Federal Register / Vol. 83, No. 141 / Monday, July 23, 2018 / Notices 34901 

40See Amendment No. 1, supra note 6. 

41 15 U.S.C. 78s(b)(2). 

42 Id. 

43 17 CFR 200.30–3(a)(12). 

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)(4). 

5The Rules are available at http://www.dtcc.com/ 

legal/rules-and-procedures. Capitalized terms used 

herein and not otherwise defined shall have the 

meaning assigned to such terms in the Rules. 

6CNS and its operation are described in Rule 11 

and Procedure VII of the Rules. Id. 

• Send an email to rule-comments@

sec.gov. Please include File No. SR– 

Phlx–2018–40 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File No. 

SR–Phlx–2018–40. 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 (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 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 such 

filing will also be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File No. 

SR–Phlx–2018–40 and should be 

submitted on or before August 13, 2018. 

V. Accelerated Approval of Proposed 

Rule Change, as Modified by 

Amendment No. 1 

The Commission finds good cause to 

approve the proposed rule change, as 

modified by Amendment No. 1, prior to 

the thirtieth day after the date of 

publication of notice of the amended 

proposal in the Federal Register. As 

described above, in Amendment No. 1, 

the Exchange (a) re-numbered proposed 

Phlx Rule 1081 as proposed Phlx Rule 

1085 and (b) changed the proposed 

cross-references in proposed 

Commentary .06 to Phlx Rule 1080 and 

in Floor Advice A–9 from Phlx Rule 

1081 to Phlx Rule 1085.40 The 

Commission believes that Amendment 

No. 1 simply modified certain proposed 

rule numbering and cross-referencing 

and does not raise novel regulatory 

issues. Accordingly, the Commission 

finds good cause, pursuant to Section 

19(b)(2) of the Act,41 to approve the 

proposed rule change, as modified by 

Amendment No. 1, on an accelerated 

basis. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,42 that the 

proposed rule change (SR–Phlx–2018– 

40), as modified by Amendment No. 1, 

be, and it hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.43

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–15647 Filed 7–20–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83654; File No. SR–NSCC– 

2018–003] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing of and 

Immediate Effectiveness of a Proposed 

Rule Change To Clarify and Enhance 

Rules Related to the CNS 

Reorganization Processing System 

and NSCC’s Authority To Reveal the 

Identity of Counterparties in Certain 

Circumstances 

July 17, 2018. 

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 9, 

2018, 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)(4) thereunder.4 The 

Commission is publishing this notice to 

solicit 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 the Rules and 

Procedures of NSCC (‘‘Rules’’) 5 in order 

to (1) clarify, correct, and enhance the 

description of the procedures by which 

NSCC processes transactions in 

securities that are eligible for its 

Continuous Net Settlement (‘‘CNS’’) 

system (‘‘CNS Securities’’) 6 and are 

subject to a corporate reorganization 

event through the CNS Reorganization 

Processing System; and (2) describe 

NSCC’s authority to identify to Members 

their counterparties for their positions 

in a subject security as of the critical 

date of an applicable payment or event, 

as described in greater detail below. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

NSCC is proposing to make certain 

revisions to Procedure VII, Section H of 

the Rules, which describes, among other 

matters, NSCC’s CNS Reorganization 

Processing System. 

First, the proposed changes would 

clarify, correct, and enhance the 

description of the CNS Reorganization 

Processing System by (1) revising the 

description of the scope of corporate 

reorganization events that may be 

processed through the CNS 

Reorganization Processing System; (2) 

revising the description of the 

processing of voluntary reorganizations 

through the CNS Reorganization 

Processing System; and (3) making 

technical revisions to Section H of 


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7For purposes of this filing, an ‘‘asset servicing 

event’’ refers to asset servicing or other events that 

may or may not relate to corporate reorganizations 

or payments, for example, payments pursuant to 

litigation or other disputes, distributions on class 

actions, bankruptcy payments, consent 

solicitations, other distributions, claims or fees. 

Procedure VII of the Rules, including 

correcting the use of defined terms and 

typographical and other drafting errors. 

NSCC believes these proposed changes 

would improve the clarity and 

transparency of these procedures. 

Second, the proposed changes would 

add a new subsection to Procedure VII, 

Section H of the Rules to describe that 

NSCC may (1) at its discretion, apply 

asset servicing events 7 to transactions 

in CNS Securities; (2) determine that 

such asset servicing events be processed 

outside its facilities; and (3) assist its 

Members in processing certain asset 

servicing events by identifying to those 

Members their respective counterparties 

for their positions in the subject security 

as of the critical date of that event. 

i. Overview of the CNS Reorganization 

Processing System and Section H of 

Procedure VII of the Rules 

Under the CNS system, all eligible 

compared and recorded transactions for 

a particular settlement date are netted 

by issue into one net long (buy), net 

short (sell) or flat position per Member. 

As a continuous net system, those 

positions are further netted with 

positions of the same issue that remain 

open after their originally scheduled 

settlement date (usually T+2), so that 

trades scheduled to settle on any day are 

netted with fail positions which results 

in a single deliver or receive obligation 

for each Member for each issue in which 

the Member has activity. 

