Document ID: SEC-2009-1733-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2009-12-08T05:00Z

[Federal Register: December 8, 2009 (Volume 74, Number 234)]
[Notices]               
[Page 64800-64801]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08de09-119]                         

[[Page 64800]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61089; File No. SR-NSCC-2009-09]

 
Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Move the Canadian Depository for Securities to Risk-
Based Margining

December 1, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 30, 2009, 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. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested parties.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

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

    The purpose of the proposed rule change is to move the Canadian 
Depository for Securities Clearing and Depository Services Inc. 
(``CDS'') to risk-based margining (``RBM'').

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.\2\
---------------------------------------------------------------------------

    \2\ 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

    In 2001, NSCC introduced a RBM approach to calculating Clearing 
Fund requirements for settling members. The RBM approach includes, but 
is not limited to, calculations based on portfolio volatility and, 
where applicable, market maker domination.\3\ This approach was 
implemented over time to extend to most NSCC members. The formula for 
the calculation of Clearing Fund requirements under the RBM approach is 
set forth in Procedure XV (Clearing Fund and Other Matters) of NSCC's 
Rules and Procedures (``Rules''). Presently, the only member that has 
not migrated to RBM is CDS, which is currently margined pursuant to a 
volume based formula outlined in Appendix 1 of the Rules.
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 44431 (June 15, 2001), 
66 FR 33280 [File No. SR-NSCC-2001-04].
---------------------------------------------------------------------------

    RBM more accurately reflects NSCC's exposure than the formula set 
forth in Appendix 1 because it enables NSCC to more precisely identify 
the risks posed by a member's unsettled portfolio and, as a result, 
more quickly adjust and collect additional Clearing Fund deposits. 
Therefore, effective November 2, 2009 (``Conversion Date''), NSCC moved 
CDS to the Clearing Fund formula set forth in Procedure XV. Because 
Appendix 1 is now obsolete, NSCC is removing Appendix 1 from the Rules 
effective as of the Conversion Date.\4\
---------------------------------------------------------------------------

    \4\ NSCC's Rules provide NSCC with the discretion to modify the 
deadline by which a member must satisfy it Clearing Fund 
requirement. Presently, the deadline for all members subject to RBM 
to satisfy their Clearing Fund requirement is 10 am. CDS has 
requested a 2 hour extension (to 12 pm New York Time) for a period 
of six months beginning on the Conversion Date to facilitate its 
transition to the new Clearing Fund calculation. NSCC has determined 
to grant this extension. The extension is necessary to allow: (i) 
CDS members the opportunity to fund their NSCC related deficit at 
CDS on a daily basis (currently, CDS is required to satisfy its 
Clearing Fund requirement on a weekly basis) and in U.S. dollars 
rather than in Canadian Treasuries as is allowed today and (ii) time 
for CDS to gain regulatory approval to set its deadline for 
collection from its member firms to a time that would allow for it 
to meet the 10 am deadline.
---------------------------------------------------------------------------

    NSCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \5\ and the rules and 
regulations thereunder applicable to NSCC because the proposed rule 
change should enhance NSCC's ability to ensure adequate collateral 
levels are maintained to facilitate settlement in the event of a member 
default by eliminating the non-RBM-based Clearing Fund formula and 
thereby.
---------------------------------------------------------------------------

    \5\ 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 on 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

    No written comments relating to the proposed rule change have 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 upon filing pursuant 
to Section 19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(4) \7\ 
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 of the clearing agency or persons using the 
service. At any time within sixty days of the filing of such 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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 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-2009-09 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-2009-09. 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

[[Page 64801]]

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 Section, 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/
legal/rule_filings/nscc/2009.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-2009-09 and should be submitted on or before 
December 29, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-29132 Filed 12-7-09; 8:45 am]

BILLING CODE 8011-01-P