Document ID: SEC-2010-0482-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2010-03-31T04:00Z

[Federal Register: March 31, 2010 (Volume 75, Number 61)]
[Notices]               
[Page 16214-16215]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31mr10-145]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61783; File No. SR-NSCC-2010-03]

 
Self-Regulatory Organizations; The National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Expand the Eligibility of Securities Processed Through 
the ID Net Service

March 25, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 5, 2010, the 
National Securities Clearing Corporation (``NSCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change described in Items I, II, and III below, which items have been 
prepared primarily by NSCC. NSCC filed the proposal pursuant to Section 
19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-4(f)(4) \3\ thereunder so 
that the proposal was effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the rule 
change from interested parties.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \3\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change amends NSCC's rules regarding the 
eligibility of securities processed through the ID Net Service (``ID 
Net'').

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NSCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NSCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.\4\
---------------------------------------------------------------------------

    \4\ The Commission has modified the text of the summaries 
prepared by NSCC.
---------------------------------------------------------------------------

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    On June 2, 2008, the Commission approved a rule change that 
provided for the settlement of institutional transactions through a 
joint service of NSCC and The Depository Trust Company (``DTC'') called 
ID Net. ID Net enables subscribers to the service to net all eligible 
affirmed institutional transactions at DTC against Continuous Net 
Settlement (``CNS'') transactions \5\ at NSCC. ID Net accepts affirmed 
institutional transactions that are eligible for ID Net from clearing 
agencies,\6\ entities exempt from clearing agency registration with the 
Commission, and ``qualified vendors'' \7\ and nets the broker-dealer's 
affirmed institutional transactions side of such transaction with the 
broker-dealer's CNS obligations.
---------------------------------------------------------------------------

    \5\ NSCC's Continuous Net Settlement System (CNS) is an 
automated accounting and securities settlement system that 
centralizes and nets the settlement of compared and recorded 
security transactions and maintains an orderly flow of security and 
money balances. CNS provides clearance for equities, corporate 
bonds, unit investment trusts, and municipal bonds that are eligible 
for book-entry transfer at DTC.
    \6\ The clearing agency must be registered pursuant to Section 
17A of the Act or obtain an exemption.
    \7\ The term ``qualified vendor'' is defined in the rules of the 
New York Stock Exchange, the National Association of Securities 
Dealers, and other self-regulatory organizations.
---------------------------------------------------------------------------

    Participation in ID Net is voluntary. Eligibility for ID Net 
requires that a

[[Page 16215]]

broker-dealer be a DTC participant and an NSCC member eligible for CNS 
processing. The custodian bank must be a DTC participant. In addition, 
eligibility for ID Net processing is based on the underlying security 
being processed, the type of transaction submitted for processing, and 
the timing of affirmation. Most equity securities that are eligible for 
CNS are eligible for ID Net processing. However, the following 
securities were initially excluded from ID Net eligibility: (1) 
Corporate and municipal bonds and unit investment trust issues; (2) new 
issue securities; (3) securities that are IPO tracked (because the use 
of omnibus accounts will bypass the tracking system); (4) trades in 
issues that are currently undergoing a mandatory or voluntary 
reorganization; (5) trades in CUSIPs with a CNS buy-in; and (6) trades 
in securities appearing on the SEC's Regulation SHO list. At its 
inception, NSCC noted that because ID Net was a new service, it was 
excluding certain securities that could potentially have a relatively 
high rate of delivery failure or disrupt normal processing of 
transactions in ID Net in order to ensure that the system ran smoothly. 
NSCC also noted that as its experience with ID Net grew, it would 
revaluate the exclusion of certain issues.
    Since the implementation of ID Net, the service has operated with 
minimal disruption, thus allaying the concerns regarding the addition 
of certain securities previously excluded from the service. In order to 
enhance processing efficiency and at the request of its members, NSCC 
is expanding ID Net to allow NSCC at its discretion from time to time 
to make eligible for ID Net any security that is eligible for CNS 
processing.
    NSCC will announce by ``Important Notice'' particular securities or 
classes of securities are made eligible for processing through ID Net.
    The proposed rule change is consistent with Section 17A of the 
Act,\8\ as amended, and the rules and regulations thereunder applicable 
to NSCC. The proposed rule change will promote the prompt and accurate 
clearance and settlement of securities transactions by leveraging the 
capabilities of the NSCC system to provide for more streamlined 
securities deliveries and to extend netting benefits and efficiencies 
to more ID Net transactions.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

(B) Self-Regulatory Organization'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.

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

    Written comments relating to the proposed rule change were not and 
are not intended to be 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 proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-
4(f)(4) \10\ thereunder because the proposed rule change effects a 
change in an existing service of NSCC that: (i) Does not adversely 
affect the safeguarding of securities or funds in the custody or 
control of NSCC or for which it is responsible and (ii) does not 
significantly affect the respective rights or obligations of NSCC or 
persons using the service. At any time within sixty days of the filing 
of the proposed rule change, the Commission may summarily abrogate such 
rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NSCC-2010-03 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-2010-03. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filings also will be available for 
inspection and copying at the principal office of NSCC and on NSCC's 
Web site at http://www.dtcc.com/downloads/legal/rule_filings/2010/
nscc/2010-03.pdf. 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-2010-03 and should be submitted on or before April 21, 2010.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7204 Filed 3-30-10; 8:45 am]
BILLING CODE 8011-01-P