
[Federal Register Volume 79, Number 25 (Thursday, February 6, 2014)]
[Notices]
[Page 7269]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-02501]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71455; File No. SR-NSCC-2013-13]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving Proposed Rule Change To Discontinue Its 
Stock Borrow Program

January 31, 2014.

I. Introduction

    On December 10, 2013, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change SR-NSCC-2013-13 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 December 27, 2013.\3\ The 
Commission did not receive 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. 34-71156 (Dec. 20, 
2013), 78 FR 79028 (Dec. 27, 2013) (SR-NSCC-2013-13).
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II. Description of the Proposal

    NSCC is amending its Rules and Procedures (``Rules'') to 
discontinue its Stock Borrow Program. The effective date of the rule 
change will be announced by NSCC via an Important Notice.
    Currently, NSCC Members may elect to participate in the Stock 
Borrow Program by designating specific securities from their inventory 
at the Depository Trust Company (``DTC'') as available to be lent in 
the event that NSCC's Continuous Net Settlement (``CNS'') system cannot 
complete a delivery of a security to a long Member because a short 
Member has not completed its delivery to CNS. In such a case, if a 
lender has identified such a security as available through the Stock 
Borrow Program and the lender has a free excess position of the 
security at DTC, NSCC initiates deliveries through CNS to the long 
Member and sets up a pending receive for the lending Member. If the 
position is not returned to the lender by the end of the settlement 
day, i.e., the Member with the original obligation to deliver to CNS 
does not complete that delivery, the lender receives full market value 
for the securities through NSCC settlement.
    Usage of NSCC's Stock Borrow Program has declined over the past few 
years. In 2007, NSCC borrowed a daily average of approximately $1.85 
billion in market value at the close of each day from the approximately 
21 Members that participated in the Stock Borrow Program. In October 
2013, only three Members participated in the Stock Borrow Program and 
the average daily value borrowed at the close of day during that month 
was approximately $81 million. Usage of the program has continued to 
drop since the end of October 2013. Given the reduction in the use of 
the program, NSCC has determined that it is not economically efficient 
to maintain the service.

III. Discussion and Commission Finding

    Section 19(b)(2)(C) of the Act \4\ 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 \5\ requires that 
the rules of a clearing agency be designed to, among other things, 
``promote the prompt and accurate clearance and settlement of 
securities transactions and . . . 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.'' \6\ The Commission 
finds that NSCC's proposed rule change is consistent with these 
requirements because discontinuing an underutilized service will enable 
NSCC to allocate its resources to core clearing agency functions in a 
more efficient and effective manner.
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    \4\ 15 U.S.C. 78s(b)(2)(C).
    \5\ 12 U.S.C. 78q-1(b)(3)(F).
    \6\ 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 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \7\ and the 
rules and regulations thereunder.
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    \7\ 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).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change SR-NSCC-2013-13 be, and it hereby is, 
approved.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-02501 Filed 2-5-14; 8:45 am]
BILLING CODE 8011-01-P


