Document ID: SEC-2018-1795-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2018-11-23T05:00Z

[Federal Register Volume 83, Number 226 (Friday, November 23, 2018)]
[Notices]
[Pages 59427-59429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25468]

[[Page 59427]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84611; File No. SR-NSCC-2018-010]

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change To Enhance the Mutual Fund Profile Service To Provide for 
the Transmission of Event Notifications Through a New Feature Called MF 
Info Xchange

November 16, 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 13, 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 Rule 19b-4(f)(4) thereunder.\4\ 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)(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 modifications to NSCC's Rules 
& Procedures (``Rules'') in order to reflect proposed enhancements to 
NSCC's Mutual Fund Services.\5\ The proposed rule change would enhance 
the Mutual Fund Profile Service (``MFPS'') \6\ of NSCC to provide for 
the delivery and receipt of event notifications relating to funds and 
pooled investment entities through a new feature called MF Info 
Xchange, as described in greater detail below.
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    \5\ Capitalized terms used herein and not otherwise defined 
shall have the meaning assigned to such terms in the Rules, 
available at http://dtcc.com/~/media/Files/Downloads/legal/rules/
nscc_rules.pdf.
    \6\ Section D of Rule 52, supra note 5.
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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 proposed rule change consists of modifications to the Rules in 
order to reflect proposed enhancements to NSCC's Mutual Fund Services. 
The proposed rule change would enhance MFPS to provide for the delivery 
and receipt of event notifications relating to funds and pooled 
investment entities through a new feature called MF Info Xchange, as 
described in greater detail below.
(i) Background
    In 1996, NSCC launched MFPS, providing participating Members with 
an automated method of transmitting and receiving daily price and rate 
information pertaining to funds and other pooled investment entities 
(collectively referred hereto as ``Funds'') through a centralized and 
standardized facility.\7\ In 1998, NSCC implemented three new databases 
as part of MFPS, (i) the participant profile database, (ii) the 
security issue profile database and (iii) the distribution declaration 
information profile database,\8\ through which NSCC offers the Funds 
industry a centralized repository for prospectus and operational 
information relating to Fund securities, Fund distributions and Fund 
processing capabilities.
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    \7\ Securities Exchange Act Release No. 37171 (May 8, 1996), 61 
FR 24343 (May 14, 1996) (SR-NSCC-1996-04).
    \8\ Securities Exchange Act Release No. 40614 (October 28, 
1998), 63 FR 59615 (November 4, 1998) (SR-NSCC-1998-09).
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    MF Info Xchange would be a new feature of MFPS that would 
facilitate communication of event notifications among Funds, their 
principal underwriters or other entities authorized to process 
transactions on behalf of Funds, that are Members, Mutual Fund/
Insurance Services Members, Investment Manager/Agent Members, TPP 
Members, TPA Members, Data Services Only Members and Fund Members 
(``data providers''), on the one hand, and the distribution partners of 
the Funds, such as broker-dealers and banks that are NSCC Members \9\ 
and other third parties identified by the data providers to receive 
event notifications (``data receivers''), on the other hand. On a daily 
basis, data providers and data receivers exchange a number of event 
notifications via email, fax and phone call outside of NSCC relating to 
events affecting the Funds. Such event notifications include corporate 
actions, such as Fund name changes, mergers, acquisitions and closures, 
and other events, such as expense ratio changes and benchmark changes. 
These event notifications are not standardized across the industry, and 
data receivers do not currently have an efficient standardized method 
to view and manage past and upcoming Fund events.
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    \9\ For purposes of this filing, ``NSCC Members'' shall mean 
Members and Limited Members.
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    The mutual fund industry has requested that NSCC deliver a data 
sharing solution for participants in the Fund industry to exchange such 
event notifications, and create standardization to the event 
notification process. The current event notification process is 
inconsistent among data providers and data receivers, with data 
providers sending event notifications using various methods without 
standardized formats across the industry. The existing methods of 
sending event notifications are often time consuming manual processes 
that add risk and complexity by increasing the chance of manual errors 
and leaving event notifications open to interpretation because of the 
lack of standardized formats. MF Info Xchange has been developed with 
the active participation of an industry working group to streamline the 
delivery and receipt of various types of Fund event notifications to 
provide a standardized method of sending event notifications.
    Data providers using MF Info Xchange would be able to submit event 
notifications for distribution, using data entry, uploads and other 
input mechanisms, modify previously submitted event notifications, view 
upcoming and past notifications and manage distribution lists. Upon 
receipt of the event notification data through MF Info Xchange, NSCC 
would create a unique ID associated with the event relating to the 
notification, and track corrections and updates to the same event using 
the same event ID. NSCC would also store the data in a data repository 
for retrieval by NSCC Members. In addition, NSCC would distribute the 
event notifications via email to a defined distribution list provided 
by the data providers. Data providers could also indicate the NSCC 
Members on the distribution list that could be given access to the 
event notifications on the data repository. Such NSCC Members that have 
subscribed to MF Info Xchange would have access to the data repository 
to retrieve the event notifications and

