Document ID: SEC-2009-0248-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2009-02-24T05:00Z

[Federal Register: February 24, 2009 (Volume 74, Number 35)]
[Notices]               
[Page 8298-8299]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24fe09-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59413; File No. SR-NSCC-2009-01]

 
Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend Addendum O To Allow Admission of Entities That Are 
Organized in a Country Other Than the U.S. for Admission as Limited 
Members

February 18, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 28, 2009, the 
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 primarily by NSCC. NSCC filed the proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-
4(f)(4) thereunder \3\ so that the proposal 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\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \3\ 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change will permit entities that are organized in 
a country other than the United States and that are not otherwise 
subject to U.S. Federal or State regulation to be eligible to become 
Mutual Fund/Insurance Services Members, Fund Members, and Insurance 
Carrier/Retirement Services Members.

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 such statements.

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

    Prior to this rule change, NSCC permitted entities that are 
organized in a country other than the United States and that are not 
otherwise subject to U.S. Federal or State regulation (``non-U.S. 
entities'') to become Direct Clearing Corporation Members only. The 
proposed rule change amends Addendum O to NSCC's Rules and Procedures 
by expanding the types of membership categories available to non-U.S. 
entities. Specifically, non-U.S. entities will be able to apply to be 
Mutual Fund/Insurance Services Members, Fund Members, and Insurance 
Carrier/Retirement Services Members.\4\
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    \4\ Rule 2 and Addendum B address admission of applicants as 
members of NSCC. Admission of an applicant whose use of NSCC 
services is limited to mutual fund services and/or insurance and 
retirement processing services is subject to the following 
provisions of Addendum B, depending on the particular capacity in 
which the applicant seeks to act: Section 2 of Addendum B (Mutual 
Fund/Insurance Services Members); Section 3 of Addendum B (Fund 
Members); Section 4 of Addendum B (Insurance Carrier/Retirement 
Services Members). NSCC has not yet established admission criteria 
applicable to non-U.S entities that are insurance companies. NSCC 
will file a proposed rule change extending Addendum O to such non-
U.S. applicants at such time as it has established applicable 
criteria.
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    NSCC believes that such change is appropriate because the admission 
process that is already in place is designed to mitigate the risks 
posed to NSCC by admission of non-U.S. members. For example, admission 
is subject to an applicant's demonstration that it meets reasonable 
standards of financial responsibility, operational capability, and 
character, and each member must continue to be in a position to 
demonstrate to NSCC that it meets these standards as an ongoing 
condition of membership.
    Furthermore, Addendum O to NSCC's rules establishes additional 
admissions criteria applicable to non-U.S. entities that address the 
unique risks associated with their admission, including: (1) That the 
entity is not subject to U.S. Federal or State regulation; (2) that the 
operation of the laws of the entity's home country and time zone 
differences may impede the successful exercise of NSCC's rights and 
remedies, particularly in the event of the entity's failure to settle; 
and (3) that financial information about the non-U.S. entity made 
available to NSCC for monitoring purposes may be less adequate than 
information about U.S.-based entities.\5\ In addition to executing the 
standard NSCC membership agreement, Addendum O requires that the non-
U.S. entity enter into a series of undertakings and agreements that are 
designed to address jurisdictional concerns and to assure that NSCC is 
provided with audited financial information in a format that is 
acceptable to NSCC. The non-U.S. entity must also be subject to 
regulation in its home country and be in good standing with its home 
country regulator. In order to address the risks presented by 
acceptance of financial statements prepared in non-U.S. GAAP, Addendum 
O provides for a higher capital requirement than that otherwise 
applicable for admission under NSCC rules.
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    \5\ Addendum O was adopted by NSCC pursuant to Securities 
Exchange Act Release No. 58344, (Aug. 12, 2008), 73 FR 48413 (Aug. 
19, 2008) [File No. SR-NSCC-2007-15]. Certain of the criteria set 
forth in Addendum O may be waived where inappropriate to a 
particular applicant or class of applicants (e.g., a foreign 
government, international or national central securities 
depositories).
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    NSCC believes that the proposed rule change is consistent with the 
requirements of Section 17A(b)(3)(F) of the Act \6\ because the 
proposed policy does not unfairly discriminate against non-U.S. 
entities seeking admission to NSCC because it appropriately takes into 
account the unique risks to the clearing corporation raised by their 
admission.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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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

    NSCC has not solicited or received written comments relating to the 
proposed rule change. NSCC will notify the Commission of any written 
comments it receives.

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

    The foregoing rule change has become effective pursuant to Section

[[Page 8299]]

19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(4) \8\ thereunder 
because it effects a change in an existing service of a registered 
clearing agency that does not adversely affect the safeguarding of 
securities and funds in the custody or control of the clearing agency 
or for which it is responsible and does not significantly affect the 
respective rights or obligations of the clearing agency or persons 
using the service. At any time within 60 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.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(4).
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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 e-mail to rule-comment@sec.gov. Please include 
File No. SR-NSCC-2009-01 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 No. SR-NSCC-2009-01. 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. to 3 p.m. Copies of such filing also will be available for 
inspection and copying at NSCC's principal office and on NSCC's Web 
site at http://www.nscc.com/legal/index.html. 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 No. NSCC-2009-01 and should be submitted on or 
before March 17, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-3860 Filed 2-23-09; 8:45 am]

BILLING CODE 8011-01-P