
[Federal Register: January 21, 2009 (Volume 74, Number 12)]
[Notices]               
[Page 3661-3666]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21ja09-138]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59238; File No. SR-NSCC-2006-17]

 
 Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving Proposed Rule Change To Reorganize 
Membership Rules and Procedures

January 13, 2009.

I. Introduction

    On December 13, 2006, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') and on January 31, 2008, amended proposed rule change 
SR-NSCC-2006-17 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 July 10, 2008.\2\ On August 4, 2008, NSCC again 
amended the proposed rule change.\3\ The Commission received no comment 
letters. For the reasons discussed below, the Commission is approving 
the proposed rule change, as amended.
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    \1\ U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 58100 (July 3, 2008), 73 
FR 39759.
    \3\ The August 4, 2008, amendment was technical in nature and 
did not require the proposed rule change to be noticed, again.
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II. Description

    NSCC is reorganizing its Rules and Procedures (``Rules'') related 
to membership standards and membership requirements to conform them to 
its current practices and to harmonize them with similar rules of 
NSCC's affiliate, the Fixed Income Clearing Corporation (``FICC'').\4\
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    \4\ Both NSCC and FICC's Government Securities Division 
(``GSD'') share a number of common members, and both act as central 
counterparties with respect to certain transactions submitted by 
members. Harmonization of NSCC and FICC Rules is an ongoing process, 
and additional NSCC and FICC ``harmonizing'' rule filings will 
follow.
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    Over the years, NSCC has created a variety of membership classes, 
each with different initial and continuing membership requirements. 
These requirements are currently scattered throughout NSCC's Rules. 
With the objective of promoting greater transparency, NSCC is 
reorganizing and restructuring its Rules related to member types, the 
membership application process, and the ongoing requirements of NSCC 
members in a form that it believes will make them more readily located 
and understood by applicants and members alike.

[[Page 3662]]

    To accomplish this, NSCC is restructuring Rule 2 (previously, 
``Members'') into a revised Rule 2 (``Members and Limited Members'') 
and is creating a new Rule 2A (``Initial Membership Requirements'') and 
a new Rule 2B (``Ongoing Membership Requirements and Monitoring''). 
Current provisions and rule text will be moved from existing rules and 
addenda and will be relocated within these newly structured rules. 
Certain provisions will be modified where necessary and, where 
possible, harmonized with analogous provisions of GSD's rules. 
Additionally, NSCC proposes to add descriptive text to its Rules with 
regard to the membership application process and with regard to the 
voluntary membership retirement process (i.e., text which codifies 
NSCC's current process of evaluating applicants and the current process 
by which an existing member may voluntarily retire from membership in 
NSCC).

1. Membership Types--Members and Limited Members

    NSCC's previous Rule 2 (currently titled ``Members'') provided that 
an applicant may apply to become a member that uses all of NSCC's 
services or to become a member that uses certain limited services.
    In restructuring and revising Rule 2, NSCC seeks to clearly, 
concisely, and in one location, set forth each membership type 
differentiating between member types that may generally, unless 
otherwise limited by NSCC access all services made available by NSCC 
(often referred to as ``full service Members'') and those member types 
that may utilize NSCC's systems and services only on a limited basis 
(``Limited Members''). Limited Members will include the following: Fund 
Members, Insurance Carrier/Retirement Services Members, Municipal 
Comparison Only Members, Mutual Fund/Insurance Services Members, Data 
Services Only Members, Commission Billing Members (previously ``Non-
Clearing Members''), Settling Bank Only Members, and Third Party 
Administrator Members. This change is cosmetic only, logically grouping 
member types, and will not alter in any way each member's existing 
rights and obligations.
    Additionally, NSCC is adding text to Rule 2 making it clear that no 
full service Member or Limited Member may submit or confirm any 
transaction, charge, request, instruction, or transmission through 
NSCC's services, or otherwise utilize NSCC's services, in contravention 
of any law, rule, regulation, or statute.

