[Federal Register Volume 60, Number 164 (Thursday, August 24, 1995)]
[Notices]
[Pages 44093-44095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20953]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36112; File No. SR-NSCC-95-11]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of a Proposed Rule Change Concerning
Book-Entry Money Settlements With Members
August 17, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on August 8, 1995, the
National Securities Clearing Corporation (``NSCC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change (File No. SR-NSCC-95-11) as described in Items I, II, and III
below, which items have been prepared primarily by NSCC. The Commission
is publishing this notice to solicit comments from interested persons.
\1\ 15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Change
NSCC is asking for renewal of its temporary authority to allow
intrabank funds transfers between NSCC and its members in satisfaction
of settlement obligations.
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
[[Page 44094]]
summaries, set forth in sections A, B, and C below of such
statements.\2\
\2\ The Commission has altered some of these statements.
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A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
On October 5, 1990, NSCC filed a proposed rule change with the
Commission that was noticed in the Federal Register \3\ and was
subsequently amended three times.\4\ On September 4, 1992, the proposal
as amended was approved on a temporary basis through August 31,
1993.\5\ The temporary approval subsequently was extended through
August 31, 1995.\6\ The current filing requests an extension of the
temporary approval order until such time as NSCC implements its same-
day funds settlement system.
\3\ Securities Exchange Act Release No. 28715 (December 12,
1990), 55 FR 715 [File No. SR-NSCC-90-21].
\4\ Letters from: (1) Jeffrey F. Ingber, Associate General
Counsel, NSCC, to Jonathan Kallman, Assistant Director, Division of
Market Regulation (``Division''), Commission (August 14, 1991); (2)
Peter J. Axilrod, Associate General Council NSCC, to Jerry
Carpenter, Branch Chief, Division, Commission (March 23, 1992); and
(3) Peter J. Axilrod, Associate General Counsel, NSCC, to Thomas C.
Etter, Jr., Attorney, Division, Commission (July 22, 1992).
\5\ Securities Exchange Act Release No. 31157 (September 4,
1992), 57 FR 42602 [File No. SR-NSCC-90-21].
\6\ Securities Exchange Act Release No. 32836 (September 2,
1993), 58 FR 47483 [File No. SR-NSCC-93-08]; Securities Exchange Act
Release No. 34573 (August 22, 1994), 49 FR 44443 [File No. SR-NSCC-
94-17].
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As discussed in detail in the approval order of September 4, 1992,
the rule change permits NSCC members to satisfy their settlement
obligations to NSCC and permits NSCC to satisfy its settlement
obligations to its members by means of electronic intrabank funds
transfers between members' accounts and NSCC's accounts at various
settlement banks. Under the proposal, two types of intrabank funds
transfers are available: (1) Electronic transfers whereby on settlement
day NSCC pays members by check for next-day value and members pay NSCC
by NSCC directing the settlement banks to make irrevocable transfers
from the members' accounts to NSCC's accounts for next-day availability
or whereby members pay NSCC by check and NSCC effects payments by
electronic transfers (``one-way electronic transfers'') and (2)
electronic transfers whereby on settlement day both NSCC and members
pay by NSCC directing the settlement banks to make irrevocable
transfers for next-day value without any netting (``two-way electronic
transfers'').
As a prerequisite to either NSCC or any of its members making a
settlement payment by an electronic funds transfer, the proposed rule
change imposes three requirements. First, any such payment must be
effected on a next-day funds availability basis.\7\ Second, any such
payment must be in conformity with an agreement, which must be executed
by NSCC and any bank that acts as a payment intermediary, which
stipulates that any such funds transfer must be effected on an
irrevocable and final basis.\8\ Third, any bank that acts as an
intermediary for such funds transfers must meet NSCC's standards for
letter of credit issuers.\9\
\7\ The term ``next-day funds'' refers to funds paid today that
will be available tomorrow. By contrast, ``same-day funds'' refers
to funds that are immediately available.
\8\ The September 4, 1992, order noted that on March 24, 1992,
NSCC filed with the Commission a letter representing that NSCC will:
(1) Submit for Division approval the current form of any agreement
pursuant to which intrabank funds transfers are to be made and (2)
notify the Division of the identity of each bank that enters into
any such contract. Letter from Peter J. Axilrod, Associate General
Counsel, NSCC, to Jerry Carpenter, Branch Chief; Division,
Commission (March 23, 1992).
\9\ For a bank or trust company to be approved by NSCC to issue
letters of credit on behalf of members for purposes of clearing fund
requirements, the bank or trust company must meet specific standards
in terms of: (1) Minimum levels of stockholders' equity and (2)
certain credit ratings for its short term obligations as determined
by Standard and Poor's Corporation or Moody's Investor Service, Inc.
NSCC Rule 4, Section 1; Securities Exchange Act Release No. 29444
(July 16, 1991), 56 FR 34081 [File No. SR-NSCC-91-03] (order
approving NSCC's revised standards for approved issuers of letters
of credit for clearing fund purposes).
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NSCC believes that a renewal of the approval of the rule change
would be consistent with the Act and particularly with Section 17A
thereof.\10\ Section 17A(a)(1) of the Act encourages the use of
efficient, effective, and safe procedures for securities clearance and
settlement. Moreover, section 17A(b)(3)(F) of the Act requires that the
rules of clearing agencies be designed to assure the safeguarding of
funds in the custody or control of clearing agencies or for which they
are responsible.
\10\ 15 U.S.C. 78q-1 (1988).
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NSCC believes that substantial marketplace efficiencies can be
achieved by authorizing NSCC to effect electronic intrabank funds
transfers to satisfy settlement obligations between itself and its
members. NSCC also believes that the exchange of checks is labor
intensive and that physical movement of checks can involve loss or
delay. NSCC therefore believes that intrabank funds transfers should
enhance the safeguarding of funds and that earlier finality of
settlement provides certainty to the marketplace and serves to increase
investor confidence in the markets.
The Commission temporarily approved the proposed rule change to
permit NSCC and other interested parties to assess prior to permanent
Commission approval the effects intrabank funds transfers have on money
settlement payments at NSCC. Because the assessment process is not
complete, the facts and circumstances justifying temporary approval of
the rule change have not changed significantly from the date of
original temporary approval. NSCC also expects to implement a same-day
funds settlement system and to file a proposed rule change with the
Commission in connection therewith. Therefore, NSCC is requesting that
temporary approval be extended until such time as NSCC implements its
same-day funds settlement system.
B. Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe 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 by NSCC.
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 self-regulatory organizations consent, 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 NW., Washington, DC 20549. Copies
of the submissions, all subsequent
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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 5th Street NW., Washington, DC 20549. Copies of
such filing also will be available for inspection and copying at the
principal office of NSCC. All submissions should refer to File No. SR-
NSCC-95-11 and should be submitted by September 14, 1995.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\11\
\11\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-20953 Filed 8-23-95; 8:45 am]
BILLING CODE 8010-01-M
