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[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
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