Through the CNS Reorganization 

Processing System, NSCC may apply 

eligible corporate reorganization events 

to its Members’ positions in CNS 

Securities when such events occur 

during the settlement cycle. Corporate 

reorganization events that NSCC may 

apply to these transactions in the 

subject securities include (1) mandatory 

reorganizations (for example, mergers, 

full redemptions, liquidations, reverse 

splits, and name changes); and (2) 

voluntary reorganizations (for example, 

mergers with elections, tender offers, 

and exchange offers). As set forth in 

Section H of Procedure VII of the Rules, 

NSCC has the discretion to (1) exclude 

certain corporate reorganization events 

(including those for which operational 

difficulties would prevent the 

processing through the CNS 

Reorganization Processing System); and 

(2) process corporate reorganization 

events that would otherwise be 

ineligible if NSCC determines that it has 

the capability to do so. 

Section H of Procedure VII of the 

Rules describes the timeline of actions 

that must occur in connection with the 

processing of eligible corporate 

reorganization events, and states that 

NSCC would provide Members with 

notice detailing how corporate 

reorganization events would be 

processed if they would otherwise be 

ineligible for processing. As described 

in the Rules, the processing of 

mandatory reorganizations occurs 

automatically. The processing of 

voluntary reorganizations through the 

CNS Reorganization Processing System, 

however, requires certain actions to be 

taken by both NSCC and by Members 

with positions in the subject security 

during the period of time leading up to 

and following the expiration of the 

event. This period of time is referred to 

in the Rules as the ‘‘protect period’’ and 

is defined by reference to the expiration 

date, or ‘‘E,’’ of a voluntary 

reorganization (e.g., ‘‘E+1’’ is one day 

past the expiration date of the event). 

Currently, Section H of Procedure VII of 

the Rules describes the rules and actions 

applicable to voluntary reorganizations 

with a protect period of two days in 

roughly chronological order. A table 

within Section H of Procedure VII of the 

Rules identifies the timeline of rules 

and actions applicable to voluntary 

reorganizations that have a protect 

period of one day or that do not have 

a protect period. 

NSCC may assist its Members by 

applying to CNS Securities applicable 

asset servicing events. NSCC may also 

determine that operational difficulties 

prevent it from applying certain asset 

servicing events, in which case, 

Members must work directly with each 

other to process those asset servicing 

events. As a result of CNS netting, 

counterparties to obligations are not 

known to each other. Therefore, in order 

to process asset servicing events away 

from NSCC, Members occasionally 

request that NSCC identify their 

counterparty to a particular obligation 

over the critical event date (e.g., the 

record date or the position capture 

date). In these circumstances, NSCC 

applies a random allocation procedure 

(utilizing the same allocation procedure 

described in Procedure VII, Section H, 

1 of the Rules) to match counterparties. 

After matching counterparties through 

this allocation procedure, NSCC 

contacts each of the counterparties via 

email or telephone to receive authority 

to identify the counterparties to the 

requesting Member. 

ii. Rationale for Proposed Rule Changes 

In connection with a review of its 

Rules, NSCC identified opportunities to 

improve Section H of Procedure VII of 

the Rules in order to more clearly 

describe the operation of the CNS 

Reorganization Processing System. 

NSCC also determined that this section 

of the Rules should be revised to correct 

drafting errors in, and make other 

technical corrections to, the current 

descriptions within the Rules. 

Currently, the Rules do not address 

the application of asset servicing events, 

which are applied automatically by 

NSCC and do not require any action by 

Members. However, NSCC believes it 

would improve the transparency of the 

Rules to include a section in Procedure 

VII, Section H of the Rules that would 

describe NSCC’s authority to apply asset 

servicing events, identify examples of 

asset servicing events that it may not 

apply, and describe how NSCC may 

assist Members to process asset 

servicing events outside of its facilities, 

as described further below. 

NSCC believes these proposed 

changes would improve Members’ 

understanding of their rights and 

obligations, and NSCC’s rights and 

obligations, in connection with the CNS 

Reorganization Processing System and 

the processing of assets servicing events 

and, thereby, would improve the 

operation of these services. 

iii. Proposed Changes to Description of 

CNS Reorganization Processing System 

The proposed changes, described 

below, would improve and update the 

Rules that describe the operation of the 

CNS Reorganization Processing System, 

by clarifying and enhancing the 

descriptions to make them clearer to 

Members. NSCC believes making these 

descriptions clearer would enhance 

Members’ understanding of their rights 

and obligations in connection with this 

service. 

Proposed Clarifications to the Scope of 

Corporate Reorganization Event 

Processing 

Under the introduction to ‘‘Corporate 

Reorganizations,’’ in Section H, 4 of 

Procedure VII of the Rules, NSCC is 

proposing changes to clarify and correct 

the descriptions of which corporate 

reorganization events may be processed 

through the CNS Reorganization 

Processing System and NSCC’s 

authority to exclude certain corporate 

reorganization events from such 

processing. 

Revising the Non-Exhaustive List of 

Corporate Reorganization Events that 

May be Applied by NSCC. The proposed 


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8A ‘‘redemption’’ is a reorganization event that 

occurs on a maturity date when the issuer makes 

a payment on debt securities for the principal 

amount plus any accrued interest. A redemption 

may include a conversion privilege, which would 

entitle the security holder to convert the security in 

lieu of the redemption payment. 

