Document ID: SEC-2015-1800-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2015-11-03T05:00Z

[Federal Register Volume 80, Number 212 (Tuesday, November 3, 2015)]
[Notices]
[Pages 67828-67830]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27912]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76289; File No. SR-NSCC-2015-008]

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to Provide Additional Details Regarding the Requirement 
that Members Participate in Annual Testing of Business Continuity and 
Disaster Recovery Plans

October 28, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on October 23, 2015, National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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)(6) \4\ 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)(6).
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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 a change to NSCC's Rule 2B of 
the Rules and Procedures (``Rules'') of NSCC to provide additional 
details regarding the requirement that Members participate in annual 
testing of NSCC's business continuity and disaster recovery plans 
(``BCP Testing''), as more fully described below.\5\
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    \5\ Terms not otherwise defined herein have the meaning set 
forth in NSCC's Rules, available at http://www.dtcc.com/legal/rules-and-procedures.aspx.
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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, 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

1. Purpose
    The proposed rule change would amend NSCC's Rule 2B (Ongoing 
Membership Requirements and Monitoring) to provide additional details 
regarding the requirement that NSCC Members participate in NSCC's 
annual BCP Testing. Currently, pursuant to Addendum B of the Rules, an 
applicant is qualified for membership with NSCC if it is ``able to 
satisfactorily communication with the Corporation and fulfill 
anticipated commitments to and meet the operational requirements of the 
Corporation with necessary promptness and accuracy and to conform to 
any condition and requirement that the Corporation reasonably deems 
necessary for its protection.'' \6\ Once a firm becomes a Member of 
NSCC, NSCC Rule 2B provides that Members may be required to fulfill 
certain operational testing requirements that may be imposed by NSCC to 
test and monitor the continuing operational capability of the 
Members.\7\
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    \6\ Addendum B, Section 1(C) of NSCC's Rules, supra, note 5.
    \7\ NSCC Rule 2B, Section 3, supra, note 5.
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    Recently, the Commission promulgated Regulation Systems Compliance 
and Integrity (``Reg. SCI''), which requires NSCC to establish 
standards to designate members \8\ and requires participation by such 
designated members in scheduled BCP Testing with NSCC on an annual 
basis.\9\ Although NSCC already conducts annual BCP Testing with 
certain Members,\10\ NSCC is proposing to amend Rule 2B to further 
describe NSCC's requirement with respect to BCP Testing.
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    \8\ 17 CFR 242.1004(a). In adopting Reg. SCI, the Commission 
determined not to require covered entities to notify the Commission 
of its designations or the standards that will be used in 
designating members, recognizing instead that each entity's 
standards, designations, and updates, if applicable, would be part 
of its records and, therefore, available to the Commission and its 
staff upon request. See Securities and Exchange Act Release No. 
73639 (November 19, 2014), 79 FR 72252 (December 5, 2014) (File No. 
S7-01-13).
    \9\ 17 CFR 242.1004(a) and (b).
    \10\ NSCC Rule 2B, Section 3, supra, note 5.
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    The proposed amendments to Rule 2B would increase transparency 
regarding BCP Testing, and ensure NSCC's practice with respect to such 
testing is consistent with Reg. SCI by setting forth NSCC's rights to: 
(i) Designate Members required to participate in BCP Testing using 
established standards; (ii) determine the scope and reporting of such 
BCP Testing; and (iii) require Members to comply with such BCP Testing 
within specified timeframes. In connection with these proposed 
amendments, NSCC would refine the factors that it currently uses to 
designate Members for BCP Testing. For example, while NSCC would 
continue to rely on activity-based thresholds to mandate participation 
with annual BCP Testing, NSCC would also take into account additional 
factors when designating firms for BCP Testing, including, but not 
limited to: (i) Significant operational issues of the Member during the 
past twelve months; and (ii) past performance of the Member with 
respect to BCP Testing. Members would be informed of the specific 
standards that would be used by NSCC, along with any updates or changes 
to these standards, which would be applied on a prospective basis, 
through established methods of communication between NSCC and its 
Members. Likewise, Members would be notified in advance that they have 
been designated to participate in BCP Testing for the upcoming year, 
and would be provided details concerning the nature of such testing as 
the particular test plans are determined.
    NSCC believes the proposed rule change would have no impact on NSCC 
Members relative to what Members are currently required to do. As 
described above, NSCC already requires certain Members to participate 
in BCP Testing on an annual basis. The proposed rule change would 
provide further clarity with respect to these requirements for 
consistency with Reg. SCI.

