[Federal Register Volume 59, Number 26 (Tuesday, February 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2827]
[[Page Unknown]]
[Federal Register: February 8, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33558; File No. SR-NSCC-93-14]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Order Granting Accelerated Approval
on a Temporary Basis of a Proposed Rule Change Extending a Pilot
Program Relating to the Handling of Physical Securities and Paper
Transactions for Participants Located in New York City
January 31, 1994.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 23, 1993, 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. On January 27, 1994 NSCC filed an amendment
to the proposal.\2\ The Commission is publishing this notice and order
to solicit comments from interested persons and to grant accelerated
approval of the proposed rule change on a temporary basis through
January 31, 1995. This approval order supersedes a previous order that
approved the pilot program until April 30, 1994.\3\
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\As explained below, the amendment modified the proposal to
seek approval to offer the limited money settlement services to two
participant. Letter from Karen L. Saperstein, Vice President/
Director of Legal and Associate General Counsel, NSCC, to Jerry W.
Carpenter, Branch Chief, Division of Market Regulation, Commission
(January 27, 1994).
\3\Securities Exchange Act Release No. 32221 (April 26, 1993),
58 FR 26570 [File No. SR-NSCC-93-03] (order approving pilot program
on a temporary basis until April 30, 1994).
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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 allow NSCC (1) to continue to operate
the pilot program relating to the handling of physical securities and
paper transactions for participants located in New York City and (2) to
expand the program to offer limited money settlement services to two
participants.
II. Self-Regulatory Organization's Statement on 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
1. Background
On April 26, 1993, the Commission approved until April 30, 1994,
NSCC's proposed rule change that established its pilot program to
provide direct clearing type services for participants located in New
York City (``New York Window'' or ``NYW'').\4\ NSCC was asked by
several participants to provide such services because New York City
participants have been experiencing a continual decline in their
activities associated with the processing of physical securities. This
decline in activities is a result of the increasing depository
eligibility of securities that previously had been settled physically.
Consequently, these participants no longer find it desirable to
maintain their own window operations. NSCC originally requested
approval of the NYW program on a pilot basis because NSCC was seeking
to operate the individual participants' window programs at NSCC. After
operating the pilot for a period of time, NSCC was to evaluate the
program to determine whether any changes should be made and whether to
expand and standardize the operations. NSCC is still in the process of
evaluating the NYW program and at this time is not ready to implement a
standardized, proprietary program to replace the individual
participants' operations.\5\ Therefore, NSCC is requesting that the NYW
pilot program be extended.
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\4\For a detailed description of the NYW program and a
discussion of the various legal, regulatory, and operational issues,
refer to Securities Exchange Act Release No. 32221 supra note 3.
\5\NSCC is planning to implement a proprietary New York Window
program during the third quarter of 1994, which will necessitate the
filing of a proposed rule change under section 19(b)(2) of the Act.
Telephone conversation between Karen Saperstein, Vice President/
Director of Legal and Associate General Counsel, NSCC, and Jerry W.
Carpenter, Branch Chief, and Peter R. Geraghty, Attorney, Division
of Market Regulation, Commission (January 26, 1994).
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2. Limited Money Settlement Service
At the request of a participant, NSCC studied the feasibility of
providing limited money settlement services. NSCC found that it is
feasible to provide such services and, therefore, will provide the
following limited money settlement services to two participants on a
limited basis.\6\
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\6\Prior to its January 27, 1994, amendment, NSCC had requested
that it be allowed to offer limited money settlement services to one
participant. Refer to note 2 and accompanying text.
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To the extent that the NYW processes ``receives'' that result in
next-day funds debits for each participant, NSCC will issue a check in
payment of such debits. NSCC will not issue such checks until it has
verified the receipt of same-day funds from each participant in an
amount equal to the gross amount of each participant's payment
obligations for that day. To the extent that the NYW processes
``deliveries'' that result in next-day funds credits for each
participant, NSCC will pay each participant the aggregate amount of all
checks received and deposited by NSCC for the participant each day. The
payments will be made in same-day funds on the day following receipt
and deposit by NSCC of the checks. To the extent that receives or
deliveries processed by the NYW result in same-day funds debits and
credits, the wire transfers will continue to be made directly between
the NYW participants and the other parties to the transactions.
NSCC has stated that the proposed rule change will be implemented
consistent with NSCC's statutory obligation under section 17A of the
Act to safeguard securities and funds in NSCC's custody or control.
B. Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe a burden will be placed on competition as a
result of the proposed rule change.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No comments were received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Section 17A(a)(1)(B) of the Act sets forth Congress findings that
inefficient procedures for clearance and settlement of securities
transactions impose unnecessary costs on investors and persons
facilitating transactions by and acting on behalf of investors.\7\ The
Commission reasserts its belief, as stated in the previous New York
Window approval order, that NSCC's proposed pilot program should help
minimize inefficient procedures employed by individual New York City
participants by concentrating these operations in one centralized
facility.\8\ In addition, the Commission also believes that the limited
money settlement service should provide a more efficient mechanism by
which the two participants can settle their debits and credits
generated by the NYW processing.
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\7\15 U.S.C. 78q-1(a)(1)(B).
\8\Supra note 3.
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Section 17A(b)(3)(F) of the Act requires that the rules of a
clearing agency be designed to assure the safeguarding of securities
and funds which are in its custody or control or for which it is
responsible.\9\ The Commission believes that the safety procedures
established for the pilot program and approved in the previous New York
Window approval order \10\ continue to enable NSCC to meet its
obligations under the Section 17A of the Act. In addition, the
Commission believes the safeguards NSCC will employ in providing
limited money settlement services to the two participants also enable
NSCC to fulfill its safeguarding obligations. For example, NSCC will
not make any payment on behalf of or to the limited money settlement
services participants until NSCC has received funds sufficient to cover
the amount of NSCC's payment.
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\9\15 U.S.C. 78q-1(b)(3)(F).
\10\Supra note 3.
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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 the Commission
has previously published notice of and has approved the NYW pilot
program. NSCC's previous proposed rule change did not generate any
comment letters, and none are expected on this proposal. The limited
money settlement services have not been previously noticed or approved;
however, the Commission does not believe the services raised any
controversial issues. In addition, accelerated approval will allow the
two participants to begin utilizing the new service immediately and to
begin benefitting from the efficient and centralized payment procedures
provided by NSCC. During the temporary approval period, NSCC will
continue to evaluate the New York Window program and the limited money
settlement services.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. Copies
of the submissions, 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 Section, 450 Fifth Street NW.,
Washington, DC 20549, and at the principal offices of NSCC. All
submissions should refer to File No. SR-NSCC-93-14 and should be
submitted by March 1, 1994.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change (File No. SR-NSCC-93-14) be, and
hereby is, approved until January 31, 1995.
\11\15 U.S.C. 78s(b)(2).
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For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\17 CFR 200.30-3(a)(12) (1992).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-2827 Filed 2-7-94; 8:45 am]
BILLING CODE 8010-01-M
