
[Federal Register Volume 80, Number 81 (Tuesday, April 28, 2015)]
[Notices]
[Pages 23618-23625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09841]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74794; File No. 600-34]


Self-Regulatory Organizations; SS&C Technologies, Inc.; Notice of 
Filing of Application for Exemption From Registration as a Clearing 
Agency

April 23, 2015.

I. Introduction

    On April 15, 2013, SS&C Technologies, Inc. (``SS&C'') filed with 
the Securities and Exchange Commission (``Commission'') an application 
on Form CA-1 for exemption from registration as a clearing agency 
pursuant to Section 17A of the Securities Exchange Act of 1934 
(``Exchange Act'') and Rule 17Ab2-1 thereunder. SS&C amended its 
application on August 12, 2013, December 23, 2014, and March 30, 2015. 
SS&C is requesting an exemption from clearing agency registration in 
connection with its proposal to offer an electronic trade confirmation 
(``ETC'') service and a matching service. The Commission is publishing 
this notice in order to solicit comments from interested persons on the 
exemption request.\1\ The Commission will consider any comments it 
receives in making its determination whether to grant SS&C's request 
for an exemption from clearing agency registration.
---------------------------------------------------------------------------

    \1\ The descriptions set forth in this notice regarding the 
structure and operations of SS&C have been largely derived from 
information contained in SS&C's amended Form CA-1 application and 
publicly available sources. The application and non-confidential 
exhibits thereto are available on the Commission's Web site.
---------------------------------------------------------------------------

II. Background

A. SS&C Organization

    SS&C was incorporated in the State of Delaware on March 29, 1996. 
SS&C's headquarters are in Windsor, Connecticut, with offices in 20 
locations across the United States. SS&C has additional offices in 
Toronto and other locations throughout the world, and is a global 
provider of financial services-related solutions to investment 
management, banking, and other financial sector clients. All control 
and direction over SS&C is vested in SS&C Technologies Holdings, Inc., 
SS&C's parent company and a public holding company listed on NASDAQ 
(symbol SSNC).\2\
---------------------------------------------------------------------------

    \2\ See Form CA-1 at p. 111 (Exhibit C, providing a graphic 
description of SS&C's organizational structure).
---------------------------------------------------------------------------

    SS&C proposes to provide ETC services and matching services for 
fixed-income and equity trades as described

[[Page 23619]]

in its Form CA-1 application. An overview of SS&C's proposed matching 
service is presented in Part III below. All matching service activities 
would be performed by SS&C's subsidiary, SS&C Technologies Canada Corp. 
(``SS&C Canada''). The policies and operations of SS&C Canada are 
overseen by its officers and directors, and are subject to control by 
SS&C's parent, SS&C Technologies Holdings, Inc. SS&C Canada will 
perform the matching services in Mississauga, Canada, through its 
software-enabled service, SSCNet, which is a global trade network 
linking investment managers, broker-dealers, clearing agencies, 
custodians, and interested parties. Client support for these services 
will be rendered through SS&C's offices in the United States, the 
United Kingdom, and Australia. SS&C will coordinate support activity, 
which includes help desk facilities and call and issue tracking through 
a shared client call database, and relationship management. SS&C and 
SS&C Canada will maintain an intercompany agreement setting forth 
respective services and obligations.
    In addition to the conditions set forth in this notice, SS&C has 
made the following representations regarding its operations: (i) SS&C 
shall obtain contractual commitments from its customers permitting it 
to provide information to the Ontario Securities Commission, the 
Commission, and other third parties; (ii) SS&C shall make available 
SS&C Canada employees in Canada or the United States for interview by 
the Commission subject to reasonable notice, provided that such action 
does not impose unreasonable hardship under applicable immigration law 
on such employees; (iii) as set forth in the intercompany agreement, 
SS&C shall provide the Commission access to information related to 
SS&C's matching system and ETC services, including those documents it 
receives from its service provider, SS&C Canada (the ``Business 
Activities Information''); (iv) SS&C Canada shall provide on the same 
business day to SS&C at its headquarters in Windsor, Connecticut 
electronically generated Business Activities Information, in whatever 
form SS&C shall specify, including regularly and automatically 
generated and ad hoc reports, books and records, correspondence, 
memoranda, papers, notices, accounts and other such records; and (v) 
SS&C Canada shall send to SS&C at its headquarters in Windsor, 
Connecticut all manually generated Business Activities Information, in 
whatever form SS&C shall specify, no later than the business day on 
which the record is granted. Further, SS&C has confirmed with external 
counsel that implementation of the intercompany agreement would not 
violate the Canadian Personal Information Protection and Electronic 
Documents Act or the Ontario Business Records Protection Act.\3\ This 
would allow for the disclosure of personal information by SS&C Canada 
to SS&C (U.S.).
---------------------------------------------------------------------------