[[Page 67829]]

2. Statutory Basis
    Section 17A(b)(3)(F) of the Act, requires, in part, that NSCC's 
Rules be designed to promote the prompt and accurate clearance and 
settlement of securities transactions and to protect investors and the 
public interest.\11\
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    \11\ 15 U.S.C. 78q-1(b)(3)(F).
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    Rule 17Ad-22(d)(2), promulgated under the Act, requires NSCC to 
require that its Members have robust operational capacity to meet 
obligations arising from participation in the clearing agency, to 
monitory that its participation requirements are met on an ongoing 
basis, and to have participation requirements that are objective and 
publicly disclosed.\12\ Rule 17Ad-22(d)(4), promulgated under the Act, 
requires NSCC to identify sources of operational risk and minimize them 
through the development of appropriate systems, controls, and 
procedures, and have business continuity plans that allow for timely 
recovery of operations and fulfillment of the clearing agency's 
obligations.\13\
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    \12\ 17 CFR 240.17Ad-22(d)(2).
    \13\ 17 CFR 240.17Ad-22(d)(4).
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    Rule 1004(a) and (b) of Reg. SCI requires NSCC to establish 
standards for the designation of those Members that NSCC reasonably 
determines are, taken as a whole, the minimum necessary for the 
maintenance of fair and orderly markets in the event of the activation 
of its business continuity and disaster recovery plans, and to 
designate Members pursuant to those standards and require participation 
by such designated Members in scheduled BCP Testing annually.\14\
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    \14\ 17 CFR 242.1004(a) and (b).
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    By facilitating the testing of how business continuity and disaster 
recovery plans function between NSCC and its Members during an 
emergency, the proposed rule change would facilitate the prompt and 
accurate clearance and settlement of securities transactions and 
protect investors and the public interest consistent with of the Act. 
The proposed rule change would provide additional details to NSCC's 
Rules regarding the requirement for Members to take part in its BCP 
Testing annually, strengthening its compliance with Rule 17Ad-22(d)(2) 
and (4).\15\ Further, the proposed rule change would foster the 
objectives of the Commission under Reg. SCI by helping to ensure 
resilient and available markets.\16\
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    \15\ 17 CFR 240.17Ad-22(d)(2) and (4).
    \16\ 17 CFR 242.1004(a) and (b).
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    As such, NSCC believes that the proposed rule change is consistent 
with Section 17A(b)(3)(F) of the Act, Rule 17Ad-22(d)(2) and (d)(4), 
promulgated under the Act, and Rule 1004(a) and (b) of Reg. SCI, cited 
above.

(B) Clearing Agency's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change would impose 
any burden on competition because the proposed rule change would apply 
to all Members and only provides additional details regarding an 
existing requirement.

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

    Written comments were not and are not intended to be solicited with 
respect to the proposed rule change, and none have been received.

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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) \17\ of the Act and 
Rule 19b-4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires NSCC to give the Commission written notice of NSCC's intent 
to file the proposed rule change, along with a brief description and 
text of the proposed rule change, at least five business days prior 
to the date of filing of the proposed rule change, or such shorter 
time as designated by the Commission. The Commission deems this 
requirement to have been met.
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    A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii) \20\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
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    NSCC has asked the Commission to waive the 30-day operative delay 
so that the proposal may become operative immediately upon filing. 
According to NSCC, the proposed rule change does not present any novel 
or controversial issues. Rather, NSCC is merely providing additional 
details regarding BCP Testing requirements or adding provisions that 
are consistent with or required by Reg. SCI. Accordingly, the 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest as 
it will allow NSCC to incorporate changes required under Reg. SCI prior 
to the November 3, 2015 compliance date. Therefore, the Commission 
designates the proposed rule change to be operative upon filing.\21\
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    \21\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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-2015-008 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-2015-008. 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

[[Page 67830]]

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 Web site (http://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 Number 
SR-NSCC-2015-008 and should be submitted on or before November 24, 
2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-27912 Filed 11-2-15; 8:45 am]
 BILLING CODE 8011-01-P