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[Federal Register Volume 79, Number 203 (Tuesday, October 21, 2014)]
[Notices]
[Pages 62977-62979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-24946]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73358; File No. SR-NSCC-2014-09]

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend Rule 52 (Mutual Fund Services) and Addendum A (Fee 
Structure) With Respect to the DTCC Payment aXis Service, and To Make 
Certain Technical Changes

October 15, 2014.
    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 October 2, 2014, National Securities Clearing Corporation (``NSCC'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared by NSCC. NSCC filed the proposed rule change 
pursuant to Section 19(b)(3)(A) \3\ of the Act and Rule 19b-4(f)(2) \4\ 
and (4) \5\ thereunder. The proposed rule change was effective upon 
filing with the Commission. 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 amendments to Rule 52 (Mutual 
Fund Services) and Addendum A (Fee Structure) of NSCC's Rules & 
Procedures with respect to the DTCC Payment aXis service, and certain 
technical changes in connection therewith, as more fully described 
below. The text of the proposed rule change is available on NSCC's Web 
site at http://www.dtcc.com/legal/sec-rule-filings.aspx, at the 
principal office of NSCC, and at the Commission's Public Reference 
Room.

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, NSCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NSCC has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

(1) Statement of Purpose
    Background. NSCC's DTCC Payment aXis service (``Service'') \6\ was 
initially approved by the Commission on December 9, 1992 (``1992 Rule 
Filing'').\7\ In the 1992 Rule Filing, NSCC described that the new 
service would provide for the automation of payments of commissions 
owed in respect of mutual fund transactions between fund companies 
(``Funds'') and their retail broker-dealers (``Distributors'') and that 
NSCC's role in this new commission service would be to transmit data 
between the Funds (i.e., the commission payers) and the Distributors 
(i.e., the commission receivers). In 2005, NSCC expanded the scope of 
the Service to permit Distributors to transmit fee data through NSCC to 
other Distributors, and to settle the fee payments in respect thereof, 
expanding the Service to allow for more than the exchange of 
commission-related information from Funds to Distributors.\8\
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    \6\ The Service was formerly known as ``Mutual Fund Commission 
Settlement''.
    \7\ Securities Exchange Act Release No. 31579 (December 9, 
1992), 57 FR 60017 (December 17, 1992) (SR-NSCC-1992-13).
    \8\ See Securities Exchange Act Release No. 52458 (September 16, 
2005), 70 FR 56200 (September 26, 2005) (SR-NSCC-2005-10).
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    On October 22, 2012, NSCC filed a proposed rule change (``2012 Rule 
Filing''),\9\ which, in particular and relevant to the current proposed 
rule change, introduced a unique data processing flow to the 
Service.\10\ In the

[[Page 62978]]