    \3\ As the draft intercompany agreement is governed by 
Connecticut law, and as external counsel are not qualified to 
practice in Connecticut, in providing these opinions they have 
assumed that the provisions of the Agreement have the same meaning 
under Connecticut law as they would under Ontario and Canadian law.
---------------------------------------------------------------------------

    SS&C's directors and officers maintain direct control over SS&C and 
will oversee the business of SS&C's proposed matching service. The 
board of directors includes a standing audit committee and, from time 
to time, special committees formed to address specific issues.\4\ SS&C 
is owned principally by public shareholders, including William C. 
Stone, who controls approximately 20% of the shares and has indirect 
control of SS&C.\5\
---------------------------------------------------------------------------

    \4\ For example, SS&C maintains an Information Security Policy 
as well as a Confidentiality and Privacy Policy to ensure customer 
information is protected. The SS&C Board of Directors and executive 
officers are ultimately responsible for Information Security. The 
Vice President of Security coordinates the Information Security 
activities within SS&C.
    \5\ See Form CA-1 at p. 112 (Exhibit D).
---------------------------------------------------------------------------

B. Matching as a Clearing Agency Function

    On April 6, 1998, the Commission issued an interpretive release 
regarding matching services \6\ (the ``Matching Release'').\7\ In the 
Matching Release, the Commission concluded that matching constitutes a 
clearing agency function, specifically the ``comparison of data 
respecting the terms of settlement of securities transactions,'' within 
the meaning of Section 3(a)(23)(A) of the Exchange Act.\8\ Therefore, 
any person providing independent matching services must either register 
with the Commission as a clearing agency or obtain an exemption from 
registration pursuant to Section 17A of the Exchange Act and Rule 
17Ab2-1 thereunder.\9\ In 2001, the Commission granted an exemption 
from registration as a clearing agency to Omgeo, a subsidiary of The 
Depository Trust and Clearing Corporation (``DTCC'') and Thomson 
Financial, to conduct ETC and matching services.\10\ SS&C has applied 
for a similar exemption from registration as a clearing agency to 
provide ETC and matching services.
---------------------------------------------------------------------------

    \6\ The term ``matching service'' as used here means an 
electronic service to centrally match trade information between a 
broker-dealer and its institutional customer.
    \7\ See Confirmation and Affirmation of Securities Trades; 
Matching, Exchange Act Release No. 34-39829 (Apr. 6, 1998), 63 FR 
17943 (Apr. 13, 1998).
    \8\ In addition, on July 1, 2011, the Commission published a 
conditional temporary exemption from clearing agency registration 
for entities that perform for security-based swap transactions 
certain post-trade processing services, including matching services. 
See Exchange Act Release No. 34-64796 (Jul. 1, 2011), 76 FR 39963 
(Jul. 7, 2011) (providing an exemption from registration under 
Section 17A(b) of the Exchange Act, and stating that ``[t]he 
Commission is using its authority under section 36 of the Exchange 
Act to provide a conditional temporary exemption, until the 
compliance date for the final rules relating to registration of 
clearing agencies that clear security-based swaps pursuant to 
sections 17A(i) and (j) of the Exchange Act, from the registration 
requirement in section 17A(b)(1) of the Exchange Act to any clearing 
agency that may be required to register with the Commission solely 
as a result of providing Collateral Management Services, Trade 
Matching Services, Tear Up and Compression Services, and/or 
substantially similar services for security-based swaps''). The 
order facilitated the Commission's identification of entities that 
operate in that area and that accordingly may fall within the 
clearing agency definition.
    \9\ See 15 U.S.C. 78q-1 and 17 CFR 240.17Ab2-1.
    \10\ See Global Joint Venture Matching Services--US, LLC; Order 
Granting Exemption From Registration as a Clearing Agency, Exchange 
Act Release No. 34-44188 (Apr. 17, 2001), 66 FR 20494 (Apr. 23, 
2001) (``Omgeo Exemptive Order''). On July 24, 2013, DTCC announced 
that it had entered into an agreement with Thomson Financial to 
acquire full ownership of Omgeo.
---------------------------------------------------------------------------