2. Consolidation of Membership Standards and Requirements Within the 
Rules

    The membership qualifications, financial standards, and operational 
requirements for each member type previously were set forth in separate 
rules and addenda, which were spread throughout NSCC's Rules.\4\
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    \4\ ``Members'' qualifications, standards, and requirements were 
located in Rule 2 and in Addendum B. ``Mutual Fund/Insurance 
Services Members,'' also defined to be ``Members,'' qualifications, 
standards, and requirements were located in Rule 2 and in Addendum 
B. ``Fund Members'' qualifications, standards, and requirements were 
located in Rule 51 and Addendum I. ``Insurance Carrier/Retirement 
Services Members'' qualifications, standards, and requirements are 
located in Rule 56 and in Addendum Q. ``Third Party Administrator 
Members'' qualifications, standards, and requirements were located 
in Rule 60 and in Addendum R. ``Data Services Only Members'' 
qualifications, standards, and requirements were located in Rule 31. 
``Municipal Comparison Only Members'' qualifications, standards, and 
requirements were located in Rule 3, Section 2. ``Non-Clearing 
Members'' qualifications, standards, and requirements were located 
in Rule 3, Section 2. ``Settling Bank Only Members'' qualifications, 
standards, and requirements were located in Rule 54.
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    To consolidate this information, NSCC is creating two new rules, 
Rule 2A and Rule 2B, which will contain the content moved from 
membership Rules 3, 31, 51, 54, 56, and 60. Rule 2A (``Initial 
Membership Requirements'') provides information regarding initial 
membership eligibility requirements for all member types and addresses 
the membership application and evaluation process. Rule 2B (``Ongoing 
Membership Requirements and Monitoring'') contains provisions regarding 
the continuing requirements of members. For ease of reference, NSCC is 
also relocating and consolidating the detailed membership 
qualifications, financial standards, and operational requirements for 
all member types into Addendum B (renamed ``Qualifications and 
Standards of Financial Responsibility, Operational Capability and 
Business History''). The content NSCC is reorganizing into Addendum B 
is currently spread throughout Addenda B, I, Q, and R.
    Accordingly, NSCC is deleting current membership related Rules 3 
(specifically, Sections 2, 5, and 6), 31, 51, 54, 56, and 60. In 
addition, NSCC will delete Addenda I, Q, and R.

3. Use of the Terms ``Members'' and ``Settling Members'' Throughout the 
Rules

    Currently, an applicant that agrees to limit its use of NSCC's 
services to those specified by NSCC (i.e., Mutual Fund Services and/or 
Insurance and Retirement Services) is called a ``Mutual Fund/Insurance 
Services Member.'' Thus when the term ``Member'' is used within NSCC's 
Rules, it may apply to a full service Member (which may generally use 
all NSCC services), a Mutual Fund/Insurance Services Member (which may 
only utilize the Mutual Fund and Insurance and Retirement Processing 
Services), or to both depending upon the context. Additionally, NSCC's 
Rules make reference to ``Settling Members,'' which may apply to a full 
service Member, a Mutual Fund/Insurance Services Member, a Non-Clearing 
Member, or all three member types. It is only in further understanding 
the Rules or in the context of a term's use that one may determine to 
which member type a Rule may apply.\5\ Accordingly, NSCC proposes to 
modify all references to ``Settling Member'' and to ``Member'' within 
each NSCC Rule to clearly indicate which member type a rule is 
applicable. Definitions associated with these terms (contained in Rule 
1) will be modified, and the term ``Settling Member'' will be deleted 
from NSCC's Rules.
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    \5\ For example, as a Mutual Fund/Insurance Services Member may 
not participate in the Continuous Net Settlement Service (``CNS''), 
any reference to ``Members'' within Rule 11 (``CNS'') will not apply 
to Mutual Fund/Insurance Services Members. Any reference to 
``Settling Member'' within Rule 17 (``Fine Payments'') will apply to 
all full-service Members, Mutual Fund/Insurance Services Members, 
and Non-Clearing Members (which NSCC is renaming ``Commission 
Billing Members'').
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4. Rule 15 (``Financial Responsibility and Operational Capability'')

    Rule 15 contains, among other things, the requirements of members 
with regard to reports to be filed on an ongoing basis (e.g., annual 
audited financial statements, Financial and Operational Combined 
Uniform Single (``FOCUS'') Reports, etc.) and notifications that 
members are required to make to NSCC regarding any failure to maintain 
their membership qualifications and standards, including notifications 
of certain material changes in business, ownership, or control. NSCC 
proposes to move these ongoing reporting requirements into new Rule 2B. 
Rule 15 will then be renamed ``Assurances of Financial Responsibility 
and Operational Capability.''
    In Section 2.A. (``Reports and Information'') of new Rule 2B, NSCC 
is adding text that clarifies that unless specifically set forth within 
the Rule, the time periods established for submitting reports and data 
to NSCC are set forth in the form of notices posted on NSCC's Web site 
and that each