2012 Rule Filing, NSCC explained that unlike the processing flow 
applicable to all other commission and fee payment types processed 
through the Service, instructions for the payment of 12b-1 fees to a 
Distributor with regard to investor accounts held on an omnibus account 
basis at the Fund (``12b-1 Omnibus Fees'') must in all events be 
initiated by the Distributor seeking payment. Having received the 
payment instruction in proper form from the Distributor, NSCC would 
then transmit such payment instruction to the contra-side Fund. The 
contra-side Fund could then either (i) confirm or reject the payment 
instruction, or (ii) release payment (either with or without 
confirmation).
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    \9\ Securities Exchange Act Release No. 68159 (November 5, 
2012), 77 FR 67410 (November 9, 2012) (SR-NSCC-2012-08).
    \10\ The 2012 Rule Filing also (i) renamed the Service from 
``Mutual Fund Commission Settlement'' to the current ``DTCC Payment 
aXis'', (ii) specified that the Service permits for the flow of 
commission and other fee data, and the settlement of payments 
thereof, among users of the Service without regard to whether the 
flow of funds is from the Fund to the Distributor, from the 
Distributor to the Fund, from a Distributor to another Distributor, 
or otherwise, (iii) specified that transmission of commission and 
other fee data with regard to investor accounts held on an omnibus 
account basis was included within the suite of functionalities 
offered by the Service and (iv) amended the fee structure with 
respect to the fees charged by NSCC with regard to the Service.
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    Currently, NSCC is preparing to add three additional fee types to 
the list of commission and fee payments that may be processed through 
DTCC Payment aXis. The three fee types are known in the Funds industry 
as Sub-Accounting Service Fees, Retirement/Bank Trust Service Fees and 
Networking Service Fees. All three fee types will be subject to the 
same processing flow as 12b-1 Omnibus Fees, where the party seeking 
payment must initiate the transaction (``Payee Initiated Processing 
Flow'').\11\
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    \11\ Networking Service Fees may also be processed using the 
traditional process flow, at the paying Fund's discretion.
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The Proposed Rule Change
    Commission and Other Fee Payments between DTCC Payment aXis Users. 
Because the 2012 Rule Filing described the newly introduced Payee 
Initiated Processing Flow as having applicability only with regard to 
12b-1 Omnibus Fees, NSCC proposes to amend Rule 52 to remove the 12b-1 
Omnibus Fee limitation. In connection with this amendment, NSCC will 
also specify that the Payee Initiated Processing Flow may also apply to 
fee types where any party, including a Fund, is the recipient of the 
payment. Upon effectiveness of this proposed rule change, going forward 
NSCC will issue an Important Notice to its DTCC Payment aXis users 
regarding which commission and other fee types will be subject to the 
Payee Initiated Processing Flow. These rule changes will be effective 
immediately, with implementation for the processing of the three 
additional fee types named above to begin November 24, 2014, or 
otherwise, at such later date thereafter as NSCC may announce through 
Important Notice.
    NSCC Charges. NSCC is also amending Addendum A (NSCC's Fee 
Structure) with regard to DTCC Payment aXis. Addendum A will be amended 
as follows: the DTCC Payment aXis fee category currently entitled 
``Non-Omnibus'' will be renamed ``Commission & Fee Settlement'', and 
the DTCC Payment aXis fee category currently entitled ``Omnibus'' will 
be renamed ``Invoicing & Fee Settlement'', to better conform to the 
industry naming convention.
    In addition, ``detail records'' transaction charges, currently 
charged within the ``Omnibus'' fee category (being renamed ``Invoicing 
& Fee Settlement''), are being reduced by NSCC and will be charged 
under a separate fee structure to match the fee structure applicable to 
``Commission & Fee Settlement'' (currently named, ``Non-Omnibus''), 
except that there will be no minimum charge applicable to detail 
records transactions.\12\ These rule changes will be effective 
immediately, with NSCC's implementation of the new detail records 
transaction fee structure to begin November 24, 2014, or at such later 
date thereafter as NSCC may announce through Important Notice.
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    \12\ For DTCC Payment aXis Non-Omnibus transactions, NSCC 
charges its members $.30 per hundred records for the first 500,000 
records submitted each month, with a minimum charge of $50. This $50 
minimum charge will not apply to detail records transactions.
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    Technical Changes. In connection with the above changes to NSCC's 
Rules & Procedures, NSCC is also making four technical changes as 
follows: First, in Rule 52, to remove the footnote in the heading 
explaining that the ``Mutual Fund Services'' were formerly known as the 
``Mutual Fund Settlement, Entry and Registration Verification Service'' 
(the name change occurred several years ago, and NSCC does not believe 
that the explanation is required any longer); second, in Rule 52, to 
revise the phrasing for the term ``Omnibus'' for purposes of clarity; 
third, in Rule 52, to merge Subsections 3 and 4 of Section C (DTCC 
Payment aXis) into one Subsection as the two Subsections are 
substantially related; and four, in Addendum A, to add the subheading 
``Transaction Fees'' under the current ``Non-Omnibus'' heading (being 
renamed ``Commission & Fee Settlement), which subheading was 
inadvertently omitted in the 2012 Rule Filing. There are no new NSCC 
charges associated with this technical change to Addendum A. These rule 
changes will be effective immediately.
(2) Statutory Basis
    NSCC believes that the proposed rule change is consistent with the 
requirements of the Act, and the rules and regulations thereunder 
applicable to NSCC. In particular, the proposed rule change is 
consistent with (i) Section 17A(b)(3)(F) \13\ of the Act because it 
provides a mechanism for members to communicate commission and fee 
payment instructions and to settle payments between themselves in a 
standardized and automated form, fostering cooperation and coordination 
with persons engaged in the clearance and settlement of securities 
transactions, and (ii) Section 17A(b)(3)(D) \14\ of the Act because it 
amends the service fees NSCC charges in connection with use of the 
Service, which helps to provide for the equitable allocation of 
reasonable dues, fees and other charges among members in connection 
with use of the Service. In addition, the proposed rule change will be 
implemented consistently with the safeguarding of securities and funds 
in NSCC's custody or control or for which NSCC is responsible because 
the proposed rule change applies solely to non-guaranteed services and 
also solely with respect commission and fee payments between or among 
Funds and their distribution partners. Accordingly, the proposed rule 
change does not affect the safeguarding of securities or funds in 
NSCC's custody or control or for which NSCC is responsible.
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    \13\ 15 U.S.C. 78q-1(b)(3)(F).
    \14\ 15 U.S.C. 78q-1(b)(3)(D).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will have any 
impact, or impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    Written comments relating to the proposed rule change have not yet 
been solicited or received. NSCC will notify the Commission of any 
written comments received by NSCC.

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)

[[Page 62979]]

of the Act \15\ and paragraph (f) of Rule 19b-4 \16\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File No. SR-NSCC-2014-09 on the subject line.

Paper Comments

     Send in triplicate to Secretary, Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File No. SR-NSCC-2014-09. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site 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 
NSCC's Web site at (http://www.dtcc.com/legal/sec-rule- filings.aspx).
    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File No. SR-NSCC-2014-09 and 
should be submitted on or before November 12, 2014.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-24946 Filed 10-20-14; 8:45 am]
BILLING CODE 8011-01-P
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