III. SS&C's Proposed Matching Service

    In its application for exemption from registration as a clearing 
agency, SS&C states it will provide ETC and matching services for 
broker-dealers and institutional customers that will allow such 
entities to streamline communications and process allocation and post-
trade information for fixed-income and equity trades for depository 
eligible U.S. securities.\11\ According to SS&C, users of its services 
will gain access to a matching utility that is affordable, flexible in 
handling either part or all of the trade matching cycle, and easily 
interfaced with other matching utilities. Its matching service allows 
users to route an order to a broker, receive an execution notice from 
the broker, and enter trade details and allocations so that SS&C's 
matching service can generate a matched confirmation and send an 
affirmed confirmation to the depository at the Depository Trust Company 
(``DTC'')--the full lifecycle of a trade.
---------------------------------------------------------------------------

    \11\ See Form CA-1 at p. 129 (Exhibit S).
---------------------------------------------------------------------------

    SS&C's matching service will offer both block level matching and 
detail level matching.\12\ The block level matching, also known as 
trade level matching, is an optional first step that requires a broker-
dealer to submit a final cumulative notice of execution (``NOE'')

[[Page 23620]]

on the trade date, which will be matched against the aggregated totals 
of the corresponding allocations submitted on the trade date by the 
investment manager.\13\ During import of the trade data, the matching 
service validates key fields, and if errors are found, the trade is 
placed in a reprocess queue and displayed within a reprocess blotter to 
allow for manual data correction or resubmission. The matching service 
will allow the investment manager and the broker-dealer to configure a 
match agreement to determine whether to require block level matching, 
which instrument types are eligible for block level matching, and which 
fields are eligible as well. For example, the counterparties may choose 
to match proceeds based on gross or net amounts. The investment manager 
is allowed to set tolerances against certain fields (such as accrued, 
commission, fees, price, or settlement amount) on either an actual or 
percentage basis, and if the details submitted by the broker-dealer 
fall within the accepted tolerance range, the details are deemed to be 
accepted by the investment manager. SS&C's matching service considers 
all matches within tolerance to be partially matched, with exact 
matches to be fully matched, and matches outside of the tolerance (or 
submitted details without a corresponding entry by the counterparty) to 
be unmatched.
---------------------------------------------------------------------------

    \12\ See id. at p. 118 (Exhibit J).
    \13\ See id.
---------------------------------------------------------------------------

    Detail level matching occurs either at once or after the block 
level matching process is complete. Upon receipt of an allocation, a 
broker-dealer can generate a confirmation for delivery to the 
investment manager and capture within SS&C's matching service. The 
confirmation is subject to validation of its key fields, and any errors 
are returned to the broker-dealer through a reprocess blotter. Like the 
block level matching process, the detail level matching process allows 
the investment manager to determine which fields must be matched, and 
within what tolerance such matches should be set. The same partially 
matched, exact match and unmatched results apply to the detail level 
matching process as they do in the block level matching process. 
However, because additional time is required to prepare and submit 
allocations or confirmations, there is a ``Waiting to be Matched'' 
period that can be established by the investment manager, which allows 
trades to be matched within this period (approximately thirty minutes), 
with other trades appearing as unmatched.\14\ Trades can be released to 
custodian or interested parties that are direct members of SS&C's 
network SSCNet once the trade enters the network, or after the match. 
If a custodian is responsible for affirming a trade, it can be released 
to them immediately.
---------------------------------------------------------------------------

    \14\ See id.
---------------------------------------------------------------------------

    Standing instructions are provided through the Delivery Instruction 
Database (``DIDB''), which is fully integrated into SSCNet, and 
provides a repository for settlement instructions across asset classes, 
including foreign exchange and term deposits. Rather than requiring 
users to attach instructions to portfolios directly, or maintaining 
portfolios within the DIDB, a cross-referencing mechanism is used to 
ensure portfolios are synchronized with the proper set of instructions. 
In addition, local cross-referencing allows each user to maintain its 
own set of currency codes, transaction type identifiers, counterparty 
codes, and portfolio identifiers, ensuring that the responsibility for 
maintenance rests with each user.\15\ SSCNet is also integrated into 
the Society for Worldwide Interbank Financial Telecommunication 
(``SWIFT'') Network, allowing users to communicate with parties outside 
the SSCNet platform.\16\ For example, some users desire receiving 
transactions from a batch facility, rather than SSCNet's real-time 
message system. Users can select the output format for batch 
communications (SSCNet proprietary, SWIFT, ISITC, or DTC affirmation 
format), as well as when the batch should be submitted. Once a 
transaction is exported from SSCNet, it is marked in the audit trail.
---------------------------------------------------------------------------

    \15\ See id. at p. 119 (Exhibit J).
    \16\ See id.
---------------------------------------------------------------------------