[[Page 3663]]

member is required to retrieve all notices from NSCC's Web site daily.
    In Section 2.B. (``Notification of Changes in Condition'') of new 
Rule 2B, NSCC is changing the reporting requirements of certain member 
types with respect to providing NSCC with written notice of events that 
will effect a change in control of the member or that could have a 
material impact on the member's business and/or financial condition. 
Historically, this provision applied to full service Members (i.e., 
those Members for which certain activity is guaranteed at a fixed point 
in the clearance and settlement process) as well as Mutual Fund/
Insurance Services Members, Fund Members, and Insurance Carrier/
Retirement Services Members (i.e., those member types whose activity is 
limited to use of non-guaranteed services). NSCC has determined that 
this notification provision should apply solely to full service 
Members.
    Additionally, NSCC seeks to delete the current requirement that a 
Commission Billing Member (previously called a ``Non-Clearing Member'') 
provide NSCC with written and oral notice if it is no longer in 
compliance with any of the relevant qualifications and standards for 
membership. Commission Billing Members participate in NSCC solely for 
the purpose of paying and receiving broker commissions and file 
transmissions that are sent to NSCC directly from either the New York 
Stock Exchange or the American Stock Exchange. As there are no NSCC 
financial or operational requirements applicable to this member type 
and the participation of the member is coordinated between NSCC and the 
member's Exchange, the current requirement is not necessary.

5. Rule 1 (``Definitions and Descriptions'')

    NSCC proposes the following with respect to terms defined within 
Rule 1:
Board of Directors
    The current definition is modified to make clear that the term 
``Board of Directors'' means the Board of Directors of NSCC or a 
committee thereof acting on delegated authority.
Commission Billing Member
    NSCC is renaming Non-Clearing Members ``Commission Billing 
Members'' to better reflect the nature of their participation in NSCC's 
services. Non-Clearing Members utilize NSCC's Commission Settlement 
Service solely for the payment and collection of commissions.
Limited Member
    The term ``Limited Member'' will mean a Person whose use of NSCC's 
services is limited to those services specified by NSCC.
Person
    The proposed term ``Person'' will mean a partnership, corporation, 
limited liability corporation, or other organization, entity, or 
individual.
Registered Broker-Dealer
    The term ``Registered Broker-Dealer'' (currently defined in Rule 2 
as ``a broker or dealer registered under the Securities Exchange Act of 
1934, as amended'') is being moved to Rule 1.
Settling Member
    The term ``Settling Member'' is being deleted from NSCC's Rules. 
Each member type encompassed by this term is being specifically named 
within NSCC's Rules.
    Other conforming technical changes to Rule 1 are being made to 
accommodate the restructuring of the Rules.

6. Rule 2A (``Initial Membership Requirements'')

Applicant Operational Testing Requirements
    Under NSCC's Rules, certain applicants as determined by NSCC must 
demonstrate that they will be able to satisfactorily communicate with 
NSCC. These applicants conduct system/operational tests with NSCC. NSCC 
is adding new text to its rules (Rule 2A, Section 1.C. [''Application 
Documents'']) to make clear NSCC's current requirement with regard to 
applicant testing.
Member's Agreement
    NSCC's Rules currently provide that members sign and deliver to 
NSCC a member's agreement. The applicable provisions of each type of 
member's agreement have historically been set forth in the Rule that 
applies to that member type (e.g., a Fund Member's agreement provisions 
are contained in Rule 51, a full service Member's provisions are 
contained in Rule 2, a Third Party Administrator Member's provisions 
are contained in Rule 60). Regardless of member type, each member 
agreement has certain standard provisions that generally apply to all 
members (e.g., the only services the member may use are those that are 
permitted by NSCC, that the member will abide by NSCC's Rules and be 
bound by all provisions of the Rules, etc.) and certain other 
provisions that are unique to particular member types (e.g., Fund 
Members have a unique provision with regard to NSCC's inspection of 
their books and records).
    NSCC new Rule 2A, Section 1.E. (``Membership and Other 
Agreements'') contains the main member agreement provisions for all 
member types, as well as address the requirements with regard to any 
other agreements.
 Third Party Administrator (``TPA'') ACH Agreements
    NSCC's Rules currently state that TPA Members (non-settling 
members) must provide NSCC with an agreement for preauthorized payments 
(an ``ACH'' agreement) so that NSCC may collect monthly charges 
pursuant to Rule 26 (``Bills Rendered''). To accommodate payment 
methods other than ACH (i.e., ``e-payment'' using a credit card or bank 
account), NSCC is replacing the specific TPA ACH requirement within its 
Rules with more generic text.

