Document ID: SEC-2010-2022-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2010-12-29T05:00Z

[Federal Register Volume 75, Number 249 (Wednesday, December 29, 2010)]
[Notices]
[Pages 82115-82117]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-32787]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63604; File No. SR-NSCC-2010-18]

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change Relating to the 
Insurance and Retirement Processing Services To Incorporate a New 
Analytics Reporting Service

December 23, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 10, 2010, the 
National Securities Clearing Corporation (``NSCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II 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 persons.
---------------------------------------------------------------------------

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

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

    NSCC is proposing to expand its Insurance and Retirement Processing 
Service (``IPS'') by providing a new Analytics Reporting Service in 
order to provide greater transparency to the insurance market.

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

1. Background
    Currently, service providers that make insurance information 
available to the insurance industry generally utilize a combination of 
publicly accessible financial information, responses provided by market 
participants to optional surveys, and proprietary analytical tools. 
These services also rank the various market participants and products 
in the insurance market to provide relative rankings by revenue or 
other criteria. Reliance on survey results and the aggregation and 
analysis of those results often makes the information several months 
old by the time it is distributed to subscribers.
2. Proposed Amendments
    NSCC proposes to add a new Section 12 to NSCC Rule 57 to provide an 
Analytics Reporting Service.\2\ The Analytics Reporting Service would 
use actual transaction information currently used by NSCC in processing 
IPS transactions rather than survey results. NSCC believes that this 
would allow IPS to provide more efficient, cost-effective, and timely 
benchmarking and other market information about the insurance market. 
The Analytics Reporting Service would assist NSCC Members and Limited 
Members in better understanding their business and the broader market 
for insurance products; would help them to better understand investor 
needs; would support the efficient development of products that meet 
investor needs; and would assist them in making decisions related to 
sales, marketing, and product development.
---------------------------------------------------------------------------

    \2\ The text of proposed new Section 12 to NSCC Rule 57 can be 
viewed at http://www.dtcc.com/downloads/legal/rule_filings/2010/nscc/2010-18.pdf.
---------------------------------------------------------------------------

3. Overview
    The Analytics Reporting Service would provide NSCC Members and 
Limited Members with the ability to perform market analysis based on 
IPS data. This market analysis (commonly referred to as 
``benchmarking'') would allow users of this service to obtain and 
compare aggregated data from different perspectives including, but not 
limited to, geographic location, type of transaction, and other 
criteria that NSCC and the NSCC Members and Limited Members determine 
to be most useful. The benchmarking portion of the service would 
provide information on an aggregate basis and would not reveal the 
confidential or proprietary information of any NSCC Member or Limited 
Member. The service would permit NSCC Members and Limited Members to 
monitor and to analyze their business through benchmarking relative 
performance by comparing their own transactional information against 
the overall market's and by conducting market research and analyzing 
market trends.
    Additionally, NSCC would provide information that attributes 
aggregated transaction information to specific NSCC Members and Limited 
Members for the purposes of providing a relative ranking of products 
and market participants (i.e., league tables). This aspect of the 
Analytics Reporting Service would allow NSCC Members and Limited 
Members to conduct peer analysis and to understand their performance 
relative to other NSCC Members or Limited Members. Although service 
providers already provide league tables on the basis of surveys and 
other tools, this information may be considered confidential or 
proprietary information by NSCC or the individual NSCC Members or 
Limited Members to which it pertains.
    NSCC would offer the Analytics Reporting Service through a 
proprietary online service.

[[Page 82116]]

4. NSCC's Right to Release Clearing Data
    ``Clearing Data'' as defined in NSCC's Rule 49 includes data 
received by NSCC for inclusion in the clearance and settlement process 
of NSCC or such data, reports, or summaries produced as a result of 
NSCC processing such transaction data. Rule 49 generally prohibits the 
release of Clearing Data relating to a transaction to parties other 
than the NSCC Members or Limited Members that are involved in the 
transaction.
    The use of IPS-related Clearing Data as part of the Analytics 
Reporting Service for purposes of providing benchmarking data does not 
violate this general prohibition of Rule 49. Rule 49 explicitly permits 
NSCC to utilize Clearing Data in a form that prevents the disclosure of 
proprietary or confidential financial, operational, or trading data of 
a particular NSCC Member or Limited Member. Thus, Rule 49 permits the 
sharing of cleansed or aggregate reporting of transaction information 
or Clearing Data. The Analytics Reporting Service would utilize 
Clearing Data for benchmarking purposes in a manner that is consistent 
with existing NSCC rules because it would provide only cleansed or 
aggregated reporting data that would not reveal the proprietary or 
confidential information of any NSCC Member or Limited Member.
    Because the league tables that provide a relative ranking of NSCC 
Members and Limited Members and their products may be considered by 
some NSCC Members and Limited Members to be the release of confidential 
or proprietary information, NSCC is providing notice of its intent to 
release this data in accordance with NSCC Rule 49(c). NSCC Rule 49(c) 
provides that an NSCC Member or Limited Member may request the release 
of any Clearing Data whose release is not otherwise permitted under 
Rule 49 either in writing or by written agreement. NSCC intends this 
proposed rule change and the addition of the Analytics Reporting 
Service to serve as the written agreement providing for the release of 
the Clearing Data under Rule 49(c). NSCC believes that this proposed 
rule change, the amendment to its rules, and NSCC's Important Notice to 
NSCC Members and Limited Members \3\ (a notice issued to NSCC Members 
and Limited Members in relation to every rule filing submitted to the 
Commission by NSCC) provides NSCC Members and Limited Members with 
reasonable and sufficient notice of its intent to distribute cleansed 
and aggregated IPS related Clearing Data.
---------------------------------------------------------------------------

