Document ID: SEC-2018-1929-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2018-12-14T05:00Z

[Federal Register Volume 83, Number 240 (Friday, December 14, 2018)]
[Notices]
[Pages 64374-64380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27080]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84770; File No. SR-NSCC-2018-011]

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change To Amend Certain Fees and Make Other Changes

December 10, 2018.
    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 26, 2018, 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 Rules 19b-4(f)(2) and (f)(4) thereunder.\4\ The 
Commission is publishing this notice to solicit comments on the

[[Page 64375]]

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) and (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 would amend Addendum A (Fee Structure) of 
the NSCC Rules & Procedures (``Rules'') \5\ with respect to certain 
fees as well as make other changes, as described in greater detail 
below.
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    \5\ Capitalized terms not defined herein are defined in the 
Rules, available at http://www.dtcc.com/~/media/Files/Downloads/
legal/rules/nscc_rules.pdf.
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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 purpose of this proposed rule change is to amend Addendum A 
(Fee Structure) of the Rules with respect to certain fees and make 
other changes in order to (i) reduce complexity and increase 
transparency, (ii) better align fees with the costs of services 
provided by NSCC, and (iii) encourage Member practices that promote 
efficient market behavior. The proposed rule change would also make 
technical and conforming changes. Taken collectively, the proposed rule 
changes would reduce NSCC's revenue by approximately 4%.
    In order to accomplish these objectives, NSCC is proposing to (i) 
remove fees with little or no activity, (ii) group fees for related or 
similar services under one fee, (iii) modify certain fees, and (iv) 
remove fees that relate to settlement of certain transaction activity.
(i) Background
    NSCC provides clearance and settlement services for trades executed 
by its Members in the U.S. equity, corporate and municipal bond, and 
unit investment trust markets.
    Members are assessed fees in accordance with Addendum A (Fee 
Structure). The current Fee Structure covers a multitude of fees that 
are assessed on Members based upon their activities and the services 
utilized. The number of fees and the methods by which they are 
calculated make the current Fee Structure unnecessarily complex. In 
addition, certain fees in the current Fee Structure have over time 
become misaligned with the costs of services provided by NSCC.
    NSCC has undertaken a strategic review of its pricing structure, 
and developed a revenue and pricing strategy with the goals of reducing 
pricing complexity, aligning pricing with costs of providing the 
services, and encouraging Member practices that promote efficient 
market behavior.\6\
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    \6\ NSCC is also proposing changes to fees for NSCC's Mutual 
Fund Services and Insurance and Retirement Processing Services in a 
separate proposal. In addition, NSCC's affiliates, The Depository 
Trust Company (``DTC'') and Fixed Income Clearing Corporation, are 
proposing changes to their respective fees.
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A. Pricing Overly Complex
    The number of fees and the methods by which they are calculated 
make the current Fee Structure difficult for Members to understand and 
reconcile. In fact, Members and market participants have often 
indicated to NSCC that the current Fee Structure is too complex and 
difficult to understand.
    In order to streamline the Fee Structure, the proposal would 
include changes to standardize fees and remove fees that have little 
activity or no activity. The proposed changes would also eliminate fees 
that relate to delivery of certain securities outside of NSCC. In 
addition, in order to reduce the complexity of pricing, the proposed 
changes would group fees for similar services into one fee. By 
simplifying and updating the Fee Structure, these proposed changes 
would improve the transparency of the Rules.
B. Pricing Misalignment With Costs of Services
    Certain fees in the current Fee Structure have over time become 
misaligned with NSCC's costs of providing the services. As such, the 
revenue from these fees no longer cover the costs of such services. 
NSCC believes it is reasonable and appropriate to assess Members fees 
that are commensurate with the costs of services provided to Members. 
Accordingly, the proposed changes would adjust certain fees so that 
revenue for NSCC would better align with the costs of the services.
C. Promote Efficient Market Behavior
    The proposed changes would adjust certain fees in order to 
encourage Member practices that promote efficient market behavior.
(ii) Proposed Fee Changes
    Based upon feedback from Members and market participants as well as 
a review of current fees conducted by NSCC as described above, NSCC is 
proposing to modify the Fee Structure to (i) reduce complexity and 
increase transparency, (ii) better align fees with the costs of 
services provided by NSCC, and (iii) encourage Member practices that 
promote efficient market behavior.
    In that respect, the proposed Fee Structure would consolidate 28 
fees, modify 2 existing fees and eliminate 8 fees, each as further 
described below.
    NSCC is proposing to consolidate the following fee groupings--