7. Rule 2B (``Ongoing Membership Requirements and Monitoring'') Reports 
and Information

Annual Audited Financial Statements
    NSCC's Rules currently state that a member whose membership is 
contingent upon a guarantee of a third party must provide a copy of the 
annual audited financial statements of the guarantor. If such 
statements for the member or its guarantor are not available, NSCC may 
accept at its sole discretion consolidated financial statements 
prepared at the level of the parent of the member or guarantor. NSCC is 
modifying this text to make clear that it may accept consolidated 
financial statements or financial information prepared at the level of 
the parent of such entity.\6\
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    \6\ NSCC is also correcting a typographical error in Rule 2B, 
Section 2.A.(a) in that ``each'' guarantor should read ``such'' 
guarantor.
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Call Reports
    New Rule 2B, Section 2.A.(c) applies to Call Reports filed with 
NSCC by members that are banks or trust companies. To the extent that 
such information is not contained within the Call Report or the member 
is a bank or trust company that is not required to file a Call Report, 
such member will be required to provide NSCC with information 
containing each of its capital levels and ratios.

[[Page 3664]]

Supplemental and Quarterly Financial Statements Filed With The National 
Association of Insurance Commissioners (``NAIC'')
    NSCC is deleting the current Rule 15 requirement that Insurance 
Companies provide NSCC with copies of their supplemental and quarterly 
financial statements filed with the NAIC or the Insurance Company's 
regulatory authority. Currently, NSCC receives annual audited financial 
statements and annual regulatory reports from these members in order to 
monitor adherence to membership requirements. The revised rule language 
will conform the Rules to current practice.
Securities Exchange Act Rule 15c3-1 Notification
    NSCC is adding Rule 2B, Section 2.A.(g) to its Rules to require 
that a member that has provided notice to the Commission pursuant to 
paragraph (e) of Securities Exchange Act Rule 15c3-1 (``Notice 
Provisions Relating to Limitations on the Withdrawal of Equity 
Capital'') shall notify NSCC and shall provide NSCC with a copy of such 
notice by close of business on the day such notice is provided to the 
Commission.
Operational Testing
    NSCC requires that certain ``top tier'' members participate in 
periodic connectivity testing with NSCC for business recovery purposes. 
NSCC is adding Rule 2B, Section 3 (``Operational Testing'') to its 
Rules to specifically set forth NSCC's operational testing 
requirements.
Ongoing Monitoring--Surveillance Status
    Currently NSCC's ``credit risk matrix,'' (i.e., the provision 
relating to NSCC's ongoing monitoring of full service Members) appears 
in Addendum B. NSCC is moving its current risk matrix into new Rule 2B. 
NSCC is also replacing the term ``Settling Member'' with ``Member'' as 
the credit risk matrix only applies to full service ``Members.''
Voluntary Retirement
    NSCC is adding Rule 2B, Section 5 (``Voluntary Retirement'') to its 
Rules, which is the current process by which an active participant may 
voluntarily retire as an NSCC member.

8. Addendum B (``Qualifications and Standards of Financial 
Responsibility, Operational Capability and Business History'')

