[Federal Register Volume 61, Number 236 (Friday, December 6, 1996)]
[Notices]
[Pages 64783-64784]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31085]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37999; File No. SR-NSCC-96-18]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Granting Approval of a Proposed Rule Change to
Modify Procedures Relating to the Reconfirmation and Pricing Service
December 2, 1996.
On September 30, 1996, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change (File No. SR-NSCC-96-18)
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'').\1\ Notice of the proposal was published in the Federal
Register on November 1, 1996.\2\ On November 21, 1996, NSCC filed an
amendment to the proposed rule change.\3\ No comment letters were
received. For the reasons discussed below, the Commission is granting
approval of the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ Securities Exchange Act Release No. 37877 (October 28,
1996), 61 FR 56595.
\3\ Letter from Anthony Davidson, Associate Counsel, NSCC, to
Christine Sibille, Special Counsel, Division of Market Regulation,
Commission (November 20, 1996). This amendment was a technical
amendment that did not require republication of notice.
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I. Description
The proposed rule change modifies NSCC's procedures relating to
NSCC's Reconfirmation and Pricing Service (``RECAPS'').\4\ NSCC's
Procedure II(G) currently provides that after the processing of initial
RECAPS input members have an opportunity to submit supplemental input
during the same RECAPS cycle. Prior to this amendment, supplemental
input included only advisories, deletes, and as-of trades. An advisory
allows a member to acknowledge a contraside submission that has not
been reconfirmed. A delete permits a member to delete its own
submission from RECAPS. An as-of trade enables a member to submit a
transaction to RECAPS if the member failed to submit the transaction as
initial RECAPS input at the start of the RECAPS cycle.
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\4\ RECAPS is NSCC's automated system which provides the ability
to a member on a quarterly basis to reconfirm and reprice
transactions that have been compared but have failed to settle.
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The proposed rule change makes several modifications to NSCC's
Procedure II(G) regarding RECAPS supplemental input. First, the
proposed rule change expands the range of responses by a member to a
contraside submission that has been reconfirmed to include ``don't
knows'' (DKs'') and rejects. A member must respond to a contraside
submission that has not been reconfirmed on the next business day after
the initial submission date by submitting an advisory, a DK, or a
reject and in the case of a reject by also indicating the reasons for
the rejection (e.g., trade previously settled or different quantity).
The proposed rule change provides that failure to respond to a
contraside submission that has not been reconfirmed by the next
business day after the initial submission date results in the
transaction being deemed DK'ed. The proposed rule change also provides
that a DK'ed transaction extinguishes the rights, if any, of the DK'ing
member with respect to the transaction. Transactions of a member that
have been DK'ed will be subject to the rules of the appropriate
marketplace.
The proposed rule change also eliminates deletes as a type of
RECAPS supplemental input. In practice, members do not use the delete
function.
The proposed rule change adds a RECAPS activity report which NSCC
will make available to members at the end of the RECAPS cycle. The
RECAPS activity report will contain summary information regarding a
member's overall activity during a particular RECAPS cycle, including
the number of transactions submitted, the number of transactions that
were reconfirmed, and the number of transactions that were DK'ed,
rejected, or for which there was no response.
II. Discussion
Section 17A(b)(3)(F) provides that the rules of a clearing agency
must be designed to promote that prompt and accurate clearance and
settlement of securities transactions.\5\ Prior to this amendment,
members which had transactions submitted against them by another party
could only submit an advisory to acknowledge the trade. If the member
chose not to acknowledge the trade, the contraside did not learn the
reason for the trade not being reconfirmed. The expansion in the range
of responses to a transaction submitted by a contraside that has not
been reconfirmed will help to clarify why
[[Page 64784]]
certain transactions have not been reconfirmed and therefore
subsequently will not settle. By providing for the contraside to
receive information on why the transaction was not reconfirmed, the
proposal may enable the contraside to amend their submission in order
to create a match. Thus, the proposal may increase the number of trades
that settle. The modifications also encourage members to respond to
contraside submissions to prevent a DK and the loss of a member's
rights with respect to the transaction. This should result in more
trades being resolved in the RECAPS process. Therefore, the Commission
believes that the proposal could resolve a higher percentage of
unreconfirmed trades and thus facilitate the prompt and accurate
clearance and settlement of transactions.
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\5\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
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III. 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-96-18) be and hereby is
approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12) (1996).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-31085 Filed 12-5-96; 8:45 am]
BILLING CODE 8010-01-M
