[Federal Register Volume 61, Number 45 (Wednesday, March 6, 1996)]
[Notices]
[Pages 8997-8998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5149]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36907; File No. SR-NSCC-96-01]
Self-Regulatory Organization; National Securities Clearing
Corporation; Notice of Filing of a Proposed Rule Change Establishing
Systemized, Standard Prices for Transfers of Non-Continuous Net
Settlement Assets Through the Automated Customer Account Transfer
Service
February 29, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on January 5, 1996, the
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 primarily by NSCC. On February 8, and 20, 1996, NSCC
filed amendments to the proposed rule change.\2\ The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
\1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
\2\ Letters from Julie Beyers, Associate Counsel, NSCC, to
Christine Sibille, Division of Market Regulation, Commission
(February 7 and 15, 1996),
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change.
NSCC proposes modifying its rules to coincide with its practice of
establishing systemized, standard default prices for non-Continuous Net
Settlement (``CNS'') assets submitted by a member for transfer through
NSCC's Automated Customer Account Transfer Service (``ACATS''). Such
prices are to be based on the type of asset being transferred.
II. Self-Regulatory Organization's Statement of 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.\3\
\3\ The Commission has modified the text of the summaries
prepared by NSCC.
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A Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to modify NSCC's rules
to coincide with its practice of establishing systemized, standard
default prices based on asset type for assets not eligible for CNS
submitted by Members for transfer through ACATS. NSCC, through ACATS,
currently provides an automated and standardized service for the
accurate and timely transfer of assets in a customer account from one
brokerage firm to another.\4\
\4\ For a complete description of ACATS, refer to Securities
Exchange Act Release No. 34879 (October 21, 1994), 59 FR 54229 [File
No. SR-NSCC-94-13] (order approving a proposed rule change modifying
ACATS). See also NSCC Rule 50.
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When a customer wants to transfer his or her account to a new
broker-dealer (``receiving broker-dealer''), the receiving broker-
dealer submits through NSCC a transfer initiation request form to the
broker-dealer holding the customer's assets (``delivering broker-
dealer''). Within three business days, the delivering broker-dealer
must submit to NSCC a list of customer assets held at the delivering
broker-dealer. The list must include prices assigned to the non-CNS
eligible assets. Transfer of the account generally will take place four
business days later.
On settlement date, NSCC automatically debits the delivering
broker's settlement account at NSCC with the market value of the assets
being transferred through ACATS and credits the receiving broker's
settlement account with the same amount. The resulting settlement
obligations will appear on the members' initial settlement statements
issued in the afternoon. When the non-CNS-eligible assets are delivered
through NSCC's envelope delivery service, NSCC will then credit the
delivering broker's account at NSCC with the value of those assets and
will debit a corresponding amount from the receiving broker's
account.\5\ Thus, the delivering broker's initial settlement statement
will reflect both the debit from the initial ACATS request and a
corresponding credit from the delivery of assets resulting in no change
to such member's overall settlement obligations. If the assets are not
delivered, the delivering broker's settlement bank will be debited the
assigned value of the assets at the end-of-day settlement. These funds
will be creditede back to the delivering broker when such broker
delivers the customer's assets.
\5\ Assets delivered through NSCC's envelope delivery service
must be submitted by 11:3 a.m.
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CNS assets submitted for transfer through the ACATS system are
systematically priced. However, an asset value needs to be assigned to
any non-CNS assets (e.g., limited partnerships, mortgaged backed
securities, zero coupon bonds, foreign securities, U.S. government and
U.S. agency securities, and thinly traded municipal bonds) submitted
for transfer through ACATS. NSCC will ascribe non-CNS assets a value by
using a pricing service.\6\ If there is no price available from a
pricing service, NSCC will assign a value based on the higher of (i)
the price submitted by the delivering broker or (ii) the price
indicated by an industry defined default price matrix. The default
price matrix will employ security category indicators and will specify
a default price for each identified security category. For example,
domestic stock will be valued at $1.00 per share, and municipal bonds
will be valued at $85 per $100 principle amount. Once the default value
is established, changes by participants are not permitted.
\6\ NSCC will use the following pricing services (listed in
order of preference). Equities: The New York Stock Exchange, the
American Stock Exchange, NASDAQ, Vancouver Stock Exchange, average
OTC comparison system price, Interactive Data Financial Times
information, previous day's system price, or last available price in
system. Bonds: Average price in the Bond Comparison System for
trades compared on T or T+1, average price in the Bond Comparison
System for trades compared on T+2, average price in the Bond
Comparison System for trades compared on T+3 or older, Interactive
Data Financial Times information, previous day's system price, last
available price in system, or for municipal bonds only, if such
price is five days or older, the price obtained from J.J. Kenny S&P.
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The pricing of additional assets being transferred through ACATS
will provide ACATS users with standardized default pricing based on
asset type. This method of pricing will decrease discrepancies with
respect to asset valuation by reducing exposure to the delivering
broker due to the overvaluation of assets and by reducing exposure to
the receiving broker due to the undervaluation of assets.
NSCC believes the proposed rule change is consistent with the
requirements of Section 17A of the Act \7\ and the rules and
regulations thereunder because establishment of systemized standard
default prices for non-CNS assets transferred through ACATS will
facilitate the prompt and accurate clearance and settlement of
[[Page 8998]]
account transfers from one brokerage firm to another.
\7\ 15 U.S.C. Sec. 78q-1 (1988).
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B. Self-Regulatory Organization's Statement on Burden on Competition.
NSCC does not perceive that the proposed rule change will have an
impact on or impose a burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
No written comments have been solicited or received. NSCC will
notify the Commission of any written comments received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within thirty-five 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 ninety 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 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street N.W., Washington, D.C. 20549.
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. Sec. 552, will be available for inspection and copying in
the Commission's Public Reference Section, 450 Fifth Street N.W.,
Washington, D.C. 20549. Copies of such filing will also be available
for inspection and copying at the principal office of NSCC. All
submissions should refer to File No. SR-NSCC-96-01 and should be
submitted by March 27, 1996.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
\8\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-5149 Filed 3-5-96; 8:45 am]
BILLING CODE 8010-01-M
