
[Federal Register Volume 76, Number 97 (Thursday, May 19, 2011)]
[Notices]
[Pages 29019-29021]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-12328]


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SECURITIES AND EXCHANGE COMMISSION

(Release No. 34-64487; File No. SR-NSCC-2011-02)


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change Relating to Updating the Range of Haircuts To 
Be Applied to Eligible Clearing Fund Securities

May 13, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 10, 2011, the National 
Securities Clearing Corporation (``NSCC'') filed with the Securities 
and Exchange Commission (``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared 
primarily by NSCC. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons and to 
approve the proposed rule change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of this filing is to modify certain haircuts currently 
applied to Eligible Clearing Fund Securities.

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 summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    Under NSCC's Rules and Procedures (``Rules''), Members are required 
to make deposits to the Clearing Fund with the amount of each Member's 
required deposit being fixed by NSCC in accordance with one or more 
formulas (``Required Deposit'').\2\ A Member may satisfy its Required 
Deposit with a cash deposit, and NSCC may permit a portion of the 
Member's deposit (with the exception of the deposit of a Mutual Fund/
Insurance Services Member) to be evidenced by an open account 
indebtedness secured by Eligible Clearing Fund Securities. Eligible 
Clearing Fund Securities consist of certain Treasury, agency, and 
mortgage-backed securities.\3\ Eligible Clearing Fund Securities 
pledged as Clearing Fund collateral are subject to haircuts.
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    \2\ Rule 4 (Clearing Fund) and Procedure XV (Clearing Fund 
Formula and Other Matters).
    \3\ See Rule 1 (Definitions and Descriptions) for applicable 
definitions including Eligible Clearing Fund Securities, which are 
Eligible Clearing Fund Treasury Securities, Eligible Clearing Fund 
Agency Securities, and Eligible Clearing Fund Mortgage-Backed 
Securities.
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    The Rules permit NSCC to fund settlement by pledging Clearing Fund 
deposits as collateral for loans, and NSCC maintains a committed 
borrowing facility for this purpose. Haircuts imposed on collateral 
pledged by NSCC under the borrowing facility are being increased by the 
lending syndicate, and

[[Page 29020]]

therefore, NSCC must make corresponding increases in its Clearing Fund 
collateral haircuts in order to maintain alignment with the haircuts 
under the borrowing facility.
    Accordingly, NSCC proposes to modify Procedure XV of the Rules to 
update certain haircuts applied to the types of Eligible Clearing Fund 
Securities to maintain conformity with the requirements of its 
lenders.\4\ Specifically, NSCC proposes to increase the haircut applied 
to: (i) Agency notes and bonds from the current range of 2 to 7 percent 
based on term to a proposed range of 7 to 10 percent based on term, 
(ii) zero coupon obligations of agencies from the current range of 5 to 
12 percent based on term to a proposed 7 to 18 percent based on term, 
and (iii) mortgage-backed pass-through securities issued by Ginnie Mae 
from 6 percent to 7 percent. A complete listing of the haircut schedule 
and the proposed changes is attached to NSCC's rule filing as Exhibit 5 
and may be viewed online at http://www.dtcc.com/legal/rule_filings/nscc/2011.php.
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    \4\ In a companion rule filing, NSCC's affiliate, the Fixed 
Income Clearing Corporation (``FICC''), has also sought to modify 
the range of haircuts applied to Eligible Clearing Fund Securities 
by FICC's Government Securities Division and to Eligible 
Participants Fund Securities by FICC's Mortgage-Backed Securities 
Division. Securities Exchange Act Release No. 64488 (May 13, 2011) 
(SR-FICC-2011-03).
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    Subject to approval by the Commission, the proposed haircut changes 
on Clearing Fund collateral will become effective on May 16, 2011.
    NSCC states that the proposed rule change is consistent with the 
requirements of the Act \5\ and the rules and regulations thereunder 
applicable to NSCC because it facilitates the prompt and accurate 
clearance and settlement of securities transactions by adjusting NSCC's 
haircuts on Clearing Fund collateral so that NSCC maintains adequate 
collateral levels to support a borrowing, should it become necessary, 
to complete settlement.
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    \5\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will have any 
impact or impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments relating to the proposed rule change have not been 
solicited or received by NSCC. NSCC will notify the Commission of any 
written comments it receives.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-NSCC-2011-02 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File No. SR-NSCC-2011-02. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filings also will be available for 
inspection and copying at NSCC's principal office and on NSCC's Web 
site at http://www.dtcc.com/legal/rule_filings/nscc/2011.php. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submission should refer to File No. SR-NSCC-2011-02 and should be 
submitted on or before June 9, 2011.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    Section 19(b) of the Act \6\ 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. The Commission finds that the proposed rule change is 
consistent with the requirements of the Act, in particular the 
requirements of Section 17A of the Act,\7\ and the rules and 
regulations thereunder applicable to NSCC. Specifically, the Commission 
finds that the proposed rule change is consistent with Section 
17A(b)(3)(F) of the Act,\8\ which requires, among other things, that 
the rules of a registered clearing agency be designed 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 finds that NSCC's rule change is consistent with this 
requirement because increasing the haircuts that are applied to the 
securities that NSCC's members deposit as Clearing Fund collateral 
should help ensure that NSCC maintains adequate collateral levels to 
facilitate settlement in the event of a member default, which should 
therefore help minimize risk to NSCC and its members. Accordingly, the 
proposed rule change should improve NSCC's ability to assure the 
safeguarding of securities and funds in its custody or control or for 
which it is responsible.
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    \6\ 15 U.S.C. 78s(b).
    \7\ 15 U.S.C. 78q-1. In approving this proposed rule change, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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    NSCC has requested that the Commission approve the proposed rule 
change on an accelerated basis so that it would become effective on May 
16, 2011. By granting accelerated approval to the proposed change, NSCC 
will be able to adjust its haircuts for securities pledged as Clearing 
Fund collateral by May 16, 2011, so that NSCC's haircuts remain in 
alignment with the haircuts under the borrowing facility. As a result, 
NSCC should be better able to maintain adequate collateral levels to 
protect itself and its members in the event of a member default. 
Accordingly, the Commission finds good cause to approve the proposed 
rule change prior to the 30th day after the date of publication of 
notice of the proposed rule change in the Federal Register.

[[Page 29021]]

V. Conclusion

    It is therefore ordered pursuant to Section 19(b)(2) of the Act \9\ 
that the proposed rule change (SR-NSCC-2011-02) be, and it hereby is, 
approved on an accelerated basis.
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    \9\ Id.

    For the Commission by the Division of Trading and Markets 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-12328 Filed 5-18-11; 8:45 am]
BILLING CODE 8011-01-P