9The Corporate Actions Section of the Operations 

& Technical Society of Securities Industry and 

Financial Markets Association (‘‘SIFMA’’) meets 

periodically to discuss issues related to corporate 

reorganization processing. NSCC staff attends these 

meetings. As recently as September 2017, this group 

requested that NSCC exercise the discretion 

currently provided to it in Procedure VII, Section 

H of the Rules to no longer process voluntary 

reorganization events with a protect period longer 

than two business days due to operational 

challenges in processing these events. This request 

was not solicited by NSCC. 

changes to Procedure VII, Section H, 4 

of the Rules would retain the existing 

list of the most common types of events 

that NSCC may process, but would 

clarify that this is a non-exhaustive list 

of examples. The proposed change 

would also revise the reference from 

‘‘redemptions’’ to ‘‘full redemptions’’ 

within the list of examples of mandatory 

reorganizations that NSCC may process. 

The current use of the term 

‘‘redemptions’’ was intended to refer to 

full redemptions, which are generally 

processed by NSCC. However, without 

using the qualifier ‘‘full,’’ NSCC believes 

Members may misunderstand and 

believe that NSCC would process partial 

redemptions. Partial redemptions are 

not processed by NSCC. Therefore the 

proposed change would clarify which 

type of redemptions are processed by 

NSCC and were intended to be included 

in this list. 

The proposed change would also add 

mergers with elections to the list of 

voluntary reorganizations that may be 

processed through the CNS 

Reorganization Processing System as 

these events are applied relatively 

frequently and NSCC believes including 

these events in this non-exhaustive list 

would improve the transparency of the 

Rules. Within this section, NSCC is also 

proposing to revise the defined term 

from ‘‘tender offers’’ to ‘‘voluntary 

offers,’’ because this defined term, as 

used in this section of Procedure VII of 

the Rules, refers to two types of 

voluntary offers—both tender offers and 

exchange offers. This proposed change 

would improve the clarity of these 

procedures where the current defined 

term may incorrectly imply that 

exchange offers are not included when 

this defined term is used. 

NSCC is also proposing to revise the 

list of securities that would not be 

processed through the CNS 

Reorganization Processing System by 

changing ‘‘securities subject to 

redemption if there is a conversion 

privilege attached’’ 8 to ‘‘securities 

subject to a conversion event.’’ While 

NSCC would not process conversion 

events due to operational difficulties, as 

described below, it generally would, as 

stated above, process full redemptions. 

The current language in this list was 

intended to reflect that NSCC would 

process a redemption event, but, if that 

event has a conversion privilege 

attached, it would not process the 

related conversion. The proposed 

change would clarify the meaning and 

would mitigate any confusion about the 

eligibility of these events for processing 

by providing greater transparency in the 

Rules with respect to the treatment of 

both full redemption events and 

conversion events. 

Removing Descriptions of Corporate 

Reorganization Events that are Not 

Supported by the CNS Reorganization 

Processing System. NSCC is proposing 

to remove descriptions of the processing 

of two types of voluntary 

reorganizations that it does not support 

in the CNS Reorganization Processing 

System: (1) Voluntary reorganizations 

that have a protect period longer than 

two business days and (2) conversion 

events for convertible securities. As 

described below, NSCC has generally 

exercised its existing authority provided 

under Procedure VII, Section H of the 

Rules and declined to process these 

events due to operational difficulties. 

Therefore, while these changes would 

revise the Rules as written, the changes 

would not result in any change in the 

current operation of the service. Rather, 

the proposed change would reflect 

NSCC’s longstanding exercise of its 

authority to decline to process these 

events. As such, NSCC does not believe 

that either of these changes would alter 

the respective rights or obligations of 

NSCC or Members using this service. 

NSCC believes these proposed changes 

would mitigate any confusion by 

Members regarding the availability of 

this service. 

First, NSCC is proposing to add a 

sentence to this Section H, 4 of 

Procedure VII of the Rules to make clear 

that NSCC generally would not process 

voluntary reorganizations that have a 

protect period longer than two business 

days. These types of events are 

extremely rare as the vast majority of 

voluntary reorganizations have a protect 

period of two business days or less. 

Additionally, industry feedback 

provided to NSCC has indicated that 

there is a preference that these events be 

processed outside NSCC’s facilities.9

In connection with this proposed 

change, NSCC would also remove from 

Section H, 4(b) of Procedure VII of the 

Rules descriptions of the special rules 

that govern the processing of events 

with a protect period longer than two 

business days. Some of the descriptions 

of these special processing rules 

currently in Section 4(b) do not clearly 

indicate that they are only applicable to 

these types of events, which could cause 

Members confusion about whether these 

descriptions are applicable to the 

processing of all voluntary 

reorganizations. Further, if NSCC does 

decide to process an event with a 

protect period longer than two business 

days, it would provide Members with a 

notice detailing the applicable 

processing rules, as currently stated in 

the introduction to ‘‘Corporate 

Reorganizations,’’ in Section H, 4 of 

Procedure VII of the Rules. 