 Bond Correction Fee for supplemental input on T+1
    Bond Correction Fee for supplemental input on T+2
    Bond Correction Fee for supplemental input after T+2
    Trade Rejection Fee

 Obligation Warehouse Fee to close an obligation and send to 
Continuous Net Settlement (``CNS'')
    Clearance Activity Fee--the component that is calculated based on 
the number of sides processed monthly by NSCC
    Clearance Activity Fee--``value into the net'' component
    Fee for Flip Trades

 Obligation Warehouse Fee to withhold an obligation from being 
closed and send to the CNS
    Obligation Warehouse Fee for each obligation closed due to 
Reconfirmation and Pricing Service (``RECAPS'') (charged per RECAPS 
cycle)
    Clearance Activity Fee--``value out of the net'' component
    Fee for Foreign Securities Transactions (Netted)

 Fee for Index Creation and Redemption Units instruction 
submitted for regular way (T+2) settlement
    Fee for Index Creation and Redemption Units instruction submitted 
for shortened settlement

 Fee for Failure to Deliver to CNS (Short-In CNS) per item 
short in CNS for 31 to 60 days at close of business
    Fee for Failure to Deliver to CNS (Short-In CNS) per item short in 
CNS for 61 to 90 days at close of business

[[Page 64376]]

    Fee for Failure to Deliver to CNS (Short-In CNS) per item short in 
CNS for more than 90 days at close of business

 Fee for CNS Stock Dividend Payment (Long)
    Fee for CNS Cash Dividend and Interest Payment (Long)
    Fee for CNS Stock Dividend Payment (Short)
    Fee for CNS Cash and Interest Payment (Short)

 Automated Customer Account Transfer Service (``ACATS'') fee 
for Standard Transfer Initiation Form
    ACATS fee for Non-Standard Transfer Initiation Form
    ACATS fee for Recording Asset Delivers
    ACATS fee for Corrections--asset additions, deletions, or changes
    ACATS fee for Insurance Registrations
    ACATS fee for adjustment of customer account number
    ACATS fee for Account Transfer Rejects

    NSCC is proposing to modify the following fees--

 Trade recording fee for each side of foreign security trades 
entered for settlement, but not compared by NSCC
 Fee in connection with New York State Transfer Taxes

    NSCC is proposing to eliminate the following fees--

 Bond Correction Fee for Trades Deleted on T+1
 Bond Correction Fee for Trades Deleted on T+2
 Bond Correction Fee for Trades Deleted after T+2
 Obligation Warehouse Fee for each obligation closed due to 
Pair Off (charged per obligation side)
 Fee for day deliveries to CNS to cover short value positions
 Fee for research on invalid CNS dividend or interest claim
 Monthly Participant Fees for trade input, either (a) as a 
Service Bureau or (b) by an affiliated Service Bureau
 Special Service Fees for DTC Sponsored Accounts--available to 
each CNS participant who is not also a participant of DTC

