Document ID: SEC-2020-1230-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2020-08-03T04:00Z

[Federal Register Volume 85, Number 149 (Monday, August 3, 2020)]
[Notices]
[Pages 46768-46771]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16704]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89408; File No. SR-NSCC-2020-015]

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change To Modify Fees for the Subscription-Based Portfolio 
Composition File Reporting Service

July 28, 2020.
    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 21, 2020, 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)(2) 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)(2).
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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 Addendum A (Fee 
Structure) of the NSCC Rules & Procedures (``Rules'') \5\ with respect 
to fees for the subscription-based portfolio composition file reporting 
service 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://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

[[Page 46769]]

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 fees for the subscription-
based portfolio composition file reporting service in order to better 
align fees with the costs of services provided by NSCC. Based on the 
current subscription volume, NSCC anticipates that the proposed rule 
change would increase NSCC's annual revenue from the portfolio 
composition file reporting service by approximately $108,000. The 
proposed rule change would also make technical and conforming changes.
(i) Background
    NSCC provides an exchange-traded fund (``ETF'') portfolio 
composition file reporting service whereby NSCC makes available to each 
subscribing Member reports which contain information on ETF portfolios 
that such Member requests. These reports are available as machine 
readable output files, as well as through a web-based interface from 
which Members may download and print reports. This reporting service is 
covered in Procedure II (Trade Comparison and Reporting Service), 
Section F, of the Rules.
    Members are assessed fees in accordance with Addendum A (Fee 
Structure) of the Rules based on their activities and the services 
utilized. With respect to the ETF portfolio composition file reporting 
service, the current Fee Structure provides that each Member that 
subscribes to such service is charged a fee based on the number of 
portfolios subscribed by the Member on an average daily basis per 
billing month (referred to as ``units'' in the Fee Structure). Fees are 
calculated by applying a tiered fee structure to the average daily 
number of units subscribed by the Member in the billing month, subject 
to a maximum and a minimum monthly fee. The minimum monthly fee is 
designed to offset the costs to NSCC of providing this service to 
Members on an on-going basis while the maximum monthly fee is designed 
to cap subscribing Members' fees for this service to enable such 
Members to benefit from the economies of scale that NSCC realizes as 
the number of units being reported increases.
    Currently, Members are charged $3.00 per unit per month for the 
first zero to 200 average daily units, $2.00 per unit per month for the 
next 300 average daily units (201st to 500th units), $1.00 per unit per 
month for all average daily units above 500 (501st and above), subject 
to a monthly minimum charge of $600 and a monthly maximum charge of 
$1,550. The current fees have not been changed for more than five years 
and are no longer aligned with NSCC's costs of providing the ETF 
portfolio composition file reporting service.\6\ As such, the revenue 
from these fees does not cover the costs of such service. Accordingly, 
the proposed changes would adjust fees for the subscription-based 
portfolio composition file reporting service so that revenue for NSCC 
would better align with the costs of providing such service.
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    \6\ NSCC made a number of enhancements to the ETF portfolio 
composition file reporting service during 2018 and 2019. These 
enhancements increased NSCC's costs of providing the ETF portfolio 
composition file reporting service.
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(ii) Proposed Fee Changes
    NSCC is proposing to modify the Fee Structure to better align fees 
for the subscription-based portfolio composition file reporting service 
with NSCC's costs of providing such service. Specifically, in Section 
V.B. of the Fee Structure, NSCC is proposing to increase the fees for 
the subscription-based portfolio composition file reporting service so 
that Members would be charged $4.00 (instead of $3.00) per unit per 
month for the first zero to 200 average daily units, $3.00 (instead of 
$2.00) per unit per month for the next 300 average daily units (201st 
to 500th units), $2.00 (instead of $1.00) per unit per month for all 
average daily units above 500 (501st and above), subject to a monthly 
minimum charge of $800 (instead of $600) and a monthly maximum charge 
of $1,800 (instead of $1,550). NSCC has not modified these fees since 
2014.\7\
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    \7\ See Securities Exchange Act Release No. 72307 (June 4, 
2014), 79 FR 33250 (June 10, 2014) (SR-NSCC-2014-06).
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    NSCC is also proposing technical and conforming changes. 
Specifically, NSCC is proposing to delete an outdated footnote from 
Section V.B. of the Fee Structure. Footnote 20 in Section V.B. of the 
Fee Structure refers to the minimum monthly charge being $300 until 
December 31, 2015 and that it will increase to $600 per month 
thereafter and footnote 20 will be deleted then; however, due to a 
technical oversight, footnote 20 has not yet been deleted. As such, 
NSCC is proposing a technical change to delete footnote 20 from Section 
V.B. of the Fee Structure, and a conforming change to renumber footnote 
21 as footnote 20 in Section V.C. of the Fee Structure.
(iii) Implementation Timeframe
    NSCC would implement this proposal by September 1, 2020. 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 by 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) \8\ and 17A(b)(3)(F) \9\ of 
the Act and Rule 17Ad-22(e)(23)(ii),\10\ as promulgated under the Act, 
for the reasons described below.
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    \8\ 15 U.S.C. 78q-1(b)(3)(D).
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
    \10\ 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.\11\ NSCC believes the proposed rule changes to 
the Fee Structure to better align pricing with costs of services would 
provide for the equitable allocation of reasonable fees. The proposed 
changes would increase the fees assessed for the subscription-based 
portfolio composition file reporting service in order to better align 
with the costs of providing such service. NSCC believes the proposed 
changes to the fees are equitable because they would apply uniformly to 
all Members that utilize the services. NSCC believes the proposed 
changes are reasonable because they would be commensurate with the 
increased costs of resources allocated by NSCC in providing such 
services. Therefore, NSCC believes the proposed rule changes to the Fee 
Structure to better align pricing with costs of services are consistent 
with Section 17A(b)(3)(D) of the Act.
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    \11\ 15 U.S.C. 78q-1(b)(3)(D).
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    Section 17A(b)(3)(F) of the Act requires, in part, that the Rules 
be