Therefore, NSCC is proposing to 

remove a sentence in the introduction to 

Section H, 4(b) of Procedure VII of the 

Rules that states the rules within this 

subsection apply to voluntary 

reorganizations with a protect period 

longer than two business days unless 

otherwise stated. Additionally, within 

this section under new subheading ‘‘On 

and Following E+3,’’ NSCC is proposing 

to remove the statement that positions 

may be removed from the CNS 

Reorganization Sub-Account as a result 

of the CNS allocation process because 

only voluntary reorganizations that have 

a protect period longer than two 

business days would reach the CNS 

allocation process after NSCC has frozen 

positions in the CNS Reorganization 

Sub-Account. NSCC would also remove 

a paragraph under this subheading that 

describes the effect of the CNS 

allocation process on positions subject 

to a voluntary reorganization because, as 

stated above, only voluntary 

reorganizations that have a protect 

period longer than two business days 

would reach the CNS allocation process 

at this point in the processing timeline. 

Second, NSCC would remove Section 

H, 5 of Procedure VII of the Rules which 

describes the special processing rules 

that apply to a conversion event for 

convertible securities. For at least the 

past 10 years, NSCC has exercised its 

existing authority to decline to process 

these reorganization events for 

convertible securities due to operational 

difficulties. Therefore, the proposed rule 

change would reflect the longstanding 

operation of the CNS Reorganization 

Processing System, and would mitigate 

any confusion by Members regarding 

the availability of this service. 

NSCC does not believe these proposed 

changes would alter the respective 

rights or obligations of NSCC or its 

Members using this service. 


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Proposed Clarifications to Voluntary 

Reorganization Processing Rules 

NSCC is also proposing changes that 

would clarify and enhance the 

description of rules applicable to 

voluntary reorganizations under Section 

H, 4(b) of Procedure VII of the Rules. 

Adding Chronological Subheadings 

and Reordering the Processing Rules. In 

order to better organize these rules and 

improve the transparency regarding 

when certain rules apply within the 

reorganization processing timeline, 

NSCC is proposing to add chronological 

subheadings within this section. Within 

the descriptions of the rules under each 

new subheading, NSCC would revise 

statements by removing redundant 

references to timing because the timing 

of that applicable statement or rule 

would be clear from the new 

subheadings. This proposed change 

would simplify these descriptions of the 

applicable rules, making them clearer 

and more easily understood by 

Members. 

NSCC is also proposing to reorder 

certain statements within this section of 

Procedure II to be more closely aligned 

to chronological order. While the 

chronology of processing has not 

changed, over time various revisions to 

these Rules have added descriptions to 

this section that are out of chronological 

order. NSCC is proposing to move the 

description of the processing that occurs 

on E+1 to follow the description of 

processing that occurs after the CNS 

night cycle processing on E+1. 

Additionally, NSCC is proposing to 

move two statements regarding the 

regular CNS allocation process to the 

new subheading ‘‘On E+2 (Protect 

Period Expiration Date).’’ These two 

statements describe the occurrence of 

the regular CNS allocation process and 

the priority within that allocation 

process of certain positions. Currently, 

these statements appear lower in the 

timeline. 

Revisions Under ‘‘On E+2 (Protect 

Period Expiration Date).’’ Under the 

new subheading ‘‘On E+2 (Protect 

Period Expiration Date),’’ NSCC is 

proposing to clarify that Members are 

prohibited from moving subject 

securities between the Fully-Paid-For 

Subaccount and the CNS General 

Account either on the protect expiration 

date or on the expiration of the 

voluntary reorganization when there is 

no protect period, as applicable. 

Currently, the Rules simply refer to the 

Fully-Paid-For Subaccount as a ‘‘nonreorganization subaccount.’’ NSCC 

believes the proposed change would 

improve the transparency of the Rules 

by more clearly identifying the 

subaccount that is subject to this 

restriction. NSCC is also proposing to 

move this statement earlier under the 

new heading ‘‘On E+2 (Protect Period 

Expiration Date)’’ because this 

restriction is applicable throughout 

during E+2 (rather than only after the 

day cycle, where it is currently listed). 

Finally, as described further below, 

NSCC is proposing to add this rule to 

the table within this section because 

this rule also applies to the events 

addressed by this table. This proposed 

change would improve the transparency 

of the Rules by making the table more 

comprehensive. 

Revisions Under ‘‘After Day Cycle— 

E+2.’’ Under the new subheading ‘‘After 

Day Cycle—E+2,’’ NSCC is proposing to 

remove a sentence from the Rules that 

is a statement of fact that Members may 

have a partial allocation of positions in 

the CNS Reorganization Sub-Account. 

While accurate, this statement does not 

describe the rights or obligations of 

either NSCC or its Members in 

connection with the processing of 

corporate reorganization events, nor 

does it provide any material information 

that NSCC believes would be relevant to 

Members in their understanding of the 

operation of this service. NSCC is 

proposing to simplify the Rules by 

removing statements that do not provide 

important information to Members 

regarding the operation of this service 

and NSCC believes this proposed 

change would make the Rules clearer 

and more easily understood by 

Members. 

