
own NSCC and DTC as operating subsidiaries.\4\ NSCC has informed the 
Commission that a consideration in the NSCC/DTC integration plan is to 
insulate NSCC and DTC from the risks and obligations of the other.
---------------------------------------------------------------------------

    \4\ For a description of the holding company structure, refer to 
Securities Exchange Act Release No. 41800 (August 27, 1999), 64 FR 
48694 [File No. SR-NSCC-99-10].
---------------------------------------------------------------------------

    The rule change adopts NSCC Rule 58, which provides that

[[Page 57172]]

notwithstanding any affiliation between NSCC and any other entity, 
including any clearing agency, except as otherwise expressly provided 
by written agreement: (1) NSCC shall not be liable for any obligations 
of such other entity; (2) the participants fund or other assets of NSCC 
shall not be available to such other entity; (3) such other entity 
shall not be liable for any obligations of NSCC; and (4) any assets of 
such other entity shall not be available to NSCC. The Commission has 
approved similar revisions to DTC's rules.\5\
---------------------------------------------------------------------------

    \5\ Securities Exchange Act Release No. 42013 (October 15, 1999) 
[File No. SR-DTC-99-11].
---------------------------------------------------------------------------

II. Discussion

    Section 17A(b)(3)(F) of the Act \6\ requires that the rules of a 
clearing agency assure the safeguarding of securities and funds which 
are in the custody or control of the clearing agency or for which it is 
responsible. The Commission believes that the proposed rule change is 
consistent with NSCC's obligations under Section 17A(b)(3)(F) because 
it should ensure that NSCC's assets, including its clearing fund, are 
not diminished as a result of its affiliation with DTC.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

III. Conclusion

    On the basis of the foregoing, the Commission finds that NSCC's 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act and the 
rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-NSCC-99-07) be and hereby is 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
[FR Doc. 99-27599 Filed 10-21-99; 8:45 am]
BILLING CODE 8010-01-M