[[Page 46770]]

designed to promote the prompt and accurate clearance and settlement of 
securities transactions.\12\ The proposed rule changes to make 
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.
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
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    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.\13\ NSCC believes that the proposed rule changes to make 
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 make technical and conforming changes are consistent with Rule 17Ad-
22(e)(23)(ii) under the Act.
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    \13\ 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 increase the fees for 
the subscription-based portfolio composition file reporting service may 
have an impact on competition, because these changes would likely 
increase the fees of those Members that utilize such service 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 to $2 per 
unit per month for all average daily units above 500), NSCC believes 
the increase in fees would similarly affect all Members that utilize 
the subscription-based portfolio composition file reporting service, 
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.\14\
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    \14\ 15 U.S.C. 78q-1(b)(3)(I).
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    The proposed rule changes to increase the fees for the 
subscription-based portfolio composition file reporting service 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.\15\ 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 service) and would result in reasonable fees (by better 
aligning with the costs of the service). 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.\16\
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    \15\ 15 U.S.C. 78q-1(b)(3)(D).
    \16\ 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 increase the fees for the subscription-based 
portfolio composition file reporting service would also be appropriate 
in furtherance of the purposes of the Act. The proposed rule changes 
would allow NSCC to assess fees that are better aligned with its costs 
of providing the service. Having the ability to assess fees that are 
better aligned with NSCC's costs of providing the services would help 
NSCC to 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.\17\
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    \17\ Id.
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    NSCC does not believe the proposed rule changes to make technical 
and conforming changes would impact competition.\18\ 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.
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    \18\ Id.
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(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 \19\ and paragraph (f) of Rule 19b-4 
thereunder.\20\ 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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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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 rule-comments@sec.gov. Please include 
File Number SR-NSCC-2020-015 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-2020-015. This file 
number should be included on the subject line if email is used. To help 
the

[[Page 46771]]

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-2020-015 and should be submitted on 
or before August 24, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-16704 Filed 7-31-20; 8:45 am]
BILLING CODE 8011-01-P