Also under this new subheading, 

NSCC is proposing to revise the 

description of the process by which a 

Member may request that NSCC move a 

long position in a subject security from 

the CNS Reorganization Sub-Account 

back to the CNS General Account. The 

proposed change would clarify that, 

where one Member may make the 

request, the Member with the 

corresponding long or short position 

must approve that request before NSCC 

would take action. This proposed 

change would improve the transparency 

of the Rules by including a description 

of this necessary step in the processing 

of these requests that is not currently 

stated in the Rules. 

Under the new subheading ‘‘After Day 

Cycle—E+2,’’ NSCC is proposing to 

remove the description of the process by 

which NSCC would exit a security from 

the CNS System if it is subject to more 

tender offers than available CNS 

Reorganization Sub-Accounts. In the 

event that a CNS Security is subject to 

more tender offers than available CNS 

Reorganization Sub-Accounts, NSCC 

would exercise its discretion, as stated 

earlier in Section H, 4 of Procedure VII, 

and would not process the voluntary 

reorganization due to operational 

difficulties. Therefore, while this 

statement, which appears later in this 

section, is accurate, NSCC does not 

believe it is necessary to include this 

additional statement in the Rules. 

NSCC’s decision not to process the 

voluntary reorganization due to 

operational difficulties would occur 

earlier in the chronology and is already 

covered by the earlier, broader 

statement regarding the scope of 

corporate reorganization event 

processing. This proposed change 

would simplify the Rules by removing 

an unnecessary statement that is 

redundant of an earlier statement and 

would make the Rules clearer. 

Revisions Under ‘‘On and Following 

E+3.’’ Under the new subheading ‘‘On 

and Following E+3,’’ NSCC is proposing 

to improve the description of the 

circumstances in which positions in the 

CNS Reorganization Sub-Account 

would be returned to the Members’ CNS 

General Account by including a 

description of when a voluntary 

reorganization is canceled or when the 

expiration date of a voluntary 

reorganization is extended. This 

proposed change would make this 

description more comprehensive and, 

therefore, improve the transparency of 

the Rules. 

Also under this new subheading, 

NSCC is proposing to remove a 

paragraph that describes the process for 

reflecting a delivery of a subject security 

outside NSCC’s facilities because NSCC 

believes this is a repetitive description 

of the process by which Members may 

request that their positions be removed 

from the CNS Reorganization SubAccount back to the CNS General 

Account. This process is already 

described in the Rules under the new 

subheading ‘‘On and Following E+3.’’ 

Therefore, the proposed change would 

simplify the Rules by removing a 

redundant statement that does not 

provide Members with additional 

information regarding the process 

described above. 

Revisions to the Processing Rules 

Table. NSCC is also proposing changes 

that would improve the information 

within the table in this section of the 

Rules. This table identifies the 

timeframes for processing (1) voluntary 

reorganizations with a protect period of 

one day and (2) voluntary 

reorganizations with no protect period. 

The proposed changes to this table 

would clarify in the introduction to this 

table that the table applies to these two 

types of events, where it currently states 

it is applicable to processing of 


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voluntary reorganizations with protect 

period of one day ‘‘or less.’’ NSCC is 

also proposing to include in this table 

the rule that Members are prohibited 

from moving positions in subject 

securities between the CNS General 

Account and Fully-Paid-For Subaccount 

either on the protect period expiration 

date (in this case, E+1) or, when there 

is no protect period, on the event 

expiration date (in this case, E). 

Including this rule, which is applicable 

to the processing of these events, would 

make this table more comprehensive 

and improve the transparency of the 

Rules. 

Proposed Technical Revisions To 

Improve, Clarify and Simplify 

Descriptions 

NSCC is proposing technical revisions 

to the descriptions throughout Section 

H of Procedure VII of the Rules that 

would enhance the clarity and 

transparency of these procedures. Such 

changes would correct the use of 

defined terms and typographical and 

other drafting errors, revise statements 

for clarity and consistency, and improve 

internal cross-references within the 

Rules. Additionally, NSCC would 

propose to add ‘‘money balances’’ to 

Section H, 1 of Procedure VII, which 

describes the types of adjustments 

NSCC may make within the CNS system 

and which may appear on the Members’ 

Miscellaneous Activity Report. 

Currently, this section only refers to 

‘‘positions’’ which could be interpreted 

to mean only securities positions. 

Because NSCC may make adjustments to 

either securities positions or money 

balances within CNS, the proposed 

change would clarify this statement and 

improve the transparency of this section 

of the Rules. 

As another example of the technical 

revisions being proposed, NSCC would 

also revise references within these 

procedures from ‘‘short positions’’ or 

‘‘long positions’’ that are being 

processed through the CNS 

Reorganization Processing System to 

‘‘short positions in the subject security’’ 

and ‘‘long positions in the subject 

security.’’ NSCC would also propose to 

amend this section by revising 

references to the ‘‘Sub-Account’’ to the 

complete defined term, the ‘‘CNS 

Reorganization Sub-Account.’’ 