    The foregoing proposed fee changes would address pricing 
complexity, pricing misalignment with costs of services, and encourage 
member practices that promote efficient market behavior, as further 
described in the discussion below.
A. Fee Changes To Address Pricing Complexity Section I of Addendum A 
(Trade Comparison and Recording Service Fees)
    In Section I.B.2.a., NSCC is proposing to group three Bond 
Correction Fees currently assessed to the submitter for all 
supplemental input on T+1 ($0.60), T+2 ($0.90), and after T+2 ($1.50), 
along with the Trade Rejection Fee ($.50 per bond reject) from Section 
I.B.3., into one single fee. Based on a blended average \7\ of the four 
fees using 2017 volume numbers, NSCC is proposing a fee of $0.95 to the 
submitter that would apply to all bond correction supplemental input 
after T. NSCC would accomplish this by deleting the four fees and 
revising the lead-in sentence to remove the exception language and add 
in $0.95 as the fee applicable to the submitter.
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    \7\ NSCC calculates the blended average by dividing the portion 
of 2017 revenue attributed to the relevant fee groups by the 
applicable 2017 volume numbers. The blended average is then used by 
NSCC as the resulting consolidated fee, with adjustments in some 
instances to achieve a round number. NSCC believes using this 
blended average approach would minimize impact to Members. For 
example, assume NSCC is grouping Fee A and Fee B into one fee using 
the blended average approach. If the 2017 revenue from these two 
fees was $400,000 and these fees were collectively assessed 2,000 
times during 2017, the resulting consolidated fee based on a blended 
average would be $200 ($400,000/2,000).
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    In Section I.B.2.b., NSCC is proposing to remove three Bond 
Correction Fees currently assessed to both sides for trades deleted on 
T+1 ($0.60), T+2 ($0.90), and after T+2 ($1.50). These fees currently 
have little or no activity, and NSCC is proposing to delete them.
    In Section I.C.2., NSCC is proposing to change the trade recording 
fee charged for a foreign security trade entered for settlement, but 
not compared by NSCC, from $0.75 to $0.85 per side. NSCC is proposing 
this change in order to standardize the trade recording fees so that 
they would be the same for bonds as well as foreign security trades. 
NSCC believes having a standard trade recording fee regardless of the 
types of securities would help to reduce complexity of pricing and 
streamline the Fee Structure.
    In Section I.D., NSCC is proposing to group the $0.35 Obligation 
Warehouse Fee to close an obligation and send it to CNS, along with 
other fees, into the ``value into the net'' component of the Clearance 
Activity Fee in Section II.A., given that these fees all relate to 
activities going into the netting process.\8\ Similarly, NSCC is 
proposing to group two Obligation Warehouse Fees, (i) the $0.05 fee to 
withhold an obligation from being closed and send to the CNS and (ii) 
the $0.35 fee for each obligation closed due to RECAPS (charged per 
RECAPS cycle), along with the Fee for Foreign Securities Transactions 
(Netted) ($.50 per item) from Section II.I., into the ``value out of 
the net'' component of the Clearance Activity Fee in Section II.A., 
given that these fees all relate to activities exiting the netting 
process. NSCC is also proposing to eliminate the Obligation Warehouse 
Fee for each obligation closed due to Pair Off that is charged per 
obligation side. This fee currently has little or no activity, and NSCC 
is proposing to delete it.
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    \8\ In addition to the Obligation Warehouse Fee to close an 
obligation and send it to CNS, NSCC is also proposing to group (i) 
the component of the Clearance Activity Fee that is calculated based 
on the number of sides processed monthly by the CNS ($0.021593 per 
side for zero to 35,000 monthly sides, $0.001197 per side for 35,001 
to 42,000,000 monthly sides, and $0.000628 per side for over 
42,000,000 monthly sides) from Section II.A. and (ii) the Fee for 
Flip Trades ($.00060 per side) from Section II.D., into the ``value 
into the net'' component of the Clearance Activity Fee.
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    In Section I.E., NSCC is proposing to group the two fees for Index 
Creation and Redemption Units instructions into one fee based on a 
blended average \9\ of the two fees using 2017 volume numbers. 
Specifically, NSCC is grouping the $30 fee assessed on each side of 
each Index Creation and Redemption Units instruction submitted for 
regular way (T+2) settlement and the $50 fee assessed on each side of 
each Index Creation and Redemption Units instruction submitted for 
shortened settlement into a single $35 fee assessed on each side of 
each Index Creation and Redemption Units instruction submitted.
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    \9\ See supra note 7.
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Section II of Addendum A (Trade Clearance Fees)
    In Section II.A., NSCC is proposing to group the component of the 
Clearance Activity Fee that is calculated based on the number of sides 
processed monthly by CNS, along with other fees as discussed above, 
into the ``value into the net'' component of the Clearance Activity 
Fee.\10\ After the proposed consolidation, the ``value into the net'' 
component of the Clearance Activity Fee would increase from 
$0.331940430 to $0.47 per million of processed value.
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    \10\ See supra note 8.
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    As discussed above, NSCC is proposing to group the two Obligation 
Warehouse Fees from Section I.D.5 and 9 with the ``value out of the 
net'' component of the Clearance Activity Fee in Section II.A., along 
with the Fee for Foreign Securities Transactions (Netted) ($.50 per 
item) from Section II.I. After the proposed consolidation,

[[Page 64377]]