    \3\ NSCC Important Notices are notices issued to NSCC Members 
and Limited Members in relation to, among other things, every rule 
filing submitted to the Commission by NSCC.
---------------------------------------------------------------------------

5. Right to Opt-Out
    Due to potential concerns that the attribution of aggregated 
transactions to specific NSCC Members and Limited Members within league 
tables may potentially reveal confidential data, NSCC Members and 
Limited Members that utilize IPS (``IPS Members'') would be able to 
request that NSCC not attribute and not include their respective 
transaction information with respect to league tables in the Analytics 
Reporting Service. That is, they may ``opt-out.'' By opting-out, the 
IPS Member would prohibit NSCC from associating their transactions in 
any discernible manner (e.g., listing the IPS Member in a league 
table). However, opting-out would not prohibit NSCC from including the 
information for purposes of describing the market in a particular 
geographic location or in accordance with other criteria that does not 
identify a specific IPS Member for purposes of benchmarking. This opt-
out provision would provide an IPS Member with the ability to prevent 
disclosure of potentially confidential or proprietary information 
attributable to its activity, just as it may prevent the disclosure of 
its individual transactions. Yet, it would not prevent NSCC from 
providing the marketplace with useful information regarding the overall 
insurance market.
    In order to opt-out of the Analytics Reporting Service prior to the 
service becoming available, IPS Members would have to notify NSCC in 
writing during the initial ninety (90) day opt-out period. NSCC would 
announce the beginning of this ninety (90) day period through an 
Important Notice. A new IPS Member would be allowed to opt-out by 
providing NSCC with written notice of their election to opt-out at any 
time prior to account activation. Once the Analytics Reporting Service 
commences to include the information of an IPS Member, the IPS Member 
would be allowed to opt-out by providing NSCC with thirty (30) days' 
written notice.
    By opting-out, the IPS Member would authorize NSCC to disclose that 
the league tables and other information that compares IPS Members and 
their insurance products do not include information from that IPS 
Member. This would clarify the content of the benchmarking data that 
NSCC would provide.
    Finally, an IPS Member that opts-out would forfeit any portion of 
NSCC's annual refund, if any, that is directly attributable to the 
revenue generated by the Analytics Reporting Service.
6. Prohibiting Disclosures Prior to Earnings Reports
    The Analytics Reporting Service would allow IPS Members to prevent 
the disclosure or attribution of transactions to a specific IPS Member 
in order to permit compliance with the laws and regulations governing 
disclosure of such information prior to earnings reporting. Based on 
discussions with IPS Members, NSCC has established a policy that 
applies an embargo period of sixty (60) days after the end of the 
first, second, and third calendar quarters and ninety (90) days after 
the end of the calendar year.
7. Fees
    NSCC intends to propose fees for the Analytics Reporting Service in 
a subsequent proposed rule filing. Until then, NSCC Members and Limited 
Members would be able to use the Analytics Reporting Service without 
any additional charge to the current Financial Activity Reporting fees. 
Parties that are not NSCC Members or Limited Members would not be able 
to use the Analytics Reporting Service until appropriate fees for non-
members have become effective.
    NSCC states that the proposed change will permit NSCC Members and 
Limited Members to enhance their monitoring and analysis of their 
respective businesses. NSCC further states that the proposed rule 
change is consistent with the requirements set forth under Section 17A 
of the Act \4\ that require the rules of a clearing agency be designed 
to foster cooperation and coordination with persons engaged in the 
clearance and settlement of securities transactions, to remove 
impediments to and perfect the mechanism of a national system for the 
prompt and accurate clearance and settlement of securities 
transactions, and, in general, to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \4\ 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 that is not necessary or 
appropriate in furtherance of the purposes of the Act.

[[Page 82117]]

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

    NSCC has not solicited and does not intend to solicit comments 
regarding this proposed rule change. NSCC has not received any 
unsolicited written comments from members or other interested parties. 
However, NSCC has worked with NSCC Members and Limited Members in 
designing this service.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 may be submitted by using 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-2010-18 on the subject line.
     Paper comments should be sent 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-2010-18. 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 Web site 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 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at NSCC's principal office and NSCC's Web site 
(http://www.dtcc.com/legal/rule_filings/nscc/2010.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 No. SR-NSCC-2010-18 and should be 
submitted by January 19, 2011.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
---------------------------------------------------------------------------

    \5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-32787 Filed 12-28-10; 8:45 am]
BILLING CODE 8011-01-P