NSCC believes the proposed technical 

revisions would create clearer 

descriptions of the rules that apply to 

the services described in this section of 

Procedure VII of the Rules and would 

improve the transparency of these 

processing procedures. 

iv. Proposed Changes To Describe 

Processing of Asset Servicing Events 

and Authority To Reveal Counterparties 

NSCC is proposing to amend Section 

H of Procedure VII of the Rules to 

include a new subsection 7 that would 

(1) disclose NSCC’s authority to 

determine when it may or may not 

process certain asset servicing events; 

(2) provide examples of asset servicing 

events that NSCC may determine shall 

be processed outside its facilities; and 

(3) describe the process by which NSCC 

may assist its Members in applying asset 

servicing events outside its facilities, 

including NSCC’s authority to match 

counterparties as of the critical date of 

that asset servicing event and reveal 

those counterparties to those Members. 

NSCC’s Authority To Apply or Decline 

To Apply Asset Servicing Events 

NSCC currently may assist its 

Members by applying certain asset 

servicing events to Members’ positions 

in CNS Securities that are subject to that 

event on the relevant event date or 

payment date. NSCC may also, in its 

discretion, determine that operational 

difficulties or other circumstances 

would prevent the processing of such 

asset servicing events within its 

facilities. NSCC is proposing to add a 

new Section H, 7 of Procedure VII of the 

Rules to provide transparency regarding 

its discretion in supporting asset 

servicing events with respect to 

transactions in CNS Securities, and its 

discretion in determining when it may 

be appropriate that an asset servicing 

event be processed outside its facilities 

due to operational difficulties or other 

concerns regarding the event. 

Identify Examples of Asset Servicing 

Events That NSCC May Not Process 

NSCC is also proposing to include in 

this new Section H, 7 of Procedure VII 

of the Rules examples of the types of 

asset servicing events NSCC may 

determine shall be processed outside its 

facilities. These events may include 

payments pursuant to litigation or other 

disputes, distributions on class actions, 

bankruptcy payments, consent 

solicitations, other distributions, claims, 

fees, or events with respect to which a 

Member has notified the Corporation 

that it either has incurred or anticipates 

that it will incur liabilities greater than 

the terms of the reorganization event. 

In connection with this change, NSCC 

is proposing to remove the last 

paragraph in Section H, 4 of Procedure 

VII of the Rules that describes the 

process by which it would remove 

positions in subject securities from the 

CNS System if a Member has notified 

NSCC that it either has incurred or 

anticipates it will incur liabilities 

greater than the terms of the 

reorganization event. Instead, NSCC 

would include these events in the list of 

asset servicing events that may be 

processed outside of NSCC’s facilities 

within the proposed new Section H, 7 

of Procedure VII of the Rules. This 

proposed change would ensure the 

Rules continue to provide Members 

with an appropriate level of 

transparency regarding how these 

events are treated without providing 

unnecessary details regarding actions 

that are taken by NSCC in order to effect 

the exit of these positions from the CNS 

System. Therefore, the proposed change 

would simplify the Rules, which 

improves its overall clarity. 

NSCC Authority To Reveal 

Counterparties To Assist Members in 

Processing Asset Servicing Events Away 

From NSCC 

The proposed rule change would also 

include a description in this new 

Section H, 7 of the Rules of NSCC’s 

authority to use a random allocation 

procedure to match counterparties and 

identify those counterparties to 

Members. As stated earlier, 

counterparties to obligations in CNS 

Securities are not known to each other 

as a result of the continuous netting of 

transactions within CNS. Therefore, 

Members occasionally request that 

NSCC identify their counterparty to a 

particular obligation over a critical 

event or payment date in order to (1) 

assist them in the processing of an asset 

servicing event outside of NSCC’s 

facilities, or (2) address claims, 

disputes, or information requests related 

to an event that NSCC has processed 

and that requires the Member to work 

directly with the counterparty. In these 

circumstances, NSCC applies a random 

allocation procedure (utilizing the same 

allocation procedure described in 

Procedure VII, Section H, 1 of the Rules) 

to match counterparties. Currently, after 

matching counterparties through its 

allocation procedure, NSCC contacts 

each of the counterparties via email or 

telephone to receive authority to 

identify the counterparties to the 

requesting Member. 

As a result of the proposed change, 

NSCC would continue its practice of 

applying a random allocation procedure 

(utilizing the same allocation procedure 

described in Procedure VII, Section H, 

1 of the Rules) to match counterparties 

when requested by a Member. The 

proposed rule change would provide 

Members with notice that NSCC may 

reveal counterparties to a requesting 

Member in these circumstances. By 


amozie on DSK3GDR082PROD with NOTICES1
34906 Federal Register / Vol. 83, No. 141 / Monday, July 23, 2018 / Notices 

10 15 U.S.C. 78q–1(b)(3)(F). 

11 Id. 

12 Id. 

13See 17 CFR 240.17Ad–22(e)(23)(i). 

14 Id. 

15 15 U.S.C. 78s(b)(3)(A). 

16 17 CFR 240.19b–4(f). 

providing this notice in the Rules, NSCC 

would no longer contact the 

counterparty to receive authority to 

reveal that counterparty’s identity to the 

requesting Member. Therefore, NSCC 

would be able to expedite the process 

and provide Members with the 

information they need to process asset 

servicing events or address other related 

requests outside of its facilities more 

quickly. 

