Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Notices 55835 

21See paragraph 2 of the proposed 17d–2 Plan. 

22See paragraph 3 of the proposed 17d–2 Plan. 

23The Commission also notes that the addition to 

or deletion from the Certification of any federal 

securities laws, rules, and regulations for which 

FINRA would bear responsibility under the Plan for 

examining, and enforcing compliance by, Dual 

Members, also would constitute an amendment to 

the Plan. 

24See paragraph 12 of the proposed 17d–2 Plan. 

25The Commission notes that paragraph 12 of the 

Plan reflects the fact that FINRA’s responsibilities 

under the Plan will continue in effect until the 

Commission approves any termination of the Plan. 

26 17 CFR 200.30–3(a)(34). 

FINRA would assume regulatory 

responsibility for certain provisions of 

the federal securities laws and the rules 

and regulations thereunder that are set 

forth in the Certification. The Common 

Rules covered by the proposed Plan are 

specifically listed in the Certification, as 

may be amended by the Parties from 

time to time pursuant to the terms and 

conditions specified in the Plan. 

According to the proposed Plan, CHX 

will review the Certification, at least 

annually, or more frequently if required 

by changes in either the rules of CHX or 

FINRA, and, if necessary, submit to 

FINRA an updated list of Common 

Rules to add CHX rules not included on 

the then-current list of Common Rules 

that are substantially similar to FINRA 

rules; delete CHX rules included in the 

then-current list of Common Rules that 

are no longer substantially similar to 

FINRA rules; and confirm that the 

remaining rules on the list of Common 

Rules continue to be CHX rules that are 

substantially similar to FINRA rules.21

FINRA will then confirm in writing 

whether the rules listed in any updated 

list are Common Rules as defined in the 

proposed Plan. Under the proposed 

Plan, CHX will also provide FINRA with 

a current list of Dual Members and shall 

update the list no less frequently than 

once each quarter.22

Under the proposed Plan, CHX would 

retain full responsibility for 

surveillance, examination, investigation, 

and enforcement with respect to trading 

activities or practices involving CHX’s 

own marketplace; registration pursuant 

to its applicable rules of associated 

persons (i.e., registration rules that are 

not Common Rules); its duties as a DEA 

pursuant to Rule 17d–1 under the Act; 

and any CHX rules that are not Common 

Rules. 

The Commission is hereby declaring 

effective a plan that, among other 

things, allocates regulatory 

responsibility to FINRA for the 

oversight and enforcement of CHX rules 

that are substantially similar to the rules 

of FINRA for Dual Members of CHX and 

FINRA. Therefore, modifications to the 

Certification need not be filed with the 

Commission as an amendment to the 

Plan, provided that the Parties are only 

adding to, deleting from, or confirming 

changes to CHX rules in the 

Certification in conformance with the 

definition of Common Rules provided in 

the Plan. However, should the Parties 

decide to add a CHX rule to the 

Certification that is not substantially 

similar to a FINRA rule; delete a CHX 

rule from the Certification that is 

substantially similar to a FINRA rule; or 

leave on the Certification a CHX rule 

that is no longer substantially similar to 

a FINRA rule, then such a change would 

constitute an amendment to the Plan, 

which must be filed with the 

Commission pursuant to Rule 17d–2 

under the Act.23

The Plan also permits CHX and 

FINRA to terminate the Plan, subject to 

notice.24 The Commission notes, 

however, that while the Plan permits 

the Parties to terminate the Plan, the 

Parties cannot by themselves reallocate 

the regulatory responsibilities set forth 

in the Plan, since Rule 17d–2 under the 

Act requires that any allocation or reallocation of regulatory responsibilities 

be filed with the Commission.25

IV. Conclusion 

This Order gives effect to the Plan 

filed with the Commission in File No. 

4–274. The Parties shall notify all 

members affected by the Plan of their 

rights and obligations under the Plan. 

It is therefore ordered, pursuant to 

Section 17(d) of the Act, that the Plan 

in File No. 4–274, between FINRA and 

CHX, filed pursuant to Rule 17d–2 

under the Act, is approved and declared 

effective. 

It is therefore ordered that CHX is 

relieved of those responsibilities 

allocated to FINRA under the Plan in 

File No. 4–274. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.26

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–22837 Filed 9–13–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold an Open Meeting 

on September 17, 2010 at 10 a.m., in the 

Auditorium, Room L–002. 

The subject matter of the Open 

Meeting will be: 

The Commission will consider whether to 

propose rules that would require a public 

company to provide certain disclosures about 

its short-term borrowings in its filings with 

the Commission. The Commission will also 

consider whether to publish an interpretive 

release to provide guidance regarding the 

Commission’s current disclosure 

requirements in ‘‘Management’s Discussion 

and Analysis of Financial Condition and 

Results of Operations’’ relating to liquidity 

and capital resources. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact: 

The Office of the Secretary at (202) 

551–5400. 

Dated: September 10, 2010. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–22949 Filed 9–10–10; 11:15 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act; Notice of Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Thursday, September 16, 2010 at 3 

p.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) 

and 17 CFR 200.402(a)(3), (5), (7), 9(ii) 

and (10), permit consideration of the 

scheduled matters at the Closed 

Meeting. 

Commissioner Paredes, as duty 

officer, voted to consider the items 

listed for the Closed Meeting in a closed 

session. 

