
[Federal Register Volume 78, Number 60 (Thursday, March 28, 2013)]
[Notices]
[Pages 19050-19051]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07185]



[[Page 19050]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69221; File No. SR-NSCC-2013-01]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Net and Bilaterally Offset Aggregated Receive and 
Deliver Settlement Obligations for Special Trades, and To Use Current 
Market Price as the Uniform Settlement Price for Net Balance Orders

March 22, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 11, 2013, National Securities Clearing Corporation (``NSCC'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared primarily by NSCC. NSCC filed the proposed 
rule change pursuant to Section 19(b)(3)(A)(iii) \3\ of the Act and 
Rule 19b-4(f)(4) \4\ thereunder, so that the proposed rule change was 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change is to modify NSCC's Rules and Procedures 
(``Rules''), as described below.

II. Clearing Agency'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.\5\
---------------------------------------------------------------------------

    \5\ The Commission has modified the text of the summaries 
prepared by NSCC.
---------------------------------------------------------------------------

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

Bilateral Offset and Net of Special Trades
    Pursuant to its Rules, NSCC may determine that some or all 
transactions in a particular security settle on a trade-for-trade basis 
between counterparties (``Special Trades'').\6\ NSCC will issue receive 
and deliver instructions for Special Trades to the transacting NSCC 
members (``Members'') to settle the transactions directly between 
themselves. In addition, in accordance with the Rules, Members may 
designate transactions as Special Trades, and agree to settle the 
transactions on a trade-for-trade basis.\7\ NSCC does not guaranty 
settlement of Special Trades.
---------------------------------------------------------------------------

    \6\ See Rules, Procedure II, Section F (http://dtcc.com/legal/rules_proc/nscc_rules.pdf).
    \7\ Id.
---------------------------------------------------------------------------

    Historically, Members were required to settle each Special Trade 
individually (i.e., trade-for-trade). In order to simplify this process 
and mitigate the processing burden on Members, NSCC amended its Rules 
in 2010 \8\ in order that it may, at its discretion, aggregate bi-
laterally between counterparties the Special Trades that NSCC 
designates as such, so just one receive order and one deliver order in 
a given security would need to settle for each party, rather than 
settling potentially many individual transactions.\9\ However, a 
Special Trade's aggregated buy and sell obligations are not currently 
netted and offset between the counterparties. For example, if Broker A 
had 15 buys against Broker B in Security X, these items would be 
aggregated into one receive obligation for A and one deliver obligation 
for B for the total amount of shares for the 15 transactions in 
Security X. Likewise, if Broker A had 20 sells with Broker B on that 
same day for the same security, those items would also be aggregated 
into one deliver obligation for A and one receive obligation for B. In 
this example, A and B would each have two settlement obligations with 
the other for Security X, rather than the 35 obligations they would 
each have without aggregation.
---------------------------------------------------------------------------

    \8\ See Release No. 34-61762 (Mar. 23, 2010); 75 FR 15479 (Mar. 
29, 2010).
    \9\ Special Trades designated as such by the transacting 
Members, not NSCC, are not aggregated and continue to settle on a 
trade-for-trade basis.
---------------------------------------------------------------------------

    In order to further simplify the process described above, NSCC 
proposes that it may net aggregated positions in transactions 
designated by it as Special Trades so that any positions (i.e., both 
receive and deliver obligations) between the transacting Members can be 
offset against each other, resulting in one bilateral receive 
obligation or deliver obligation from one party to the other for the 
given security.\10\ In the example above, this would result in each 
party having one settlement obligation associated with Security X as 
opposed to two, and realizing a reduced obligation in terms of any 
associated movement of securities and money settlement.
---------------------------------------------------------------------------

    \10\ When Members have an equal number of shares bought and sold 
between them, NSCC will not issue a receive or deliver obligation, 
but will record any cash difference in the NSCC money settlement 
system.
---------------------------------------------------------------------------

    Under such circumstances, if (1) issuing of a net buy or sell 
instruction would result in a money settlement that would be 
directionally opposite to a typical money settlement in relation to its 
corresponding securities movement (i.e., a Member receives an 
instruction to receive securities with a corresponding receipt of money 
settlement payment, or deliver securities with a corresponding delivery 
of a money payment), or (2) the associated money settlement is flat in 
relation to the securities movement (i.e., a Member receives an 
instruction to receive or deliver securities without a corresponding 
money settlement amount), then NSCC may, in lieu of netting and 
offsetting, separately aggregate the receive and deliver instructions 
(as it does currently), so that the transacting Members would each have 
one aggregate buy obligation and one aggregate sell obligation in the 
given security.
Net Balance Order Pricing
    The uniform settlement price for net Balance Orders is currently 
established using a rounding methodology.\11\ If the current per share 
price of the Balance Order Security is under $2.00, the Settlement 
Price will be established to the nearest cent. If the current per share 
price of the Balance Order Security is between $2.00 and $10.00, the 
Settlement Price will be rounded to the nearest quarter dollar. If the 
current per share price of the Balance Order Security is over $10.00, 
the Settlement Price will be rounded to the nearest whole dollar. To 
promote the prompt and accurate settlement of Net Balance Orders, NSCC 
proposes to eliminate the rounding methodology and, instead, apply the 
current market price for the Balance Order Security as the uniform 
settlement price for Net Balance Orders.
---------------------------------------------------------------------------

    \11\ See Rules, Procedure V, Section C (http://dtcc.com/legal/rules_proc/nscc_rules.pdf).

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

[[Page 19051]]

Proposed Changes to Rule Text
    NSCC proposes to amend Procedure II of its Rules to provide for the 
creation of receive and deliver instructions that reflect the net 
offset of aggregated Special Trade positions, as described above.\12\ 
In addition, regarding Net Balance Orders, NSCC proposes to revise 
Procedure V of its Rules to delete the rounding methodology and add the 
current market price methodology, as described above.
---------------------------------------------------------------------------

    \12\ As with any Special Trade, NSCC will not guaranty 
settlement of receive and deliver orders of transactions aggregated 
and/or net pursuant to the proposed Rule change.
---------------------------------------------------------------------------

Statutory Basis
    NSCC believes the proposed rule change, as described above, is 
consistent with the requirements of the Act, specifically Section 
17A(b)(3)(F),\13\ and the rules and regulations thereunder applicable 
to NSCC, because the change provides for operational efficiencies for 
Members in the settlement of transactions by reducing the number of 
obligations requiring settlement for Special Trades, and promoting 
accuracy with respect to the pricing of Net Balance Orders; therefore, 
facilitating the prompt and accurate clearance and settlement of 
securities transactions.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

(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 yet 
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

    The forgoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(4) \15\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

IV. 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 email to rule-comments@sec.gov. Please include 
File No. SR-NSCC-2013-01 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NSCC-2013-01. This file 
number should be included on the subject line if email 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 
10:00 a.m. and 3:00 p.m. Copies of such filings will also be available 
for inspection and copying at the principal office of NSCC and on 
NSCC's Web site at http://dtcc.com/downloads/legal/rule_filings/2013/nscc/SR-NSCC-2013-01.pdf.
    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 submissions should refer to File Number SR-NSCC-2013-01 
and should be submitted on or before April 18, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-07185 Filed 3-27-13; 8:45 am]
BILLING CODE 8011-01-P


