
[Federal Register Volume 78, Number 170 (Tuesday, September 3, 2013)]
[Notices]
[Pages 54349-54350]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-21294]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70263; File No. SR-NSCC-2013-09]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving Proposed Rule Change Relating to the 
Decommissioning of NSCC's Over-the-Counter (OTC) Equity Comparison 
Service

August 27, 2013.
    On July 2, 2013, the National Securities Clearing Corporation filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change SR-NSCC-2013-09 pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder.\2\ The proposed rule change was published for comment in 
the Federal Register on July 18, 2013.\3\ The Commission did not 
receive any comments on the proposed rule change. This order approves 
the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 69980 (July 12, 2013), 
78 FR 42989 (July 18, 2013) (SR-NSCC-2013-09) (``Notice'').
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I. Description

    NSCC is amending its rules to decommission the over-the-counter 
(``OTC'') Equity Comparison Service and delete two obsolete provisions 
in Procedure II, ``Trade Comparison and Recording Service.''

OTC Equity Comparison Service

    Currently, NSCC provides a framework to compare and record 
transactions in eligible equity and debt securities executed on 
national stock exchanges and in the OTC market, as provided in Rule 7 
and Procedure II.\4\ Rule 7 and Procedure II both note that NSCC will 
stop providing comparison services once each exchange and/or 
marketplace assumes responsibility for trade comparison.\5\ According 
to NSCC, all marketplaces interfacing with NSCC have assumed 
responsibility for equity comparison and, as a result, NSCC's OTC 
Equity Comparison Service receives a nominal amount of over-the-counter 
bilateral equity transaction submissions.\6\ Therefore, NSCC is 
decommissioning its OTC Equity Comparison Service and amend several 
rules to reflect this, as described below.
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    \4\ See NSCC Rule 7 and Procedure II; See Notice, supra note 3 
at 42989-90.
    \5\ See NSCC Rule 7 note 1 and Procedure II note 1.
    \6\ See Notice, supra note 3 at 42990. According to NSCC, during 
May 2013, NSCC compared approximately 90 sides (an approximate 
average of 45 trades) for equity transactions through its OTC 
Comparison service. As of June 24, 2013, NSCC compared a total of 74 
sides (37 trades) for the entire month of June 2013 to date. See id. 
at note 3.
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    This change will not impact comparison services with respect to 
debt transactions, which are compared through the Real Time Trade 
Matching (or ``RTTM'') system, or transactions submitted to the 
Obligation Warehouse.\7\
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    \7\ NSCC provides an Obligation Warehouse service under which 
certain transactions may be submitted for comparison that are not 
otherwise submitted for processing to NSCC through its other 
services. See NSCC Rule 51 and Procedure IIA; Notice, supra note 3 
at 42990.
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    Once the OTC Equity Comparison service is decommissioned, 
comparison submissions for equity transactions, other than those 
submitted to the Obligation Warehouse, will not be accepted by NSCC and 
related output will not be produced.\8\ As a result, upon the effective 
date of this proposal, all equity transactions submitted for processing 
to NSCC, other than those submitted through the Obligation Warehouse, 
must be compared prior to submission (i.e., at the marketplace of 
execution or through FINRA/NASDAQ's Automated Comparison Transaction 
facility (``ACT'') and submitted to NSCC on a locked-in basis for trade 
recording).\9\
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    \8\ See Notice, supra note 3 at 42990.
    \9\ See id.
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Changes to Rule 7, Procedure II, Rule 5, Rule 1, Addendum A, and 
Addendum K

    To facilitate this proposal, NSCC is amending several rules. NSCC 
is amending Rule 7, ``Comparison and Trade Recording Operation,'' and 
Procedure II, ``Trade Comparison and Recording Service'' to reflect 
changes consistent with the above. These changes also require certain 
technical changes including re-numbering footnotes and updating cross-
references.
    NSCC is amending Rule 5, ``General Provisions'' to reflect changes 
consistent with the above and to clarify that output issued by NSCC 
with respect to transactions either compared by it, or recorded locked-
in transactions, defined as ``Compared Contracts,'' evidence valid, 
binding and enforceable compared transactions for purposes of the 
Rules.
    NSCC is amending Rule 1, ``Definitions'' to add the definition of 
``Compared Contracts'' as described in Rule 5.
    NSCC is amending its fee schedule in Addendum A to delete 
references to charges associated with OTC equity comparison.
    NSCC is amending Addendum K to update a cross-reference to reflect 
these proposed changes.

Obsolete Provisions in Procedure II

    NSCC also is deleting two obsolete provisions in Procedure II. 
First, NSCC is deleting a provision relating to the submission of 
municipal securities transactions by members on behalf of non-members 
since the function is no longer in use.\10\ Second, NSCC is deleting a 
provision relating to potential announcement via Important Notice of 
the availability of the comparison service for when-issued corporate 
securities. According to NSCC, NSCC has not scheduled to implement a 
comparison service for corporate when-

[[Page 54350]]

issued securities.\11\ In the event that NSCC proposes to implement 
this, NSCC states that it will submit a rule filing to the 
Commission.\12\
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    \10\ See id.
    \11\ See id.
    \12\ See id.
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    According to NSCC, the effective date of the proposed rule changes 
will be announced via an NSCC Important Notice at least 30 days in 
advance of its implementation.\13\
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    \13\ See id.
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II. Discussion

    Section 19(b)(2)(C) of the Act \14\ 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 rules and regulations thereunder applicable 
to such organization. Section 17A(b)(3)(F) of the Act \15\ requires the 
rules of a clearing agency to be designed to, among other things, 
promote the prompt and accurate clearance and settlement of securities 
transactions, assure the safeguarding of securities and funds which are 
in the custody or control of the clearing agency or for which it is 
responsible, and protect investors and the public interest. The 
Commission finds that NSCC's proposed rule changes are consistent with 
these requirements, primarily because, this change promotes transaction 
comparison at the point of trade, which increases operational 
efficiencies. Further, by deleting two obsolete provisions in Procedure 
II, NSCC is ensuring its rules are accurate and reflect its operations.
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    \14\ 15 U.S.C. 78s(b)(2)(C).
    \15\ 15 U.S.C. 78q-1(b)(3)(F).
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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 of the Act \16\ and the 
rules and regulations thereunder.
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    \16\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-NSCC-2013-09) be, and hereby is, 
approved.\17\
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    \17\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-21294 Filed 8-30-13; 8:45 am]
BILLING CODE 8011-01-P