Immediate Placement on Surveillance by NSCC
    Currently, NSCC's Rules provide that applicants to become a Member, 
Mutual Fund/Insurance Services Member, Fund Member, or Insurance 
Carrier/Retirement Services Member may not be known to be subject to 
any other action or condition the existence of which will require it to 
be placed on surveillance by NSCC. In addition, the financial 
requirements for certain members (full service Members and Mutual Fund/
Insurance Services Members) state that the member must have a capital 
ratio or percentage that will not require the applicant to be placed on 
immediate surveillance by NSCC. All applicants must meet their minimum 
financial requirements, as applicable to their member type. NSCC is 
deleting these provisions.
    When the NSCC membership standards were developed, the NSCC credit 
risk matrix was not in place. As a result of the implementation of the 
credit risk matrix, it is possible that once an applicant is approved 
for membership, it may be placed directly on NSCC's Watch List (i.e., 
surveillance status). As sufficient discretion to deny membership based 
on financial, operational, or character issues exists in other sections 
of NSCC's rules, elimination of these provisions will not diminish 
NSCC's authority under its Rules to deny an applicant membership.
Fund Member Applicants Subject to Securities Exchange Act Rule 17a-11 
Reporting
    NSCC is deleting Addendum I (``Standards of Financial 
Responsibility and Operational Capability for Fund Members''), which 
includes a requirement that a broker-dealer Fund Member applicant not 
be subject to reporting under Securities Exchange Act Rule 17a-11 
(``Notification Provisions for Broker and Dealers''). As a Fund Member, 
an applicant must meet NSCC's minimum financial requirements for 
membership (and, as stated above, NSCC retains sufficient discretion to 
deny membership based on financial, operational, or character issues in 
other sections of NSCC's Rules). Thus, NSCC has determined that this 
requirement is duplicative and that its elimination will not diminish 
NSCC's authority under its Rules to deny an applicant membership if it 
does not meet the applicable financial standards.
Financial Responsibility--Entities That Qualify for Membership Under 
the Category of ``Other'' Entity Types
    In certain instances in NSCC's membership Rules, an applicant that 
does not qualify for membership under one of the specifically defined 
qualification criteria established for its membership type, may apply 
for membership if it has demonstrated to NSCC that its business and 
capabilities are such that it could reasonably expect material benefit 
from direct access to NSCC's services. NSCC's financial requirements 
for such an applicant required that it meet financial stability 
standards as were applied to the industry in which the applicant was 
associated. Because industry standards have not always been well-
defined and as there has not always been consensus among market 
participants as to what those industry standards should be, in new 
Section 1 of Addendum B, NSCC is modifying the financial requirements 
for ``other'' applicants by requiring that such applicants satisfy such 
minimum standards of financial responsibility deemed appropriate by 
NSCC.
Business History
    NSCC's Rules currently provide that Insurance Carrier/Retirement 
Services applicants and Third Party Administrator applicants (both non-
guaranteed service members) must have an established business history 
of a minimum of three years or personnel with sufficient operational 
background and experience to ensure the ability of the applicant to 
conduct such a business. The business history requirement for full 
service Members, as well as Mutual Fund/Insurance Services Members and 
Fund Members (both non-guaranteed service members) is six months, or 
the member must have personnel with sufficient operational background 
and experience to ensure the ability of the applicant to conduct such a 
business.
    NSCC has determined that the business history requirement of 
Insurance Carrier/Retirement Services and Third Party Administrator 
applicants need not be any more stringent that those applied to Fund 
Members and Mutual Fund/Insurance Services Members. Therefore, NSCC is 
changing the three year requirement to six months.
Fund Members That Are Insurance Companies
    Under NSCC's Rules, an Insurance Company may apply to become a Fund 
Member; however, the financial requirements for Insurance Companies

[[Page 3665]]

is not specifically set forth in Addendum I. Addendum I states that all 
``other'' applicants shall be required to meet financial stability and 
operational capability standards as are applicable to the industry in 
which the applicant is associated. Historically, NSCC looked to its 
Insurance Carrier/Retirement Services Member financial standards set 
forth in Rule 57. NSCC is clearly stating Insurance Company financial 
standards under its Fund Member financial requirements in Addendum B, 
Section 3.

9. Rule 3 (``Lists To Be Maintained'')

    In consolidating NSCC's membership standards, NSCC is moving to 
Rule 2 the portions of Rule 3 (specifically, Sections 2, 5, and 6) that 
pertain to Municipal Comparison Only Members, Non-Clearing Members, 
and/or Data Services Only Members. For purposes of clarity, the 
remaining information within Rule 3 is being reorganized and reordered.

10. Addendum D (``Statement of Policy Envelope Settlement Service'')

    To more accurately reflect the scope of the information contained 
within Addendum D, NSCC is renaming it ``Statement of Policy Envelope 
Settlement Service, Mutual Fund Services, Insurance and Retirement 
Processing Service and Other Services Offered by the Corporation.''

11. Rule 38 (``Captions'')

    Mirroring FICC's Rules, NSCC is adding language to Rule 38 to make 
clear that NSCC's Rules are governed by New York substantive law. This 
language currently exists in NSCC's membership agreements only. Rule 38 
will be renamed ``Governing Law and Captions.''