Given that Members often request this 

information from NSCC and NSCC 

generally receives the requested 

authority to reveal the identity to its 

relevant counterparty, NSCC believes 

the proposed change would improve the 

transparency of its Rules, improve the 

processing of these events, and help 

NSCC continue to provide Members 

with a beneficial service. 

(b) Statutory Basis 

For the reasons described below, 

NSCC believes that the proposed 

changes are consistent with the Section 

17A(b)(3)(F) of the Act, which requires, 

in part, that the rules of a registered 

clearing agency be designed to promote 

the prompt and accurate clearance and 

settlement of securities transactions.10

The proposed rule change would 

improve the transparency of the Rules 

and would clarify and correct the 

descriptions within Section H of 

Procedure VII of the Rules, particularly 

the procedures applicable to the CNS 

Reorganization Processing System. 

Specifically, the proposal to add a 

description of the processing of asset 

servicing events, including NSCC’s 

discretion to determine that such events 

should be processed outside its 

facilities, would also improve the 

transparency of the Rules regarding 

these matters. 

The CNS Reorganization Processing 

System allows transactions in eligible 

CNS Securities to be processed for 

clearance and settlement through 

NSCC’s CNS Accounting System 

notwithstanding the occurrence of a 

corporate reorganization event. By 

creating clearer Rules regarding the 

processing of both corporate 

reorganization events and asset 

servicing events to CNS Securities, and 

by increasing transparency regarding 

Members’ and NSCC’s rights and 

obligations in this regard, the proposed 

changes would better facilitate the 

operation of CNS Reorganization 

Processing System and would better 

facilitate the application of asset 

servicing events. Therefore, the 

proposed change would also better 

facilitate the operation of the CNS 

system and, in this way, would promote 

the prompt and accurate clearance and 

settlement of securities transactions, 

consistent with Section 17A(b)(3)(F) of 

the Act.11

Additionally, by providing Members 

with notice through the new Section H, 

7 of Procedure VII of the Rules that 

NSCC may, when requested, identify 

their respective counterparties as of the 

critical event date, NSCC would no 

longer need to seek specific approval 

from each Member in order to do so. 

Therefore, the proposed changes would 

expedite Members’ ability to process 

asset servicing events outside of NSCC’s 

facilities. By assisting Members to 

process asset servicing events applicable 

to CNS Securities outside of NSCC’s 

facilities, the proposed changes would 

also promote the prompt and accurate 

clearance and settlement of securities 

transactions, consistent with Section 

17A(b)(3)(F) of the Act.12

Rule 17Ad–22(e)(23)(i) under the Act 

requires, in part, that NSCC establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to provide for 

publicly disclosing all relevant rules 

and material procedures.13 As described 

above, the proposed rule change would 

improve the transparency, clarity, and 

accuracy of the Rules, such that these 

provisions of the Rules would better 

publicly disclose all relevant and 

material procedures regarding the 

aspects of the operation of NSCC’s CNS 

Reorganization Processing System and 

the processing of asset servicing and 

other events and payments. Therefore, 

NSCC believes the proposed rule 

changes are consistent with Rule 17Ad– 

22(e)(23)(i).14

(B) Clearing Agency’s Statement on 

Burden on Competition 

NSCC does not believe that the 

proposed rule changes would have any 

impact, or impose any burden, on 

competition. The proposed rule changes 

would improve Members’ 

understanding of their rights and 

obligations with respect to the operation 

of the CNS Reorganization Processing 

System and would improve 

transparency regarding the processing of 

asset servicing and other events and 

payments. These proposed changes 

would be applicable to all Members that 

utilize these services and would not 

alter Members’ rights or obligations. 

The proposed rule change to remove 

descriptions of processing events that 

NSCC generally does not process due to 

operational difficulties, pursuant to its 

existing authority, would not result in 

any change in the current operation of 

the service. Rather, the change would 

update the Rules to reflect current 

practice. These changes would not alter 

Members’ rights or obligations with 

respect to this service. 

Therefore, NSCC does not believe that 

the proposed rule changes would 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 solicited or received 

any written comments relating to this 

proposal. NSCC will notify the 

Commission of any written comments 

that it receives. 

III. Date of Effectiveness of the 

Proposed Rule Change, and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 15 and paragraph (f) of Rule 

19b–4 thereunder.16 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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NSCC–2018–003 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–2018–003. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 


amozie on DSK3GDR082PROD with NOTICES1
Federal Register / Vol. 83, No. 141 / Monday, July 23, 2018 / Notices 34907 

17 17 CFR 200.30–3(a)(12). 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (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 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 

(http://dtcc.com/legal/sec-rulefilings.aspx). All comments received 

will be posted without change. Persons 

submitting comments are cautioned that 

we do not redact or edit personal 

identifying information from comment 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–NSCC– 

2018–003 and should be submitted on 

or before August 13, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–15646 Filed 7–20–18; 8:45 am] 

BILLING CODE 8011–01–P 

SMALL BUSINESS ADMINISTRATION 

Military Reservist Economic Injury 

Disaster Loans Interest Rate for Fourth 

Quarter FY 2018 

The Small Business Administration 

publishes an interest rate for Military 

Reservist Economic Injury Disaster 

Loans (13 CFR 123.512) on a quarterly 

basis. The rate will be 3.675 for loans 

approved on or after July 27, 2018. 