the ``value out of the net'' component of the Clearance Activity Fee 
would decrease from $2.36844405 to $2.12 per million of settling value.
    NSCC is proposing to eliminate the fee for day deliveries to CNS to 
cover short valued positions ($.40 per delivery) from Section II.B. 
This proposed change would simplify the Fee Structure by removing fees 
that relate to delivery of certain securities outside of NSCC.
    In renumbered Section II.B., NSCC is proposing to group the three 
Fees for Failure to Deliver to CNS (Short-In CNS) ($.50 per item short 
in CNS for 31 to 60 days at close of business; $.75 per item short in 
CNS for 61 to 90 days at close of business; and $1.00 per item short in 
CNS for more than 90 days at close of business) into a single fee, and 
increase it to $3.00 \11\ for each item short in CNS for more than 30 
days at close of business. NSCC is proposing these changes not only in 
order to reduce pricing complexity but also to encourage Member 
practices that promote efficient market behavior, i.e., disincentivize 
Members to have CNS fails for more than 30 days. NSCC believes 
encouraging Members to address CNS fails that are more than 30 days 
would promote efficient market behavior because securities would be 
delivered to CNS on a more timely basis.
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    \11\ Based on discussion with clients, NSCC believes that 
imposing a $3.00 fee per day for each item short in CNS for more 
than 30 days is an appropriate amount that would serve as an 
effective deterrent to Members having CNS fails for more than 30 
days (i.e., Members would be incentivized to deliver securities to 
CNS within 30 days of the settlement date so that they would not be 
assessed this daily fee).
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    As discussed above, NSCC is proposing to group (i) the Fee for Flip 
Trades ($.00060 per side) from Section II.D., along with other fees, 
into the ``value into the net'' component of the Clearance Activity Fee 
\12\ and (ii) the Fee for Foreign Securities Transactions (Netted) 
($.50 per item) from Section II.I., along with two Obligation Warehouse 
Fees, (x) the $0.05 fee to withhold an obligation from being closed and 
send to the CNS and (y) the $0.35 fee for each obligation closed due to 
RECAPS (charged per RECAPS cycle), into the ``value out of the net'' 
component of the Clearance Activity Fee.
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    \12\ See supra note 8.
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    In renumbered Section II.G., NSCC is proposing to group the four 
fees relating to CNS stock dividend, cash dividend, and interest 
payments (Fee for CNS Stock Dividend Payment (Long)-$12.00 per item; 
Fee for CNS Cash Dividend and Interest Payment (Long)-$1.40 per item; 
Fee for CNS Stock Dividend Payment (Short)-$12 per item; and Fee for 
CNS Cash and Interest Payment (Short)-$1.40 per item) into one fee. 
Based on a blended average \13\ of the four fees using 2017 volume 
numbers, NSCC is proposing a fee of $1.85 for each CNS stock dividend, 
cash dividend, and interest payment, including both long and short. 
NSCC is also proposing to remove the fee for research on invalid CNS 
dividend or interest claim ($70 per claim). This fee currently has 
little or no activity, and NSCC is proposing to delete it.
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    \13\ See supra note 7.
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Section IV of Addendum A (Other Service Fees)
    In Section IV.F., NSCC is proposing to group seven fees relating to 
ACATS into one single fee. Specifically, NSCC is proposing to group the 
following ACATS fees: (i) The ACATS fee for Standard Transfer 
Initiation Form ($.18 per submission), (ii) the ACATS fee for Non-
Standard Transfer Initiation Form ($.18 per submission), (iii) the 
ACATS fee for Recording Asset Delivers ($.05 per asset which is 
reported by the delivering firm), (iv) the ACATS fee for Corrections-
asset additions, deletions, or changes ($.06 per asset), (v) the ACATS 
fee for Insurance Registrations ($.25 per insurance registration 
submitted, to the receiver and the deliverer), (vi) the ACATS fee for 
adjustment of customer account number ($.12 per adjustment), and (vii) 
the ACATS fee for Account Transfer Rejects ($1.20 per full account 
reject per side where both parties are required by their designated 
examining authority or other regulatory body to use an automated 
customer account transfer service), into a new proposed fee for account 
transfers. Based on a blended average \14\ of the seven fees using 2017 
volume numbers, NSCC is proposing an ACATS fee for Account Transfers of 
$0.50 per transfer initiation.
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    \14\ Id.
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Section V of Addendum A (Pass-Through and Other Fees)
    NSCC is proposing to eliminate the Monthly Participant Fees for 
trade input, either (a) as a Service Bureau or (b) by an affiliated 
Service Bureau ($250.00 per month) from Section V.A.2. NSCC is also 
proposing to eliminate the Special Service Fees for DTC Sponsored 
Accounts (available to each CNS participant who is not also a 
participant of DTC) that is currently in Section V.B.1. Both of these 
fees currently have little or no activity, and NSCC is proposing to 
delete them.
B. Fee Changes to Address Pricing Misalignment With Costs of Service
    In Section III.B., NSCC is proposing to adjust the fee assessed for 
services in connection with New York State (``NYS'') stock transfer 
taxes from $1.00 per form to $175.00 per month.\15\ NSCC has not 
increased this fee since 1990 \16\ even though the costs of providing 
this service have increased. In addition, NSCC believes changing the 
way this fee is charged from ``per form'' to ``per month'' would 
simplify the fee reconciliation process for Members because they would 
no longer need to ensure the number of forms they submitted is 
consistent with fees charged. NSCC believes assessing Members a $175 
monthly fee for this service is appropriate because doing so would not 
only allow NSCC to cover the increased costs of providing this service 
but also simplify the fee reconciliation process for Members that use 
this service.
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    \15\ This service is provided under Rule 14 (Transfer Taxes) to 
facilitate Members' compliance with the NYS stock transfer tax, 
which is imposed on the sale or transfer of certain securities 
within New York. See supra note 5. In 2017, this service was 
utilized by approximately 14 Members, all of whom were either large 
or medium-size firms. On average, each Member submitted 
approximately 20 forms per month.
    \16\ See Securities Exchange Act Release No. 28085 (June 1, 
1990), 55 FR 23495 (June 8, 1990) (SR-NSCC-89-18).
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C. Fee Changes To Promote Efficient Market Behavior
    As discussed above, in renumbered Section II.B., NSCC is proposing 
to group the current three fees for failure to deliver to CNS ($.50 per 
item short in CNS for 31 to 60 days at close of business; $.75 per item 
short in CNS for 61 to 90 days at close of business; and $1.00 per item 
short in CNS for more than 90 days at close of business) into one 
single fee of $3.00 \17\ per item short in CNS for more than 30 days at 
close of business. In addition to reduce pricing complexity, these 
changes are being proposed in order to encourage Member practices that 
promote efficient market behavior (i.e., encourage Members to address 
CNS fails that are more than 30 days). NSCC believes encouraging 
Members to address CNS fails that are more than 30 days would promote 
efficient market behavior because securities would be delivered to CNS 
on a more timely basis.
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    \17\ See supra note 11.