[[Page 59428]]

updates to those event notifications from a centralized location.
    NSCC Members would be able to use MF Info Xchange to transmit event 
notifications for certain predefined event types. Upon the initial 
launch, Fund mergers/acquisitions and Fund closures would be the only 
event types for which event notifications could be sent using MF Info 
Xchange. NSCC would announce by Important Notice posted on its website 
any enhancements of MF Info Xchange that result in new event types 
available for event notifications. Given the limited number of Fund 
event types available for event notifications upon the launch of MF 
Info Xchange, NSCC would not charge fees initially for the use of MF 
Info Xchange. NSCC would file with the Commission an appropriate rule 
change proposal to implement any fees for MF Info Xchange if NSCC adds 
a fee for the feature.
(ii) Proposed Rule Changes
    The proposed rule change would amend Rule 52 to state that NSCC 
would provide MF Info Xchange to enable data providers that are 
Members, Mutual Fund/Insurance Services Members, Investment Manager/
Agent Members, TPP Members, TPA Members, Data Services Only Members and 
Fund Members to transmit event notifications relating to Funds to other 
NSCC Members and to other third parties identified by the data 
providers to receive the event notifications, or to otherwise supply 
and provide access to event notifications directly to or from NSCC 
through a data repository. The proposed rule change would provide that 
NSCC may determine from time to time, and would announce by Important 
Notice, which types of event notifications may be transmitted using MF 
Info Xchange. The proposed rule change would provide that NSCC would 
not be responsible for the completeness or accuracy of any event 
notifications transmitted using MF Info Xchange nor for any errors, 
omissions or delays that may occur relating to the event notifications.
(iii) Implementation Timeframe
    NSCC expects to implement MF Info Xchange on November 29, 2018. As 
proposed, a legend would be added to Rule 52 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 Rule 52.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act \10\ requires, in part, that the 
Rules be designed to foster cooperation and coordination with persons 
engaged in the clearance and settlement of securities transactions. 
NSCC believes that the proposed rule change would enhance the ability 
of data providers to send, and for data receivers to access and 
retrieve, Fund event notification data in a standardized format and in 
a centralized location. Currently, there is not an industry-wide 
structured method of providing such event notification data, and data 
providers send, and data receivers receive, such event notifications in 
an inefficient and non-standardized manner across the industry. NSCC 
believes that the proposed rule change would provide the Fund industry 
a more efficient and streamlined method for data providers to 
communicate Fund event notification data to data receivers. As such, 
NSCC believes that the proposed rule change would foster cooperation 
and coordination among persons engaged in the clearance and settlement 
of securities, consistent with the requirements of Section 17A(b)(3)(F) 
of the Act.\11\
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    \10\ 15 U.S.C. 78q-1(b)(3)(F).
    \11\ Id.
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    In addition, the proposed rule change is designed to be consistent 
with Rule 17Ad-22(e)(21) promulgated under the Act.\12\ Rule 17Ad-
22(e)(21) requires NSCC to, inter alia, establish, implement, maintain 
and enforce written policies and procedures reasonably designed to be 
efficient and effective in meeting the requirements of its participants 
and the markets it serves. The proposed rule change would streamline 
the Fund event notifications process, which would enhance (i) 
efficiency in making such event notifications by reducing reliance on 
emails, faxes and phone calls for event notifications, which are 
inconsistent and a time consuming manual process, and (ii) 
effectiveness in making such event notifications by providing a 
standardized format to send such event notifications, which NSCC 
believes would reduce errors in the event notification process that 
occur as a result of the current inconsistent and unstructured event 
notification process. Therefore, by establishing a more efficient and 
effective process for data providers to deliver, and data receivers to 
receive, Fund event notifications, NSCC believes that the proposed 
change is consistent with the requirements of Rule 17Ad-22(e)(21), 
promulgated under the Act.\13\
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    \12\ 17 CFR 240.17Ad-22(e)(21).
    \13\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change would have any 
adverse impact, or impose any burden, on competition because the 
proposed rule change would add an optional feature to NSCC's services 
that would provide data providers the ability to send event 
notification data in a standardized format. As an optional feature 
available for subscription with no additional fees, the proposed rule 
change would not disproportionally impact any NSCC participants.
    Moreover, because the proposed rule change would allow data 
providers to more effectively communicate Fund event notifications, 
NSCC believes the proposed rule change would have a positive effect on 
competition among Fund industry participants. The proposed feature 
would provide data providers with a more efficient method of 
distributing event notifications to parties that need to see such 
information in order to facilitate the trading and processing of Fund 
securities. NSCC believes this would enhance competition among Funds 
and Fund participants by allowing parties to distribute such 
information more quickly and in a more streamlined manner.

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

    NSCC has not received or solicited any written comments relating to 
this proposal. 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 \14\ and paragraph (f) of Rule 19b-4 
thereunder.\15\ 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

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investors, or otherwise in furtherance of the purposes of the Act.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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 Number SR-NSCC-2018-010 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-2018-010. 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-2018-010 and should be submitted on 
or before December 14, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Eduardo A. Aleman,
Assistant Secretary.
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    \16\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2018-25468 Filed 11-21-18; 8:45 am]
BILLING CODE 8011-01-P