[Federal Register Volume 65, Number 232 (Friday, December 1, 2000)]
[Notices]
[Pages 75330-75331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30592]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43598; File No. SR-NSCC-00-12]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Granting Accelerated Approval of a Proposed Rule 
Change Relating to the Submission of Extended Corrections and Time 
Frames for Confirmation

November 20, 2000.
    On August 28, 2000, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-NSCC-00-12) 
pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ to permit NSCC to allow Fund Members and Mutual Fund 
Processors to submit extended (post settlement) corrections in NSCC's 
Mutual Fund Service's Fund/Serv. Notice of the proposal was published 
in the Federal Register on October 24, 2000.\2\ No comment letters were 
received. For the reasons discussed below, the Commission is granting 
accelerated approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 43457 (October 17, 2000) 
65 FR 63662 (October 24, 2000).
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I. Description

    Pursuant to NSCC's Rule 52A, section 12, only a Settling Member or 
TPA Member may currently submit extended (post settlement) correction 
instructions. These types of instructions are submitted when a Settling 
Member or TPA Member determines that data with respect to a settled 
order previously transmitted to a Fund Member or Mutual Fund Processor 
is in need of correction.\3\
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    \3\ Securities Exchange Act Release No. 31937 (March 1, 1993), 
58 FR 12609 [SR-NSCC-92-14] (order approving post settlement 
correction initiated by Settling Members and TPA Members).
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    Under the proposed rule change, section 12 will be amended to also 
permit Fund Members and Mutual Fund Processors to submit extended (post 
settlement) corrections to Settling Members or TPA Members. No action 
will be required by a Settling Member or TPA Member if it determines to 
accept the extended correction of a Fund Member or Mutual Fund 
Processor. A Settling Member or TPA Member will be able to reject the 
extended correction instruction within the time frame established by 
NSCC.\4\ In addition, section 12 will be revised to permit extended 
corrections for exchange orders.
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    \4\ Currently, a Settling Member or TPA Member must reject the 
extended correction instruction within three days. NSCC will issue 
an ``Important Notice'' at least 30 days prior to implementing 
changes in the time frames required for rejections of extended 
corrections. Telephone conservation between Richard J. Paley, 
Associate Counsel, NSCC, and Susan M. Petersen, Special Counsel, 
Division of Market Regulation, Commission (October 16, 2000).
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    The rule change also proposes to make two additional changes to 
Rule 52A. Sections 4 and 8 of Rule 52A are being amended to allow NSCC 
to delete certain orders, corrections, and extended corrections that 
have not been confirmed or rejected, respectively, within the time 
frame established by NSCC. Section 21 is being amended to reduce the 
maximum time frame within which a Delivering Fund Member must confirm 
the value of Fund/Serv eligible mutual fund shares, investment funds, 
or UIT units being transferred to a Receiving Fund Member from sixty 
days to tens days.\5\
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    \5\ Pursuant to Section 21 of Rule 52A, a Fund Member or Mutual 
Fund Processor (``Receiving Fund Member'') may initiate a request 
for the transfer of a customer's mutual fund shares, investment 
fund, or UIT units from another Fund Member or Mutual Fund Processor 
(``Delivering Fund Member''). The Delivering Fund Member must 
acknowledge or reject the transfer request within two business days. 
Once the transfer is acknowledged, the Delivering Fund Member must 
also confirm the value of the shares to be transferred within the 
time frame specified under Section 21. Under the proposed rule 
change, a Delivering Fund Member must submit the confirmation no 
earlier than one business day and no later than ten business days 
after acknowledging the transfer.

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[[Page 75331]]

    NSCC intends to implement these changes, subject to SEC approval, 
on November 20, 2000.

II. Discussion

    Section 17A(b)(3)(F) \6\ of the Act requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions, and to foster 
cooperation and coordination with persons engaged in the clearance and 
settlement of securities transactions. By permitting Fund Members and 
Mutual Fund Processors to submit post settlement corrections and by 
amending the time frames within which the value of the instruments 
being transferred must be confirmed, the rule change should allow NSCC 
to provide a mechanism to help facilitate the prompt and accurate 
clearance and settlement of transactions between users of Fund/Serv. 
Furthermore, by extending the ability to submit post settlement 
corrections to Fund Members and Mutual Fund Processors, an ability 
already granted to Settling Members and TPA Members, NSCC is ensuring 
that the primary users of Fund/Serv are afforded similar capabilities. 
These actions should foster cooperation and coordination among Fund/
Serv users. Accordingly, the Commission finds that the rule change is 
consistent with NSCC's obligations under the Act.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    NSCC has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after the 
date of publication of notice of the filing. The Commission finds good 
cause for so approving the proposed rule change prior to the thirtieth 
day after publication in the Federal Register because accelerated 
approval will permit NSCC to implement these Fund/Serv system 
enhancements, which are designed to accommodate new Internal Revenue 
Service regulations (which will be effective January 1, 2001),\7\ in a 
manner consistent with industry practices with respect to system 
enhancements. Furthermore, the Commission has not received any comment 
letters and does not expect to receive any comment letters on the 
proposal.
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    \7\ The new IRS regulation relates to the certification of 
foreign accounts, specifically the communication of W8-related 
registration information. Since fund companies typically do not 
implement December code or system changes, NSCC requested 
acceleration of the rule filing so as to implement and test the 
system changes prior to December.
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular 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-00-12) be and hereby is 
approved. For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).

Jonathan G. Katz,
Secretary.
[FR Doc. 00-30592 Filed 11-30-00; 8:45 am]
BILLING CODE 8010-01-M