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[[Page 64378]]

D. Technical and Conforming Changes
    NSCC is proposing a number of technical and conforming changes. 
Specifically, due to the grouping and/or removal of certain fees as 
described above, NSCC is proposing to renumber or re-letter, as 
applicable, current Fee Structure Sections I.D.6 to 8 and 11; II.A.(c), 
C., E. to H., and J.; IV.F.; V.A.3 to 4; and V.B.2 to 7.
    Additionally, NSCC is proposing to update the format of (i) the 
$.40 Listed Equity System Correction Fees to $0.40 in Section I.B.1., 
(ii) the Fails to Deliver to CNS (Short-In CNS) $.25 fee per item short 
in CNS for 1 to 30 days at close of business to $0.25 in re-lettered 
Section II.B., (iii) the $.40 per item fee for security orders 
generated to $0.40 in re-lettered Section II.C., (iv) the $.75 per item 
fee for Clearing Interface Exemption or Inclusion Instruction to NSCC 
to $0.75 in re-lettered Section II.E., (v) the $.06 ACATS fee for 
Recording Asset Receives to $0.06 in Section IV.F.2., and (vi) the $.12 
ACATS fee for Non-CNS Receive/Deliver Orders issued to $0.12 in re-
numbered Section IV.F.3.
    NSCC is also proposing to delete the word ``withhold'' and replace 
it with ``reversal'' in the parenthetical portion within the lead-in 
sentence of Section I.B.2.a. This change is being proposed in order to 
conform with the recent revisions to simplify, clarify, and improve the 
description of the rules regarding submission and processing of 
syndicate takedown trades and syndicate takedown reversals in Procedure 
II, Section D.2(A)(2)(g) of the Rules.\18\
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    \18\ See Securities Exchange Act Release 83397 (June 8, 2018), 
83 FR 27802 (June 14, 2018) (SR-NSCC-2018-002).
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(iii) Expected Member Impact
    In general, NSCC anticipates that the proposal would result in fee 
reductions for approximately 127 Members (41%) and fee increases for 
approximately 35 Members (11%). Of the 35 Members that may have their 
fees increased, 20 would have an increase of less than $1,000 per year, 
7 would have an increase between $1,000 to $10,000 per year, 3 would 
have an increase of $27,000 to $40,000 per year, and 5 would have an 
increase of $100,000 to $200,000 per year. These estimates are 
calculated based on 2017 volume numbers.
(iv) Member Outreach
    Beginning in June 2018, NSCC has conducted ongoing outreach to 
Members in order to provide them with notice of the proposed changes to 
the affected fees. As of the date of this filing, no written comments 
relating to the proposed changes have been received in response to this 
outreach. The Commission will be notified of any written comments 
received.
(v) Implementation Timeframe
    NSCC would implement this proposal on January 1, 2019. As proposed, 
a legend would be added to the Fee Structure stating there are changes 
that became effective upon filing with the Commission but have not yet 
been implemented. The proposed legend also would include a date on 
which such changes would be implemented and the file number of this 
proposal, and state that, once this proposal is implemented, the legend 
would automatically be removed from the Fee Structure.
2. Statutory Basis
    NSCC believes this proposal is consistent with the requirements of 
the Act, and the rules and regulations thereunder applicable to a 
registered clearing agency. Specifically, NSCC believes this proposal 
is consistent with Sections 17A(b)(3)(D) \19\ and 17A(b)(3)(F) \20\ of 
the Act and Rule 17Ad-22(e)(23)(ii),\21\ as promulgated under the Act, 
for the reasons described below.
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    \19\ 15 U.S.C. 78q-1(b)(3)(D).
    \20\ 15 U.S.C. 78q-1(b)(3)(F).