The subject matter of the Closed 

Meeting scheduled for Thursday, 

September 16, 2010 will be: 

Institution and settlement of injunctive 

actions; 

Institution and settlement of 

administrative proceedings; an 

opinion; and 


jlentini on DSKJ8SOYB1PROD with NOTICES
55836 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Notices 

1 15 U.S.C. 78s(b)(1). 

2Securities Exchange Act Release No. 62567 (July 

14, 2010), 75 FR 44828 (July 29, 2010) (SR–NSCC– 

2010–07). 

3 15 U.S.C. 78q–1. 

4 15 U.S.C. 78q–1(b)(3)(F). 

5 15 U.S.C. 78q–1. 

6 15 U.S.C. 78s(b)(2). 

7 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

8 17 CFR 200.30–3(a)(12). 

Other matters relating to enforcement 

proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact: 

The Office of the Secretary at (202) 

551–5400. 

Dated: September 9, 2010. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–22900 Filed 9–10–10; 11:15 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62849; File No. SR–NSCC– 

2010–07] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Order Approving 

Proposed Rule Change To Amend 

Addendum C of its Rules and 

Procedures To Implement Risk 

Enhancements To its Stock Borrow 

Program 

September 3, 2010. 

I. Introduction 

On July 1, 2010, National Securities 

Clearing Corporation (‘‘NSCC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–NSCC–2010–07 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’).1 The proposed rule change was 

published for comment in the Federal 

Register on July 29, 2010.2 No comment 

letters were received on the proposal. 

This order approves the proposal. 

II. Description 

NSCC is amending its Rules to 

implement risk enhancements whereby 

municipal and corporate bonds will be 

ineligible for lending through NSCC’s 

Stock Borrow Program (‘‘SBP’’) and 

Members will be prevented from 

lending through the SBP securities that 

were issued by that Member or any of 

its affiliates. 

1. SBP Background 

In the course of daily operations, for 

various reasons, NSCC’s Continuous Net 

Settlement (‘‘CNS’’) system often 

requires a number of shares for a 

particular security that exceeds the 

number of shares available to NSCC 

through Member deliveries. To improve 

the efficiency of the clearing system in 

such situations, NSCC’s has 

implemented automated stock borrow 

procedures to meet these needs for 

shares of a particular CNS security. 

Members wishing to participate in the 

SBP notify NSCC each day of the 

securities they have on deposit at The 

Depository Trust Company (‘‘DTC’’) that 

are available to be borrowed by NSCC. 

After NSCC’s nighttime processing of 

regular deliveries, NSCC borrows from 

its Members the securities that have 

been identified as available for the SBP 

and that are needed to fulfill deliveries. 

The daytime and nighttime SBP are 

separate processes. Members can choose 

to participate only in the nighttime SBP, 

only in the daytime SBP, or in both. 

Similarly, securities needed for 

unfulfilled delivery obligations during 

the daytime processing are borrowed 

from Members that have made securities 

available. NSCC place the borrowed 

securities in a special CNS subaccount, 

and the lending Member is advanced 

the full market value of the borrowed 

securities until they are returned. As 

securities become available, borrowed 

securities are returned through normal 

long allocations against the special 

subaccount. 

2. Proposed Amendment to Addendum 

C of the NSCC’s Rules 

After reviewing the SBP, NSCC 

determined that it faced increased risk 

when it borrows municipal or corporate 

bonds and when it borrows securities 

issued by the lending Member or any of 

its affiliates. First, if NSCC is unable to 

close out in a timely manner long 

positions in corporate or municipal 

bonds that were created by loans of such 

securities from a Member that becomes 

insolvent, then NSCC may possess high 

concentrations of corporate or 

municipal bonds that it cannot deliver 

to the insolvent Member. Consequently, 

NSCC bears an increased risk of loss 

because it would be forced to liquidate 

those corporate or municipal bond 

positions in thinly traded markets. 

Second, NSCC incurs credit exposure in 

instances where it borrows securities 

from a Member that is also the issuer of 

the securities or is an affiliate of the 

issuer. In the event that such a Member 

becomes insolvent, then NSCC incurs 

the additional risk that the securities 

loaned through the SBP issued by the 

Member or its affiliate and will likely 

decline in value. 

In both situations, NSCC believes that 

the risks posed by these SBP practices 

outweigh the benefits to NSCC and its 

Members. Accordingly, NSCC is 

amending its Rules so that municipal 

and corporate bonds will be ineligible 

for lending through the SBP and so that 

Members will be unable to lend 

securities through the SBP that are 

issued by the Member or any of its 

affiliates. Members will be advised of 

the implementation date for these 

changes through the issuance of NSCC 

Important Notices. 

III. Discussion 

The Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act 3 and the 

rules and regulations thereunder 

applicable to NSCC. In particular, the 

Commission believes that the changes 

NSCC is making to the SBP to establish 

appropriate safeguards and enhanced 

efficiency to mitigate risks to NSCC 

from the SBP are consistent with 

NSCC’s obligations under Section 

17A(b)(3)(F).4 That section requires, 

among other things, that the rules of a 

clearing agency are designed to assure 

the safeguarding of securities and funds 

which are in the custody or control of 

the clearing agency or for which it is 

responsible. 

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposal is 

consistent with the requirements of the 

Act and in particular with the 

requirements of Section 17A of the Act 5

and the rules and regulations 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,6 that the 

proposed rule change (File No. SR– 

NSCC–2010–07) be, and hereby is, 

approved.7

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–22801 Filed 9–13–10; 8:45 am] 

BILLING CODE 8010–01–P 


jlentini on DSKJ8SOYB1PROD with NOTICES