    Finally, central time stamping and a full audit trail are available 
for all transactions, with transaction histories maintained online for 
a minimum of 45 days and accessible in an online archive for up to 10 
years.\17\
---------------------------------------------------------------------------

    \17\ See id.
---------------------------------------------------------------------------

    Other than the above matching service, SS&C's Form CA-1 application 
indicates that it will not perform any other functions of a clearing 
agency requiring registration under Section 17A of the Exchange 
Act,\18\ such as net settlement, maintaining a balance of open 
positions between buyers and sellers, marking securities to the market, 
or handling funds or securities.
---------------------------------------------------------------------------

    \18\ See id. at p. 118 (Exhibit J).
---------------------------------------------------------------------------

IV. SS&C's Request for an Exemption

A. Introduction

    In its Form CA-1 application, SS&C notes that it has engaged in ETC 
and settlement services for over 20 years. During that time, SS&C 
states that it has maintained open interoperability conditions and has 
provided the assurance to participants and regulators abroad of a 
secure, reliable service.\19\ Its SSCNet utility offers a post-trade, 
pre-settlement ETC and affirmation service for all constituents in the 
institutional trade process, including investment managers, broker-
dealers, custodians, and other interested parties.\20\
---------------------------------------------------------------------------

    \19\ See id. at p. 129 (Exhibit S).
    \20\ See id. at p. 118 (Exhibit J).
---------------------------------------------------------------------------

    In sum, SS&C believes that users of its service in the United 
States will ``gain access to a matching utility that is affordable, a 
utility that will strengthen the industry-wide business continuity 
efforts in the institutional trading area and will allow users to 
choose the best matching process for their purposes.'' \21\ SS&C also 
believes that the flexibility offered by its SSCNet service ``will 
allow easy interfacing with other matching utilities and therefore 
offer market participants a greater choice in selecting their matching 
provider.'' \22\
---------------------------------------------------------------------------

    \21\ See id. at p. 129 (Exhibit S).
    \22\ See id.
---------------------------------------------------------------------------

B. Conditions to Exemption From Registration

    SS&C represents in its Form CA-1 that it would comply with the list 
of conditions found below regarding its operations and interoperability 
with other matching providers.\23\ The Commission preliminarily 
believes that the conditions are important tools to facilitate 
effective systems interoperability. By establishing a framework that 
allows the customers of multiple service providers to conduct 
transactions without having to join each matching provider, the 
Commission preliminarily believes that the interoperability conditions 
help

[[Page 23621]]

facilitate the linking of clearance and settlement facilities.\24\
---------------------------------------------------------------------------

    \23\ See id. In addition, on November 19, 2014, the Commission 
adopted Regulation Systems Compliance and Integrity (``Reg SCI''), 
which would require ``SCI entities'' to comply with requirements for 
policies and procedures with respect to their automated systems that 
support the performance of their regulated activities. See Exchange 
Act Release No. 34-73639 (Nov. 19, 2014), 79 FR 72251, 72271 (Dec. 
5, 2014). Rule 1000(a) of Reg SCI would define an ``SCI entity'' to 
include, among other things, a registered clearing agency and an 
exempt clearing agency subject to the Commission's Automation Review 
Policies (``ARP''). In particular, the term ``exempt clearing agency 
subject to ARP'' includes ``an entity that has received from the 
Commission an exemption from registration as a clearing agency under 
Section 17A of the Exchange Act, and whose exemption contains 
conditions that relate to the Commission's [ARP] Policies, or any 
Commission regulation that supersedes or replaces such policies.'' 
The Commission notes that the below conditions would meet the 
definition described in Rule 1000(a) of Reg SCI, requiring an exempt 
clearing agency subject to ARP to meet the applicable requirements 
set forth in Reg SCI.
    \24\ See 15 U.S.C. 78q-1(a)(1)(D).
---------------------------------------------------------------------------

C.1. Operational Conditions

    (1) Before beginning the commercial operation of its matching 
service, SS&C shall provide the Commission with an audit report that 
addresses all the areas discussed in the Commission's Automation Review 
Policies (``ARP'').\25\
---------------------------------------------------------------------------

    \25\ See Exchange Act Release Nos. 34-27445 (Nov. 16, 1989), 54 
FR 48703 (Nov. 24, 1989) (``ARP I''), and 34-29185 (May 9, 1991), 56 
FR 22490 (May 15, 1991) (``ARP II''); see also Memorandum from the 
Securities and Exchange Commission Division of Market Regulation to 
SROs and NASDAQ (June 1, 2001) (``Guidance for Systems Outages and 
System Change Notifications''), available at http://www.sec.gov/divisions/marketreg/sro-guidance-for-systems-outage-06-01-2001.pdf.
---------------------------------------------------------------------------

