Document ID: SEC-2008-0990-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2008-07-16T04:00Z

[Federal Register: July 16, 2008 (Volume 73, Number 137)]
[Notices]               
[Page 40902-40903]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16jy08-112]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58126; File No. SR-NSCC-2008-04]

 
Self-Regulatory Organizations; The National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to the Use of NSCC's Mutual Fund Service by 
Investment Managers in Managed Account Programs

July 9, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 24, 2008, the 
National Securities Clearing Corporation (``NSCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change described in Items I, II, and III below, which items have been 
prepared primarily by NSCC. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NSCC proposes to amend its rule in order to allow an investment 
manager in a managed account program to access NSCC's mutual fund 
services without money settlement obligations.\2\
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    \2\ Changes are to the rule text that appears in the electronic 
manual of NSCC found at http://www.nscc.com/legal/.
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II. Self-Regulatory Organization'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 these 
statements.\3\
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    \3\ The Commission has modified the text of the summaries 
prepared by the NSCC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, there is no centralized and automated communication 
process that supports mutual fund transactions in managed account 
programs. Generally, the investment manager must input the transaction 
into one or more sponsor or service provider managed account systems. 
The transaction must then be moved to the sponsor's broker/dealer 
system for communication to the mutual fund via NSCC's Fund/SERV or 
directly to the fund outside of Fund/SERV. After the transaction is 
processed through Fund/SERV or processed directly with the fund, the 
sponsor(s) or service provider's managed account system must then be 
updated to reflect the mutual fund transaction and to communicate that 
information to the investment manager. Consequently, the inclusion of 
mutual funds in managed accounts imposes operational and technological 
restraints, requires additional processing, incurs added costs, and is 
more susceptible to error.
    The purpose of the proposed rule change will amend the rules of 
NSCC regarding membership and use of NSCC's mutual fund services to 
allow an investment manager in a managed account program to access 
NSCC's mutual fund services without money settlement. The proposed rule 
change will allow an investment manager for a managed account program 
or a service provider to the investment manager to access NSCC's mutual 
fund services in respect of mutual fund transactions for which the 
managed account program sponsor will settle. The investment manager or 
the service provider that maintains the investment manager's platform 
will become a non-settling member, called an Investment Manager/Agent 
Member (``IMA Member''), and will have access to Fund/SERV and NSCC's 
other mutual fund services for transactions in managed account 
programs.
    An NSCC settling member (generally the sponsor for the managed 
account program) will contractually agree with NSCC to settle the IMA 
Member's transactions at NSCC. The settling member will receive a 
report showing all the transactions of the IMA Member and can cancel 
any transaction intraday. The settling member must be an NSCC Member or 
Mutual Fund/IPS Member, and therefore subject to NSCC's standards of 
membership as apply were it to be settling its own transactions in 
mutual fund services at NSCC.

[[Page 40903]]

    NSCC expects that the proposed rule change will remove the 
operational obstacles to adding mutual funds to managed account 
offerings, allow investment managers one entry point for mutual fund 
transactions, and automate the reconciliation of managed account 
platforms direct to Fund/SERV. The type of arrangement proposed by this 
rule change is analogous to that of a Third Party Administration 
(``TPA'') Member under NSCC's Defined Contribution Clearance & 
Settlement (DCC&S) mutual fund services.
2. Statutory Basis
    NSCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \4\ and the rules and 
regulations thereunder applicable to NSCC because the proposed rule 
change should promote processing efficiencies between investment 
managers in a managed account program, the sponsors of the program, and 
the fund companies in which the program assets are invested, thereby 
facilitating the prompt and accurate processing of securities 
transactions.
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    \4\ 15 U.S.C. 78q-1.
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 B. Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

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

    No written comments relating to the proposed rule change have 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 upon filing pursuant 
to Section 19(b)(3)(A)(iii) of the Act \5\ and Rule 19b-4(f)(6) \6\ 
thereunder in that it (1) does not significantly affect the protection 
of investors or the public interest; (ii) does not impose any 
significant burden on competition; (iii) by its terms, does not become 
operative for 30 days after the date from which it was filed (June 24, 
2008), or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest. At 
any time within sixty days of the filing of such rule change, the 
Commission may summarily abrogate 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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    \5\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \6\ 17 CFR 240.19b-4(f)(6).
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NSCC-2008-04 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 Number SR-NSCC-2008-04. This 
file number should be included on the subject line if e-mail 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 inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m.
    Copies of such filings also will be available for inspection and 
copying at the principal office of NSCC and on NSCC's Web site, http://
www.nscc.com/legal/. 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 Number 
SR-NSCC-2008-04 and should be submitted on or before August 6, 2008.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16229 Filed 7-15-08; 8:45 am]

BILLING CODE 8010-01-P