James Rivera, 

Associate Administrator for Disaster 

Assistance. 

[FR Doc. 2018–15650 Filed 7–20–18; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF STATE 

[Public Notice: 10472] 

In the Matter of the Amendment of the 

Designation of al-Shabaab (and Other 

Aliases) as a Specially Designated 

Global Terrorist 

Based upon a review of the 

administrative record assembled in this 

matter, and in consultation with the 

Attorney General and the Secretary of 

the Treasury, I have concluded that 

there is a sufficient factual basis to find 

that the following are aliases of alShabaab: al-Hijra, Al Hijra, Muslim 

Youth Center, MYC, Pumwani Muslim 

Youth, Pumwani Islamist Muslim Youth 

Center. 

Therefore, pursuant to Section 1(b) of 

Executive Order 13224, I hereby amend 

the designation of al-Shabaab as a 

Specially Designated Global Terrorist to 

include the following new aliases: alHijra, Al Hijra, Muslim Youth Center, 

MYC, Pumwani Muslim Youth, 

Pumwani Islamist Muslim Youth 

Center. 

This determination shall be published 

in the Federal Register. 

Dated: July 9, 2018. 

Michael Pompeo, 

Secretary of State. 

[FR Doc. 2018–15729 Filed 7–20–18; 8:45 am] 

BILLING CODE 4710–AD–P 

DEPARTMENT OF STATE 

[Public Notice: 10474] 

Notice of Determinations; Culturally 

Significant Objects Imported for 

Exhibition Determinations: ‘‘Judson 

Dance Theater: The Work is Never 

Done’’ Exhibition 

SUMMARY: Notice is hereby given of the 

following determinations: I hereby 

determine that certain objects to be 

included in the exhibition ‘‘Judson 

Dance Theater: The Work is Never 

Done,’’ imported from abroad for 

temporary exhibition within the United 

States, are of cultural significance. The 

objects are imported pursuant to loan 

agreements with the foreign owners or 

custodians. I also determine that the 

exhibition or display of the exhibit 

objects at The Museum of Modern Art, 

New York, New York, from on or about 

September 16, 2018, until on or about 

February 3, 2019, and at possible 

additional exhibitions or venues yet to 

be determined, is in the national 

interest. I have ordered that Public 

Notice of these determinations be 

published in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: Julie 

Simpson, Attorney-Adviser, Office of 

the Legal Adviser, U.S. Department of 

State (telephone: 202–632–6471; email: 

section2459@state.gov). The mailing 

address is U.S. Department of State, 

L/PD, SA–5, Suite 5H03, Washington, 

DC 20522–0505. 

SUPPLEMENTARY INFORMATION: The 

foregoing determinations were made 

pursuant to the authority vested in me 

by the Act of October 19, 1965 (79 Stat. 

985; 22 U.S.C. 2459), E.O. 12047 of 

March 27, 1978, the Foreign Affairs 

Reform and Restructuring Act of 1998 

(112 Stat. 2681, et seq.; 22 U.S.C. 6501 

note, et seq.), Delegation of Authority 

No. 234 of October 1, 1999, Delegation 

of Authority No. 236–3 of August 28, 

2000, and Delegation of Authority No. 

236–10 of July 6, 2018. 

Jennifer Z. Galt, 

Principal Deputy Assistant Secretary for 

Educational and Cultural Affairs, Department 

of State. 

[FR Doc. 2018–15655 Filed 7–20–18; 8:45 am] 

BILLING CODE 4710–05–P 

DEPARTMENT OF STATE 

[Public Notice: 10473] 

Notice of Determinations; Culturally 

Significant Objects Imported for 

Exhibition Determinations: ‘‘Armenia!’’ 

Exhibition 

SUMMARY: Notice is hereby given of the 

following determinations: I hereby 

determine that certain objects to be 

included in the exhibition ‘‘Armenia!,’’ 

imported from abroad for temporary 

exhibition within the United States, are 

of cultural significance. The objects are 

imported pursuant to loan agreements 

with the foreign owners or custodians. 

I also determine that the exhibition or 

display of the exhibit objects at The 

Metropolitan Museum of Art, New York, 

New York, from on or about September 

20, 2018, until on or about January 13, 

2019, and at possible additional 

exhibitions or venues yet to be 

determined, is in the national interest. 

I have ordered that Public Notice of 

these determinations be published in 

the Federal Register. 

FOR FURTHER INFORMATION CONTACT: Julie 

Simpson, Attorney-Adviser, Office of 

the Legal Adviser, U.S. Department of 

State (telephone: 202–632–6471; email: 

section2459@state.gov). The mailing 

address is U.S. Department of State, 

L/PD, SA–5, Suite 5H03, Washington, 

DC 20522–0505. 

SUPPLEMENTARY INFORMATION: The 

foregoing determinations were made 

pursuant to the authority vested in me 


amozie on DSK3GDR082PROD with NOTICES1