    \21\ 17 CFR 240.17Ad-22(e)(23)(ii).
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    Section 17A(b)(3)(D) of the Act requires that the Rules provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among its participants.\22\ NSCC believes the proposed rule changes to 
the Fee Structure, described in detail in Item II(A)(1)(ii)(A) above 
(entitled ``Fee Changes to Address Pricing Complexity''), to reduce the 
complexity of the Fee Structure would provide for the equitable 
allocation of reasonable fees. NSCC believes the proposed changes to 
address pricing complexity are equitable because they would apply 
uniformly to all Members that use the applicable services. NSCC 
believes these proposed changes are reasonable because they are 
designed to reduce complexity and increase transparency of the Fee 
Structure with minimal client impact. Therefore, NSCC believes the 
proposed rule changes described in detail in Item II(A)(1)(ii)(A) above 
to reduce the complexity of the Fee Structure are consistent with 
Section 17A(b)(3)(D) of the Act.
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    \22\ 15 U.S.C. 78q-1(b)(3)(D).
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    NSCC believes the proposed rule changes to the Fee Structure, 
described in detail in Item II(A)(1)(ii)(B) above (entitled ``Fee 
Changes to Address Pricing Misalignment with Costs of Service''), to 
better align pricing with costs of services would provide for the 
equitable allocation of reasonable fees. The proposed changes would 
modify the fee assessed for services in connection with NYS stock 
transfer taxes from $1.00 per form to a monthly fee of $175 in order to 
better align with the increased costs of providing the services. NSCC 
believes the proposed changes to the rate as well as the method of 
charging this fee are equitable because they are designed to simplify 
the fee reconciliation process for Members and would apply uniformly to 
all Members that utilize the services. NSCC believes the proposed 
changes are reasonable because they would be commensurate with the 
costs of resources allocated by NSCC in providing such services. 
Therefore, NSCC believes the proposed rule changes to the Fee Structure 
described in detail in Item II(A)(1)(ii)(B) above to better align 
pricing with costs of services are consistent with Section 17A(b)(3)(D) 
of the Act.
    NSCC also believes the proposed rule changes to the Fee Structure, 
described in detail in Item II(A)(1)(ii)(C) above (entitled ``Fee 
Changes to Promote Efficient Market Behavior''), to encourage Member 
practices that promote efficient market behavior would provide for the 
equitable allocation of reasonable fees. The proposed change would 
assess Members a daily $3 fee per item short in CNS that are more than 
30 days at close of business. NSCC believes the proposed changes are 
equitable because they would apply uniformly to all Members that have 
CNS fails that are more than 30 days. NSCC believes the proposed 
changes are reasonable because they are designed to encourage Members 
to address CNS fails that are more than 30 days in order to promote 
efficient market behavior. Therefore, NSCC believes the proposed rule 
changes to the Fee Structure described in detail in Item 
II(A)(1)(ii)(C) above to encourage Member practices that promote 
efficient market behavior are consistent with Section 17A(b)(3)(D) of 
the Act.
    Section 17A(b)(3)(F) of the Act requires, in part, that the Rules 
be designed to promote the prompt and accurate clearance and settlement 
of securities transactions.\23\ The proposed rule changes to promote 
efficient market behavior, as described in Item II(A)(1)(ii)(C) above 
(entitled ``Fee Changes to Promote Efficient Market Behavior''), are 
designed to encourage Members to address CNS fails that are