12. Technical Corrections

    In 2006, NSCC submitted for immediate effectiveness proposed rule 
change SR-NSCC-2006-07 which made clarifying and technical changes to 
NSCC's Rules related to funds which are eligible for processing on 
Fund/Serv.\7\ At that time, the membership qualifications contained 
within Section 1(viii) of Rule 31 (``Data Services Only Member'') 
should have been modified to reflect the definitional change made 
within Rule 1 with respect to ``TPA.'' Accordingly, NSCC is correcting 
the text within its rules to eliminate the reference to ``defined 
contribution plans as defined in Section 414(i) of the Internal Revenue 
Code of 1986, as amended,'' and to refer instead to ``a retirement or 
other benefit plan.''
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    \7\ Securities Exchange Act Release No. 54366 (August 25, 2006), 
71 FR 52199.
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    In 2006, NSCC submitted for immediate effectiveness proposed rule 
change SR-NSCC-2006-14 which, among other things, deleted references to 
the Product Repository service as NSCC had determined not to offer the 
service.\8\ At that time, all references within NSCC's Rules to 
``Repository Data'' should have been deleted. Accordingly, NSCC is 
seeking to delete such references.
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    \8\ Securities Exchange Act Release No. 54921 (December 12, 
2006), 71 FR 76415.
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    In 2005, the Commission approved NSCC proposed rule change SR-NSCC-
2005-01 which clarified that the operational capability that is 
ordinarily focused upon by NSCC during the application process is the 
ability of an applicant to appropriately communicate with NSCC--that is 
the ability to input to NSCC and to receive output from NSCC on a 
timely and accurate basis.\9\ The rule change removed certain 
provisions that might be interpreted to impose upon NSCC an obligation 
to make determinations with respect to particular aspects of 
operational capability. Instead, NSCC relies upon the requirement that 
the applicant in fact be able to satisfactorily communicate with NSCC 
as generally stated in the operational capability requirements 
currently set forth for members in NSCC's Rules. At the time of the 
filing, the provision within Rule 60 with respect to approval of TPA 
Member applicants based upon an alternative operational standard should 
have been deleted. Accordingly, NSCC now seeks to delete this provision 
from its Rules. NSCC will continue to retain the right to examine any 
aspect of an applicant's or member's business pursuant to the 
provisions of Rule 15.
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    \9\ Securities Exchange Act Release No. 51600 (April 22, 2005), 
70 FR 22167.
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    In 2005, the Commission approved NSCC proposed rule change SR-NSCC-
2005-14 which added Rule 64 (``DTCC Shareholders Agreement'') requiring 
that full service Members of NSCC purchase shares of the common stock 
of The Depository Trust & Clearing Corporation (``DTCC''), NSCC's 
parent corporation, and that certain Limited Member types could 
voluntarily purchase such shares.\10\ Section 5 of Rule 64 made 
incorrect references to ``Members'' and should have referenced all 
member types specified in Section 2 (``Members'') and Section 3 (``Fund 
Members, Insurance Carrier/Retirement Services Members, Municipal 
Comparison Only Members, and Mutual Fund/Insurance Services Members'') 
of Rule 64. Accordingly, NSCC now correcting such references.
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    \10\ Securities Exchange Act Release No. 52922 (December 7, 
2005), 70 FR 74070.
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    In 2004, the Commission approved NSCC proposed rule change SR-NSCC-
2003-05 which modified NSCC's Rules to provide that notices to members 
posted by NSCC via electronic format (i.e., posted on NSCC's Web site) 
meet NSCC's notification obligations.\11\ At that time, Section 7 of 
Rule 45 (``Notices'') was added to NSCC's Rules with an incorrect 
reference to Section 3. NSCC is seeking to remove this incorrect 
reference.
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    \11\ Securities Exchange Act Release No. 50085 (July 26, 2004), 
69 FR 45872.
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III. Discussion

    Section 19(b) of the Act directs the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
such proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to such 
organization. Section 17A(b)(3)(F) of the Act requires that the rules 
of a clearing agency be designed to perfect the mechanism of a national 
system for the prompt and accurate clearance and settlement of 
securities transactions.\12\ The Commission believes that NSCC's rule 
change is consistent with this Section because it should perfect the 
mechanism of a national system for the prompt and accurate clearance 
and settlement of securities transactions by assisting NSCC applicants 
and members in understanding, and thereby complying with, NSCC's 
membership standards and requirements.
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change, as amended, is consistent with the requirements 
of the Act and in particular Section 17A of the Act and the rules and 
regulations thereunder. In approving the proposed rule change, as 
amended, the Commission considered the proposal's impact on efficiency, 
competition, and capital formation.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-NSCC-2006-17), as amended, 
be and hereby is approved.


[[Page 3666]]


    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-1022 Filed 1-16-09; 8:45 am]

BILLING CODE 8011-01-P
