97-13401. Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving a Proposed Rule Change Regarding Exemption Processing

[Federal Register Volume 62, Number 99 (Thursday, May 22, 1997)]
[Notices]
[Page 28091]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13401]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38639; File No. SR-NSCC-97-3]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving a Proposed Rule Change Regarding Exemption 
Processing

May 14, 1997.
    On March 7, 1997, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-NSCC-97-3) 
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 April 9, 1997.\2\ No comment letters were received. For the 
reasons discussed below, the Commission is approving the proposed rule 
change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 38453 (March 28, 1997), 
62 FR 17274.
---------------------------------------------------------------------------

I. Description

    The rule change modifies NSCC's procedures regarding exemption 
processing in NSCC's Continuous Net Settlement (``CNS'') System. \3\ A 
short position in CNS represents the quantity of securities owed to 
NSCC by the member. To satisfy short positions for purposes of 
settlement, securities are delivered from the member's account at The 
Depository Trust Company (``DTC'') to NSCC's account at DTC.
---------------------------------------------------------------------------

    \3\ CNS is an on-going accounting system that nets a member's 
securities obligations on a daily basis to produce a short or long 
position in each issue and an overall settlement debit or credit.
---------------------------------------------------------------------------

    As a part of the NSCC's CNS accounting operation, members may 
control the delivery of their securities to NSCC through the use of 
exemptions. \4\ Through exemption limitations, a member may elect to 
deliver to NSCC all, part, or none of any short position. NSCC 
presently requires members to input exemption instructions on a daily 
basis and permits but does not require members to input standing 
instructions. Pursuant to this rule change, members are now required to 
input standing exemption instructions but need not input exemption 
instructions daily. If a daily instruction is not submitted, not 
received, or is received but cannot be processed by NSCC, the member's 
standing exemption instructions will be used.
---------------------------------------------------------------------------

    \4\ Exemptions assist members in complying with the segregation 
provisions of Rule 15c3-3 of the Act and in meeting other delivery 
needs.
---------------------------------------------------------------------------

II. Discussion

    Section 17A(b)(3)(F) \3\ of the Act requires that the rules of a 
clearing agency 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. The Commission believes that 
NSCC's rule change is consistent with NSCC's obligations under the Act 
because it makes the settlement process more efficient. Under the new 
procedures, NSCC participants will submit standing exemption 
instructions instead of daily instructions. Participants will then only 
need to submit exemption instructions when their delivery needs differ 
from their standing instructions. Thus, the proposal should reduce the 
number of instructions a participant needs to submit in order to settle 
transactions. Furthermore, the proposal will allow settlement to take 
place even if a member is unable to submit its exemption instructions. 
Thus, the proposal helps to ensure that transactions are settled 
promptly and accurately.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of 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-97-3) be and hereby is 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority. \6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-13401 Filed 5-21-97; 8:45 am]
BILLING CODE 8010-01-M