00-39. Self-Regulatory Organizations; National Securities Clearing Corporation; Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Global Clearance Network and the International Link Service  

  • [Federal Register Volume 65, Number 2 (Tuesday, January 4, 2000)]
    [Notices]
    [Pages 311-312]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 00-39]
    
    
    -----------------------------------------------------------------------
    
    SECURITIES AND EXCHANGE COMMISSION
    
    [Release No. 34-42273; File No. SR-NSCC-99-12]
    
    
    Self-Regulatory Organizations; National Securities Clearing 
    Corporation; Order Granting Accelerated Approval of a Proposed Rule 
    Change Relating to the Global Clearance Network and the International 
    Link Service
    
    December 27, 1999.
        On September 23, 1999, the National Securities Clearing Corporation 
    (``NSCC'') filed with the Securities and Exchange Commission 
    (``Commission'') a proposed rule change (File No. SR-NSCC-99-12) 
    pursuant to Section 19(b)(1) of the Securities Exchange Act
    
    [[Page 312]]
    
    of 1934 (``Act'') \1\ to allow NSCC to offer the Global Clearance 
    Network (``GCN'') and the International Link Service (``ILS''), 
    services which were previously offered by the International Securities 
    Clearing Corporation (``ISCC''). Notice of the proposal was published 
    in the Federal Register on December 1, 1999.\2\ No comment letters were 
    received. For the reasons discussed below, the Commission is granting 
    accelerated approval of the proposed rule change.
    ---------------------------------------------------------------------------
    
        \1\ 15 U.S.C. 78s(b)(1).
        \2\ Securities Exchange Act Release No. 42176 (November 23, 
    1999), 64 FR 67364.
    ---------------------------------------------------------------------------
    
    I. Description
    
        The rule change establishes new Rules 61 and 62 and Addendum U to 
    NSCC's Rules. These new rules permit NSCC to offer the GCN and the ILS 
    previously offered by ISCC.\3\ ISCC, a wholly owned subsidiary of NSCC, 
    is proposing to stop providing clearance and settlement services, to 
    transfer its clearance and settlement services to NSCC, and to withdraw 
    its registration as a clearing agency. The new rules are substantially 
    similar to the applicable ISCC rules and procedures. NSCC Rule 62, 
    which authorizes NSCC to provide the GCN service, is based on previous 
    ISCC Rule 50; NSCC Rule 61, which authorizes NSCC to provide the ILS 
    service, is based on previous ISCC Rule 40; and NSCC Addendum U, the 
    GCN service data processing procedures, is based on ISCC Addendum E.
    ---------------------------------------------------------------------------
    
        \3\ According to NSCC, it is no longer cost-effective to provide 
    international clearance and settlement services through a separate 
    company. Concurrently with this rule filing, ISCC has submitted a 
    proposed rule change to withdraw from the clearance and settlement 
    business (File No. SR-ISCC-99-01).
    ---------------------------------------------------------------------------
    
        The transfer of service will be transparent to current ISCC members 
    because GCN and ILS as offered by NSCC will be substantially similar to 
    the services previously offered by ISCC and will be offered under the 
    same terms and conditions. Further, no new programming or system format 
    changes will be required to utilize GCN and ILS as offered by NSCC. 
    Accordingly, all current ISCC participants using GCN and ILS will be 
    able to continue to utilize such services when they are offered by 
    NSCC.\4\
    ---------------------------------------------------------------------------
    
        \4\ Currently there are thirty users of GCN and three users of 
    ILS.
    ---------------------------------------------------------------------------
    
        The GCN service \5\ facilitates and centralizes the processing of 
    international transactions by providing a standardized platform to 
    communicate clearance, settlement, and custody information. GCN will 
    allow users, NSCC members, utilizing standardized input and output 
    formats, to transmit data to NSCC several times throughout the day. 
    Upon receipt, NSCC will validate the data and, if accepted, will 
    translate the data into the format of specified agent banks and will 
    transmit the data to agent banks where processing will occur under the 
    agent banks' normal terms, conditions, and operating framework.
    ---------------------------------------------------------------------------
    
        \5\ The GCN service was originally approved by the Commission in 
    1991. Securities Exchange Act Release No. 29841 (October 18, 1991), 
    56 FR 55960. ISCC subsequently modified its processing procedures 
    for GCN through the addition of Addendum E to ISCC's Rules and 
    Procedures. Securities Exchange Act Release No. 35392 (February 16, 
    1995), 60 FR 10415.
    ---------------------------------------------------------------------------
    
        The ILS facilitates the establishment of links with foreign 
    financial institutions (``FFIs''). ISCC previously sponsored accounts 
    at the Depository Trust Company (``DTC'') for the purpose of providing 
    FFIs with custody services for their U.S. securities.\6\ Deliveries and 
    receives of securities on deposit at DTC, based on instructions from 
    the FFI, will occur through DTC free of payment.
    ---------------------------------------------------------------------------
    
        \6\ ISCC provided ILS since its inception in 1989 as a clearing 
    corporation.
    ---------------------------------------------------------------------------
    
        ISCC also provides facilities management services the Emerging 
    Markets Clearing Corporation. In connection with ISCC's deregistration 
    as a clearing agency, these services will be provided by NSCC.
    
    II. Discussion
    
        Section 17A(b)(3)(F) \7\ of the Act requires that the rules of a 
    clearing agency be designed to assure the prompt and accurate clearance 
    and settlement of securities transactions. One of the primary reasons 
    for ISCC's registration as a clearing agency was to enable it to 
    provide for the safe and efficient clearance and settlement of 
    international securities. Under the rule change NSCC will offer 
    substantially similar services under the same terms and conditions as 
    ISCC. Because NSCC will continue ISCC's role as a provider of clearance 
    and settlement services for international securities transactions, the 
    Commission believes that NSCC's rule change is consistent with NSCC's 
    obligations under the Act.
    ---------------------------------------------------------------------------
    
        \7\ 15 U.S.C. Sec. 78q-1(b)(3)(F).
    ---------------------------------------------------------------------------
    
        NSCC has requested that the Commission find good cause for 
    approving the proposed rule change prior to the thirtieth day after the 
    date of publication of notice of the filing. The Commission finds good 
    cause for so approving the proposed rule change because accelerated 
    approval will permit NSCC to provide GCN and ILS services before the 
    end of the year.
    
    II. Conclusion
    
        On the basis of the foregoing, the Commission finds that the 
    proposed rule change is consistent with the requirements of the Act and 
    in particular Section 17A of the Act and the rules and regulations 
    thereunder.
        It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
    that the proposed rule change (File No. SR-NSCC-99-12) be and hereby is 
    approved.
    
        For the Commission by the Division of Market Regulation, 
    pursuant to delegated authority.\8\
    ---------------------------------------------------------------------------
    
        \8\ 17 CFR 200.30-3(a)(12).
    ---------------------------------------------------------------------------
    
    Margaret H. McFarland,
    Deputy Secretary.
    [FR Doc. 00-39 Filed 1-3-00; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
01/04/2000
Department:
Securities and Exchange Commission
Entry Type:
Notice
Document Number:
00-39
Pages:
311-312 (2 pages)
Docket Numbers:
Release No. 34-42273, File No. SR-NSCC-99-12
PDF File:
00-39.pdf