Document ID: SEC-2020-0564-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Securities Clearing Corp.
Posted Date: 2020-04-13T04:00Z

[Federal Register Volume 85, Number 71 (Monday, April 13, 2020)]
[Notices]
[Pages 20556-20558]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07656]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88579; File No. SR-NSCC-2020-009]

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change To Remove Access to the Fund/SERV Service by Data Services 
Only Members in Rule 52 and Revise the Defined Term for Fund/SERV in 
the NSCC Rules

April 7, 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 April 2, 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 
subparagraph (f)(4) of Rule 19b-4 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)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    (a) The proposed rule change of NSCC is annexed hereto as Exhibit 5 
and consists of modifications to NSCC's Rules & Procedures (``Rules'') 
in order to (i) remove access to the Fund/Serv service (``Fund/SERV'') 
by Data Services Only Members in Rule 52 of the Rules and (ii) revise 
the term ``Fund/Serv'' to ``Fund/SERV'' in the Rules to reflect 
conventional use of the term, as described in greater detail below.\5\
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    \5\ Terms not defined herein are defined in the Rules, available 
at https://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 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
Background--Data Services Only Members
    In 2001, NSCC established a new membership category, called the 
Data Services Only Member.\6\ Data Services Only Members are permitted 
to participate solely in the transmission of data and information and 
have access to only those services specifically enumerated under NSCC's 
Rules.\7\ The Data Services Only Members are not permitted to settle 
any transactions through NSCC.\8\ Initially the Data Services Only 
Members were only permitted to access Networking services in Mutual 
Fund Services.\9\ Data Services Only Members were initially granted 
permission to access Networking in order to make inquiries regarding 
their customer accounts in an automated format using a communications-
translation interface in Extensible Markup Language or ``XML''.\10\
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    \6\ Securities Exchange Act Release No. 44960 (October 19, 
2001), 66 FR 54045 (October 25, 2001) (SR-NSCC-2001-14) (indicating 
that the new membership category is being added at the request of 
NSCC's Fund Members and the Investment Company Institute in order to 
permit broker-dealers who otherwise do not qualify to be NSCC 
members to obtain access to customers account data in an automated 
format).
    \7\ See Section 2(ii)(a) of Rule 2, supra note 5 (provides that 
Data Services Only Members participate ``solely in the transmission 
of data and information, and shall utilize only those features of 
services that the Corporation may, from time to time, expressly 
designate as eligible for access by a Data Services Only Member.'').
    \8\ Id.
    \9\ Supra note 6.
    \10\ See Securities Exchange Act Release No. 45560 (March 14, 
2002), 67 FR 13200 (March 21, 2002) (SR-NSCC-2001-18) (``SR-NSCC-
2001-18''). XML is a programming format that allows for the transfer 
of structured data between different applications.
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    In 2002, the Data Services Only Member access was expanded to 
include access to Fund/SERV.\11\ Data Services Only Members were 
provided access to Fund/SERV in connection with a new function of Fund/
SERV called Fund/SPEED which was launched to provide firms and 
financial advisors with an ability to obtain information on, and 
transmit, their clients' mutual fund purchase and redemption 
transactions through Fund/SERV in an automated format, with settlement 
conducted directly between counterparties and outside of NSCC.\12\ 
Fund/SPEED was a combination of the XML inquiry functionality that had 
been provided to Data Services Only Members for Networking and an XML 
communications interface used to transmit data to Fund/SERV.\13\
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    \11\ Id. Fund/SERV is a service provided by NSCC to allow 
Members and certain Limited Members enumerated in Rule 52 to process 
and/or settle, as the case may be, on an automated basis purchase 
and redemption orders and transactions in interests in Fund/Serv 
Eligible Funds. See Rule 52, supra note 5.
    \12\ See SR-NSCC-2001-18, supra note 10.
    \13\ Id.
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    The Fund/SPEED functionality was discontinued prior to 2013.\14\ 
Following the discontinuation of Fund/SPEED, a similar functionality 
has not been added to Fund/SERV for Data Services Only Members.
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    \14\ See Securities Exchange Act Release No. 68562 (January 2, 
2013), 78 FR 1292 (January 8, 2013) (SR-NSCC-2012-11) (removing the 
fees relating to Fund/SPEED because Fund/SPEED was discontinued).
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    NSCC does not believe that there is a need to continue to permit 
Data Services Only Members to have access to Fund/SERV because the 
Fund/SPEED functionality, which was used by Data Services Only Members 
to access and transmit Fund/SERV data, was discontinued. NSCC does not 
believe that any Data Services Only Members have utilized Fund/SERV 
since Fund/SPEED was discontinued and there are currently no active 
Data Services Only Members that access the Fund/SERV service. In 
addition, Fund/SERV is primarily a service designed for settlement of 
mutual fund transactions and Data Services Only Members are not 
permitted to settle transactions through NSCC.\15\ As such, NSCC is 
proposing to remove the ability of Data Services Only Members to access 
Fund/SERV.
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    \15\ See Section 2(ii)(a) of Rule 2, supra note 5.
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Fund/SERV[supreg]
    NSCC is also proposing to change the term ``Fund/Serv'' to ``Fund/
SERV'' in several places in the Rules to reflect current conventional 
use of the name of the service and the registered trademark of the 
service. In addition, the registered trademark symbol would be placed 
on the term in Rule 52 in the heading for Section A to reflect that it 
is a registered trademark.

