01-13327. Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving a Proposed Rule Change Relating to Processing Certain Securities Undergoing Reorganization

May 18, 2001.

On July 12, 2000, the National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change (File No. SR-NSCC-00-09) 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 March 9, 2001.^[2] No comment letters were received. For the reasons discussed below, the Commission is approving the proposed rule change.

I. Description

NSCC's rules permit NSCC to continue to process certain securities undergoing reorganization or issuing dividends and specify how NSCC shall handle those issues. However, not all types of reorganizations or dividends fit the procedures specifically set forth in the rules. Ordinarily, this would require that the affected security be exited from the applicable system. Exiting the affected security from the applicable system poses a burden on the financial investment community when the issue is widely traded.

The proposed rule change modifies NSCC's Rules and Procedures to give NSCC the flexibility to process in the continuous net settlement (“CNS”), balance order, or other related system, on an exception basis, securities that would not otherwise have been eligible for processing to the extent NSCC has the capability to do so. The proposed rule change provides that in such circumstance, NSCC would issue a notice to its members setting forth how NSCC would process the security.

II. Discussion

The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder and particularly with the requirements of Section 17A(b)(3)(F).^[3] Section 17A(b)(3)(F) requires that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions. The Commission believes that NSCC's rule change meets this standard because the proposed rule change allows NSCC to process otherwise ineligible securities in NSCC's CNS system, balance order, or other related system, on an exception basis. By providing a means whereby these securities, which previously would not have been eligible for processing through NSCC, can be processed through and receive the benefits of NSCC's highly automated systems, the proposed rule change facilitates the prompt and accurate clearance and settlement of such securities transactions.

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(b)(3)(F) 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-00-09) be an hereby is approved.

For the Commission by the Division of Market Regulation, pursuant to delegated authority.^[4]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  Securities Exchange Act Release No. 44032 (March 3, 2001), 66 FR 14237.

3.  15 U.S.C. 78q-1(b)(3)(F).

4.  17 CFR 200.30-3(a)(12).