[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Notices]
[Pages 27821-27822]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13230]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38632; File No. SR-NSCC-97-02]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Granting Approval of a Proposed Rule Change to
Modify NSCC's Rules To Permit Unit Investment Trusts To Be Processed
Through Fund/SERV, Networking, and Mutual Fund Commission Settlement
Services
May 14, 1997.
On February 10, 1997, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change (File No. SR-NSCC-97-02)
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ to permit unit investment trust (``UITs'') to be
processed through NSCC's Fund/SERV, Networking, and Mutual Fund
Commission Settlement Services.\2\ Notice of the proposal was published
in the Federal Register on March 28, 1997.\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).
\2\ These services collectively constitute NSCC's Mutual Fund
Services. For a complete description of NSCC's Fund/SERV,
Networking, and Mutual Fund Commission Services, refer to Securities
Exchange Act Release Nos. 31937 (March 1, 1993), 58 FR 12609 [File
No. SR-NSCC-92-14] (order approving proposed rule change regarding
Fund/SERV system); 26376 (December 20, 1988), 53 FR 52546 [File No.
SR-NSCC-88-08] (order approving Networking); and 31579 (December 17,
1992), 57 FR 60018 [File No. SR-NSCC-92-13] (order approving the
Mutual Fund Commissions Settlement System and consolidating the
Mutual Fund Commissions Settlement, Fund/SERV, and Networking
Systems under NSCC's Mutual Fund Services).
\3\ Securities Exchange Act Release No. 38428 (March 21, 1997),
62 FR 14954.
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I. Description
Under the rule change, NSCC will permit UITs to be processed
through NSCC's Fund/SERV, Networking, and Mutual Fund Commission
Settlement Services. Prior to the rule change, UITs were eligible for
NSCC processing through NSCC's continuous net settlement (``CNS'')
system only.\4\ Because Mutual Fund Services only members (i.e.,
primarily bank broker-dealers and insurance company subsidiaries) are
not permitted access to NSCC's CNS system, they had to settle UIT
trades ex-clearing with their UIT positions held with a trustee in
book-entry form. The rule change will allow Mutual Fund Services only
members to process and settle UIT trades through the Fund/SERV,
Networking, and Mutual Fund Commission Settlement systems.
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\4\ A group of NSCC participants, bank trustees, and industry
organizations such as the Securities Industry Association's
Securities Operation Division, the Regional Municipal Operations
Association, and National Unit Trust Association requested that NSCC
permit UITs to be eligible for processing through its Fund/SERV,
Networking, and Mutual Fund Commission Settlement Services.
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The settlement process for UIT transactions through NSCC's Mutual
Fund Services will be processed the same as if these transactions were
processed in the CNS system, but UIT transactions processed through the
Mutual Fund Services will not be guaranteed. If a Mutual Fund Services
only member wants its UIT transactions submitted to NSCC to be
guaranteed, it must submit or have submitted on its behalf such
transactions to NSCC's CNS system.
II. Discussion
Section 17A(b)(3)(F) \5\ provides that the rules of a clearing
agency must be designed to remove impediments to and perfect the
mechanism of a national system for the prompt and accurate clearance
and settlement of securities transactions and to assure the
safeguarding of securities and funds which are in the custody or
control of the clearing agency or for which it is responsible. The
Commission believes that the rule change is consistent with NSCC's
obligations under the Act because it permits Mutual Fund Services only
member to process UIT transactions within NSCC. By permitting UIT
transactions to be processed through NSCC's Fund/SERV, Networking, and
Mutual Fund
[[Page 27822]]
Commissions Settlement systems, Mutual Fund Services only members will
no longer have to settle UIT transactions through exception processing
or ex-clearing. As a result, this change should further perfect the
mechanism of a national clearance and settlement system. At the same
time, because NSCC does not apply its trade guarantee to transactions
processed through Mutual Fund Services, processing and settling UIT
transactions through Mutual Fund Services should not pose any
significant additional risk to NSCC and therefore should not effect
NSCC's ability to safeguard securities and funds.
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\5\ 15 U.S.C. 78q-1(b)(3)(F).
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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-97-02) 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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-13230 Filed 5-20-97; 8:45 am]
BILLING CODE 8010-01-M
