Document ID: SEC-2013-1307-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2013-07-18T04:00Z

[Federal Register Volume 78, Number 138 (Thursday, July 18, 2013)]
[Notices]
[Pages 42989-42991]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-17178]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69980; File No. SR-NSCC-2013-09]

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change Relating to the 
Decommissioning of NSCC's Over-the-Counter (OTC) Equity Comparison 
Service

July 12, 2013.
    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 July 2, 2013, the 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. 
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.
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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 the Rules & 
Procedures (``Rules'') of NSCC with respect to the decommissioning of 
the OTC Equity Comparison Service, as well as technical changes, as 
more fully described below.

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

    (i) NSCC provides a framework for the comparison and recording of 
transactions in eligible equity and debt securities executed on 
national stock exchanges and in the over-the-counter (``OTC'') market, 
through its Comparison and Trade Recording Operation, provided pursuant 
to Rule 7

[[Page 42990]]

and Procedure II of the Rules. NSCC also provides an Obligation 
Warehouse service pursuant to Rule 51 and Procedure IIA, under which 
certain transactions may be submitted for comparison that are not 
otherwise submitted for processing to NSCC through its other services. 
Over time, in efforts to promote straight-through processing, markets 
have assumed increasing responsibility for trade comparison (i.e., 
matching the buy and sell side of a securities transaction) at the 
point of trade, and submitting the transaction to NSCC on a ``locked-
in'' basis for trade recording purposes (i.e., with the transaction 
details having been already compared). Today, all marketplaces 
interfacing with NSCC have assumed responsibility for equity comparison 
on their respective venues; as a result the level of over-the-counter 
bilateral submissions of equity transactions to the equity comparison 
operation has become nominal.\3\ In addition, NSCC's OTC Equity 
Comparison service operates through legacy batch processing at the end 
of the day. Trade capture processes now mostly run in a real-time 
environment.
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    \3\ During May 2013, NSCC compared an average of approximately 
90 sides (an approximate average of 45 trades) for equity 
transactions through its OTC Comparison service. As of June 24, 
2013, NSCC compared a total of 74 sides (37 trades) for the entire 
month of June 2013 to date.
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    Rule 7 and Procedure II each contain notes stating that the 
comparison function offered thereunder will discontinue once each 
exchange and/or marketplace assumes responsibility for trade 
comparison.\4\ Therefore, in light of the assumption of the comparison 
function by each marketplace and minimal volume to equity trades 
submissions to the OTC Equity Comparison service, NSCC proposes to 
decommission its OTC Equity Comparison service offering. The proposed 
change will not, however, impact comparison services with respect to 
debt transactions (which are compared through the Real Time Trade 
Matching (or ``RTTM'') system) or transactions submitted to the 
Obligation Warehouse, both of which will continue to be processed in 
the ordinary course. Once the OTC Equity Comparison service is 
decommissioned, comparison submissions for equity transactions other 
than those submitted to the Obligation Warehouse in accordance with 
Rule 51 and Procedure IIA will not be accepted by NSCC and related 
output will not be produced. As a result, upon the effective date of 
this proposal, all equity transactions submitted for processing to 
NSCC, other than those submitted through the Obligation Warehouse, must 
be compared prior to submission (i.e., at the marketplace of execution 
or through FINRA/NASDAQ's Automated Comparison Transaction facility 
(``ACT'') and submitted to NSCC on a locked-in basis for trade 
recording).
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    \4\ See footnotes to Rule 7 and Procedure II.
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    To facilitate this proposal, NSCC will mend Rule 7 (Comparison and 
Trade Recording Operation) and Procedure II (Trade Comparison and 
Recording Service) to reflect rules text changes consistent with the 
above. NSCC also proposes to make technical changes to Procedure II to: 
(i) delete a provision relating to the submission of municipal 
securities transactions by Members on behalf of non-members, and (ii) 
delete a provision relating to potential announcement via Important 
Notice of the availability of the comparison service for when-issued 
corporate securities.\5\
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    \5\ With respect to the former provision, the function described 
is no longer in use and the provision has become obsolete, and with 
respect to the latter provision, a comparison service is not 
currently scheduled to be implemented for corporate when-issued 
securities and NSCC would submit a rule filing to the Commission in 
the event such an implementation is proposed.
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    In addition Rule 5 (General Provisions) will be revised to clarify 
that output issued by NSCC with respect to transactions either compared 
by it, or recorded locked-in transactions (defined as ``Compared 
Contracts''), evidence valid, binding and enforceable compared 
transactions for purposes of the Rules. In this regard, Rule 1 
(Definitions) will be revised to reflect the definition of ``Compared 
Contracts''.
    NSCC will also: (i) Amend its fee schedule in Addendum A to the 
Rules to delete references to charges associated with OTC equity 
comparison, and (ii) make technical changes to the numbering of 
footnotes and certain cross-references in the Rules to reflect the 
changes noted above.
    The effective date of the proposed rule change will be announced 
via an NSCC Important Notice at least 30 days in advance of its 
implementation.
    (ii) Statutory Basis. The proposed rule change is consistent with 
the requirements of Section 17A(b)(3)(F) \6\ of the Securities Exchange 
Act of 1934, as amended (the ``Act''), and the rules and regulations 
thereunder, because it provides for operational efficiencies by 
promoting the comparison of transactions at the point of trade, and 
therefore are designed to promote the prompt and accurate clearance and 
settlement of securities transactions.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Clearing Agency'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, as usage of the OTC 
Equity Comparison service has declined significantly and other 
alternatives (including NSCC's Obligation Warehouse and the ACT 
facility) are available.

(C) Clearing Agency'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 with respect to this filing.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2013-09 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NSCC-2013-09. 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

[[Page 42991]]

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 
(http://www.dtcc.com/legal/rule_filings/nscc/2013.php). 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-2013-09 and should be 
submitted on or before August 8, 2013.

    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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-17178 Filed 7-17-13; 8:45 am]
BILLING CODE 8011-01-P