[[Page 64379]]

more than 30 days. In this respect, the proposal would encourage Member 
practices that would reduce the number of CNS fails that are more than 
30 days and thereby promote the prompt and accurate clearance and 
settlement of securities transactions. As such, NSCC believes the 
proposed rule changes to promote efficient market behavior are 
consistent with Section 17A(b)(3)(F) of the Act.
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    \23\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The proposed rule changes to make technical and conforming changes, 
as described in Item II(A)(1)(ii)(D) above (entitled ``Technical and 
Conforming Changes''), would help ensure that the Rules, including the 
Fee Structure, remain accurate and clear to Members. Having accurate 
and clear Rules would help Members to better understand their rights 
and obligations regarding NSCC's clearance and settlement services. 
NSCC believes that when Members better understand their rights and 
obligations regarding NSCC's clearance and settlement services, they 
can act in accordance with the Rules. NSCC believes that better 
enabling Members to comply with the Rules would promote the prompt and 
accurate clearance and settlement of securities transactions by NSCC. 
As such, NSCC believes the proposed rule changes to make technical and 
conforming changes are consistent with Section 17A(b)(3)(F) of the Act.
    Rule 17Ad-22(e)(23)(ii) under the Act requires NSCC to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to provide sufficient information to enable 
participants to identify and evaluate the risks, fees, and other 
material costs they incur by participating in the covered clearing 
agency.\24\ NSCC believes that the proposed rule changes to reduce the 
complexity of the Fee Structure, as described in Item II(A)(1)(ii)(A) 
above (entitled ``Fee Changes to Address Pricing Complexity''), and to 
make technical and conforming changes, as described in Item 
II(A)(1)(ii)(D) above (entitled ``Technical and Conforming Changes''), 
would help ensure that the Fee Structure is transparent and clear to 
Members. Having a transparent and clear Fee Structure would help 
Members, NSCC believes, to better understand NSCC's fees and help 
provide Members with increased predictability and certainty regarding 
the fees they incur by participating in NSCC. As such, NSCC believes 
the proposed rule changes to reduce the complexity of the Fee Structure 
and to make technical and conforming changes are consistent with Rule 
17Ad-22(e)(23)(ii) under the Act.
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    \24\ 17 CFR 240.17Ad-22(e)(23)(ii).
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(B) Clearing Agency's Statement on Burden on Competition

    NSCC believes the proposed rule changes to modify (i) the trade 
recording fee for foreign security trades and (ii) the fee assessed for 
services in connection with NYS stock transfer taxes, may have an 
impact on competition because these changes would likely increase the 
fees of those Members that utilize these services when compared to 
their fees under the current Fee Structure. NSCC believes these 
proposed rule changes could burden competition by negatively affecting 
such Members' operating costs. While these Members may experience 
increases in their fees when compared to their fees under the current 
Fee Structure, NSCC does not believe such change in fees would in and 
of itself mean that the burden on competition is significant. This is 
because even though the amount of the fee increase may seem significant 
in some instances (e.g., going from $1 per form to $175 per month), 
NSCC believes the increase in fees would similarly affect all Members 
that utilize the services, and therefore the burden on competition 
would not be significant.
    Regardless of whether the burden on competition is deemed 
significant, NSCC believes any burden on competition that is created by 
these proposed rule changes would be necessary and appropriate in 
furtherance of the purposes of the Act, as permitted by Section 
17A(b)(3)(I) of the Act.\25\
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    \25\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

    The proposed rule changes to modify (i) the trade recording fee for 
foreign security trades and (ii) the fee assessed for services in 
connection with NYS stock transfer taxes, would be necessary in 
furtherance of the purposes of the Act because the Rules must provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its participants.\26\ As described above, NSCC believes 
that the proposed rule changes would result in fees that are equitably 
allocated (by applying uniformly to all Members that use the applicable 
services) and would result in reasonable fees (by reducing the 
complexity of the Fee Structure with minimal client impact and by 
aligning with costs, respectively). As such, NSCC believes these 
proposed rule changes would be necessary in furtherance of the purposes 
of the Act, as permitted by Section 17A(b)(3)(I) of the Act.\27\
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    \26\ 15 U.S.C. 78q-1(b)(3)(D).
    \27\ 15 U.S.C. 78q-1(b)(3)(I).
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    NSCC believes any burden on competition that is created by the 
proposed rule changes to modify (i) the trade recording fee for foreign 
security trades and (ii) the fee assessed for services in connection 
with NYS stock transfer taxes, would also be appropriate in furtherance 
of the purposes of the Act. The proposed rule changes to modify the 
trade recording fee for foreign security trades would provide NSCC with 
the ability to assess a standard trade recording fee regardless of the 
types of securities and thereby help to reduce complexity of pricing 
and streamline the Fee Structure. The proposed rule changes to modify 
the fee for the NYS stock transfer tax service would allow NSCC to 
cover increased costs of providing the service as well as simplify the 
fee reconciliation process for Members that use this service. Having 
the ability to assess fees that are (i) standard regardless of the 
types of securities and (ii) commensurate with NSCC's costs of 
providing the services, would help NSCC to (x) reduce complexity of 
pricing as well as streamline the Fee Structure and (y) continue 
providing dependable and stable clearance and settlement services to 
its Members. As such, NSCC believes these proposed rule changes would 
be appropriate in furtherance of the purposes of the Act, as permitted 
by Section 17A(b)(3)(I) of the Act.\28\
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    \28\ Id.
---------------------------------------------------------------------------