[[Page 20557]]

Proposed Rule Change
    In order to implement the proposal above, NSCC would remove all of 
the references to Data Services Only Member in Section A of Rule 52 of 
the Rules,\16\ which is the section relating to Fund/SERV. In addition, 
NSCC would remove the sentence referring to orders being submitted by 
Data Services Only Members in Section 2 of Section A of Rule 52 \17\ as 
that sentence would no longer be applicable if Data Services Only 
Members are removed from having access to Fund/SERV. NSCC would also 
change the term ``Fund/Serv'' to ``Fund/SERV'' in several places in the 
Rules and the registered trademark symbol would be placed on the term 
in Rule 52 in the heading for Section A.\18\
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    \16\ Section A of Rule 52, supra note 5.
    \17\ Id.
    \18\ Id.
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2. Statutory Basis
    Section 17A(b)(3)(F) of the Act requires, in part, that the Rules 
be designed to promote the prompt and accurate clearance and settlement 
of securities transactions.\19\ NSCC believes that the proposed rule 
change is consistent with this provision because it would provide 
enhanced clarity and transparency for participants with respect to 
services offered by NSCC by updating the Rules to remove the ability to 
access a service that Data Services Only Members do not utilize and are 
unlikely to utilize in the future. Fund/SPEED, which was designed to 
provide participants access to, and the ability to transmit, certain 
Fund/SERV data without the ability to settle, was discontinued. Since 
Fund/SPEED has been discontinued, a similar functionality has not been 
added to Fund/SERV for Data Services Only Members and Fund/SERV is not 
being utilized by any Data Services Only Members. Since Fund/SERV is 
primarily a service designed to facilitate settlement of Fund/SERV 
Eligible Funds, which Data Services Only Members are not permitted to 
do through NSCC, NSCC does not believe that Data Services Only Members 
would utilize Fund/SERV in the future.\20\ The proposed change of the 
defined term ``Fund/Serv'' to ``Fund/SERV'' in several places would 
also provide enhanced clarity for participants because ``Fund/SERV'' 
reflects the current conventional use of the name of the service and is 
the registered trademark for the service.
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    \19\ 15 U.S.C. 78q-1(b)(3)(F).
    \20\ See Section A.2. of Rule 52, supra note 1 (provides that 
``Orders submitted by Data Services Only Members shall not settle 
through the facilities of the Corporation.'')
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    Therefore, by providing enhanced clarity and transparency in the 
Rules regarding the services provided by NSCC and the services to which 
Data Services Only Members have access, NSCC believes the proposed rule 
change would promote the prompt and accurate clearance and settlement 
of securities transactions, consistent with the requirements of the 
Act, in particular Section 17A(b)(3)(F), cited above.

(B) Clearing Agency's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change would have any 
impact on competition. Since Fund/SPEED was discontinued, Data Services 
Only Members are not utilizing Fund/SERV. In addition, it is not 
anticipated that any Data Services Only Members will utilize Fund/SERV 
in the future because there has not been any functionality to replace 
Fund/SPEED for Data Services Only Members and Data Services Only 
Members are not entitled to use the settlement features of Fund/SERV 
which is its primary purpose. Therefore, the proposed rule change 
should have no effect on NSCC participants, other than to remove a 
right to have access to a service by Data Services Only Members that is 
unlikely to be utilized by Data Services Only Members. In addition, the 
changes of the term ``Fund/Serv'' to ``Fund/SERV'' and the inclusion of 
the registered trademark symbol would also not have any impact on 
competition because such changes are clarifications of the Rules and 
would not otherwise affect the rights or obligations of NSCC Members.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    NSCC has not received or solicited any written comments relating to 
this proposal. 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) \21\ of the Act and paragraph (f) \22\ of Rule 19b-4 
thereunder. 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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    \21\ 15 U.S.C 78s(b)(3)(A).
    \22\ 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-2020-009 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-2020-009. This file 
number should be included on the subject line if email 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 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 
(https://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-

[[Page 20558]]

2020-009 and should be submitted on or before May 4, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07656 Filed 4-10-20; 8:45 am]
 BILLING CODE 8011-01-P