[Federal Register: August 20, 2007 (Volume 72, Number 160)]
[Notices]
[Page 46528-46529]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20au07-107]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56250; File No. SR-NSCC-2007-11]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change To Allow As-Of
Fixed Income Trades To Be Processed in the Continuous Net Settlement
System
August 14, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on July 12, 2007, the
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 NSCC. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested parties.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NSCC is seeking to modify its procedures to allow as-of fixed
income trades to be processed in NSCC's Continuous Net Settlement
(``CNS'') system.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NSCC 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. NSCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.\2\
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\2\ The Commission has modified the text of the summaries
prepared by NSCC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
When NSCC revised and updated CNS in 2004 (referred to as the ``CNS
Rewrite''), it provided the capability on any settlement day to take in
and process transactions due for settlement that day provided the
trades are recorded or compared prior to an established cut-off time in
the morning.\3\ This capability is currently provided for as-of equity
transactions but has not yet been expanded to as-of fixed income
transactions.\4\ Rather, settlement of as-of fixed income corporate
debt, municipal, and unit investment trust (``UIT'') trades (corporate
debt, municipal, and UIT trades are collectively referred to as ``CMU''
trades) matched on or after their designated settlement date currently
occurs on the business day following the day they are compared. Given
that settlement risks associated with CMU trades would be reduced if
they settled on an accelerated basis in the same manner that as-of
equity trades are settled, NSCC is proposing to enhance its fixed
income processing to permit same day settlement of as-of fixed income
transactions.\5\ To accomplish this, NSCC proposes to amend Procedure
II (Trade Comparison and Recording Service) so that CNS-eligible as-of
CMU trades matched on or after their originally designated settlement
date would be processed in CNS on the day they are submitted for
comparison so long as they compare prior to the cut-off time
established for same day settlement, which currently is 11:30 a.m.\6\
As-of trades not eligible for CNS processing will settle on a trade-
for-trade basis. Trades that match after the designated cut-off time
will continue to be assigned a settlement date on the next business
day.
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\3\ Securities Exchange Act Release No. 50026 (July 15, 2004),
69 FR 43650 [File No. SR-NSCC-2004-01].
\4\ NSCC's systems did not have the capacity for same day
settling trades for fixed income transactions in 2004.
\5\ The settlement of cash and next day CMU trades which are
compared by NSCC will continue to be the responsibility of the
parties to the trades.
\6\ In addition, references in Procedure VII (CNS Accounting
Operation) that currently note that debt securities are not eligible
for such accelerated settlement would be removed.
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In addition, because these trades are effectively guaranteed upon
comparison, risk associated with the trades will be mitigated through
the existing component of the Clearing Fund formula, as set forth in
Procedure XV (Clearing Fund Formula and Other Matters), that is
designed to mitigate the risk to NSCC associated with trades that are
processed on a settlement cycle shorter than three days. Under this
component, activity specified for a shortened settlement cycle is
isolated and a charge is calculated.\7\
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\7\ The component calculates a charge based on the average of a
member's charges for the specified activity on the three days with
the highest charges calculated for the specified activity over the
most recent twenty day period. Securities Exchange Act Release No.
54816 (November 27, 2006), 71 FR 69604 [File No. SR-NSCC-2006-09].
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NSCC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \8\ and the rules and
regulations thereunder applicable to NSCC because it should facilitate
the prompt and accurate clearance and settlement of securities by
increasing automated trade processing and by expanding the types of
trades eligible for CNS netting.
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\8\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change would impose
any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were not and are not intended to be solicited with
respect to the proposed rule change, and none have been received. NSCC
will notify the Commission of any written comments it receives.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) As the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which the self-regulatory organization consents,
the Commission will:
(a) By order approve such proposed rule change, or
(b) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
[[Page 46529]]
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NSCC-2007-11 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NSCC-2007-11. This file
number should be included on the subject line if e-mail 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 Web site (http://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 inspection and
copying in the Commission's Public Reference Section, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of NSCC and on NSCC's
Web site at http://www.nscc.com/legal. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NSCC-2007-11 and should be submitted on or before
September 10, 2007.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-16329 Filed 8-17-07; 8:45 am]
BILLING CODE 8010-01-P