    NSCC believes the proposed rule changes to promote efficient market 
behavior, as discussed above in Item II(A)(1)(ii)(C), may have an 
impact on competition because these changes would likely increase the 
fees of those Members with CNS fails that are more than 30 days. NSCC 
believes these proposed rule changes could burden competition by 
negatively affecting such Members' operating costs. While these Members 
may experience increases in their fees when compared to their fees 
under the current Fee Structure, NSCC does not believe such change in 
fees would in and of itself mean that the burden on competition is 
significant. This is because even though the amount of the fee increase 
may be significant (with a maximum increase of $2.50 for each fail over 
30 days), NSCC believes the increase in fees would similarly affect all 
Members that have CNS fails that are more than 30 days and therefore 
the burden on competition would not be significant. Regardless of 
whether the burden on competition is deemed significant, NSCC believes 
any burden

[[Page 64380]]

on competition that is created by the proposed rule changes to the fees 
associated with CNS fails that are more than 30 days would be necessary 
and appropriate in furtherance of the purposes of the Act, as permitted 
by Section 17A(b)(3)(I) of the Act.\29\
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    \29\ Id.
---------------------------------------------------------------------------

    NSCC believes that the proposed rule changes to promote efficient 
market behavior would be necessary in furtherance of the purposes of 
the Act because the Rules must provide for the equitable allocation of 
reasonable dues, fees, and other charges among its participants.\30\ As 
described above, NSCC believes that the proposed rule changes would 
result in fees that are equitably allocated (by imposing the fees on 
all Members with CNS fails more than 30 days) and would result in 
reasonable fees (by increasing fees to the extent they would serve as 
meaningful deterrents to Members having CNS fails that are more than 30 
days). As such, NSCC believes the proposed rule changes to promote 
efficient market behavior would be necessary in furtherance of the 
purposes of the Act, as permitted by Section 17A(b)(3)(I) of the 
Act.\31\
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    \30\ 15 U.S.C. 78q-1(b)(3)(D).
    \31\ 15 U.S.C. 78q-1(b)(3)(I).
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    NSCC believes any burden on competition that is created by the 
proposed rule changes to promote efficient market behavior would also 
be appropriate in furtherance of the purposes of the Act. NSCC believes 
that the proposed rule changes would encourage Members to address CNS 
fails that are more than 30 days. Reducing the number of CNS fails that 
are more than 30 days would, NSCC believes, promote the prompt and 
accurate clearance and settlement of securities transactions. As such, 
NSCC believes the proposed rule changes to promote efficient market 
behavior would be appropriate in furtherance of the purposes of the 
Act, as permitted by Section 17A(b)(3)(I) of the Act.\32\
---------------------------------------------------------------------------

    \32\ Id.
---------------------------------------------------------------------------

    NSCC does not believe the proposed rule changes to reduce the 
complexity of the Fee Structure (other than the proposed rule change to 
modify the trade recording fee for foreign security trades) and make 
technical and conforming changes, as discussed above in Items 
II(A)(1)(ii)(A) and (D), respectively, would impact competition.\33\ 
These changes would apply equally to all Members and would not affect 
Members' rights and obligations. As such, NSCC believes these proposed 
rule changes would not have any impact on competition.
---------------------------------------------------------------------------

    \33\ Id.
---------------------------------------------------------------------------

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    Written comments relating to this proposed rule change have not 
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) of the Act \34\ and paragraph (f) of Rule 19b-4 
thereunder.\35\ 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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    \34\ 15 U.S.C. 78s(b)(3)(A).
    \35\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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 rule-comments@sec.gov. Please include 
File Number SR-NSCC-2018-011 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-2018-011. 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 (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 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 
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NSCC-2018-011 and should be submitted on 
or before January 4, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
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    \36\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2018-27080 Filed 12-13-18; 8:45 am]
 BILLING CODE 8011-01-P