    (2) SS&C shall provide the Commission with annual reports and any 
associated field work prepared by competent, independent audit 
personnel that are generated in accordance with the annual risk 
assessment of the areas set forth in the ARP. SS&C shall provide the 
Commission (beginning in its first year of operation) with annual 
audited financial statements prepared by competent independent audit 
personnel.
    (3) SS&C shall report all significant systems outages to the 
Commission. If it appears that the outage may extend for thirty minutes 
or longer, SS&C shall report the systems outage immediately. If it 
appears that the outage will be resolved in less than thirty minutes, 
SS&C shall report the systems outage within a reasonable time after the 
outage has been resolved.
    (4) SS&C shall provide the Commission with 20 business days advance 
notice of any material changes that SS&C makes to the matching service 
or ETC service. These changes will not require the Commission's 
approval before they are implemented.
    (5) SS&C shall respond and require its service providers to respond 
to requests from the Commission for additional information relating to 
the matching service and ETC service, and provide access to the 
Commission to conduct on-site inspections of all facilities (including 
automated systems and systems environment), records, and personnel 
related to the matching service and the ETC service. The requests for 
information shall be made and the inspections shall be conducted solely 
for the purpose of reviewing the matching service's and the ETC 
service's operations and compliance with the federal securities laws 
and the terms and conditions in any exemptive order issued by the 
Commission with respect to SS&C's matching service and the ETC service.
    (6) SS&C shall supply the Commission or its designee with periodic 
reports regarding the affirmation rates for institutional transactions 
effected by institutional investors that utilize its matching service 
and ETC service.\26\
---------------------------------------------------------------------------

    \26\ DTC submits monthly affirmation/confirmation reports to the 
appropriate self-regulatory organizations. The Commission 
anticipates a similar schedule for SS&C.
---------------------------------------------------------------------------

    (7) SS&C shall preserve a copy or record of all trade details, 
allocation instructions, central trade matching results, reports and 
notices sent to customers, service agreements, reports regarding 
affirmation rates that are sent to the Commission or its designee, and 
any complaint received from a customer, all of which pertain to the 
operation of its matching service and ETC service. SS&C shall retain 
these records for a period of not less than five years, the first two 
years in an easily accessible place.
    (8) SS&C shall not perform any clearing agency function (such as 
net settlement, maintaining a balance of open positions between buyers 
and sellers, or marking securities to the market) other than as 
permitted in an exemption issued by the Commission.
    (9) Before beginning the commercial operation of its matching 
service, SS&C shall provide the Commission with copies of the 
intercompany agreement between SS&C and SS&C Canada and shall notify 
the Commission of any material changes to the service agreement.

C.2. Interoperability Conditions

    (1) SS&C shall develop, in a timely and efficient manner, fair and 
reasonable linkages between SS&C's matching service and other matching 
services that are registered with the Commission or that receive or 
have received from the Commission an exemption from clearing agency 
registration that, at a minimum, allow parties to trades that are 
processed through one or more matching services to communicate through 
one or more appropriate effective interfaces with other matching 
services.
    (2) SS&C shall devise and develop interfaces with other matching 
services that enable end-user clients or any service that represents 
end-user clients to SS&C (``end-user representative'') to gain a single 
point of access to SS&C and other matching services. Such interfaces 
must link with each other matching service so that an end-user client 
of one matching service can communicate with all end-user clients of 
all matching services, regardless of which matching service completes 
trade matching prior to settlement.
    (3) If any intellectual property proprietary to SS&C is necessary 
to develop, build, and operate links or interfaces to SS&C's matching 
service, as described in these conditions, SS&C shall license such 
intellectual property to other matching services seeking linkage to 
SS&C on fair and reasonable terms for use in such links or interfaces.
    (4) SS&C shall not engage in any activity inconsistent with the 
purposes of Section 17A(a)(2) of the Exchange Act,\27\ which section 
seeks the establishment of linked or coordinated facilities for 
clearance and settlement of transactions. In particular, SS&C will not 
engage in activities that would prevent any other matching service from 
operating a matching service that it has developed independently from 
SS&C's matching service.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78q-1(a)(2)(A)(ii).
---------------------------------------------------------------------------

    (5) SS&C shall support industry standards in each of the following 
categories: Communication protocols (e.g., TCP/IP, SNA); message and 
file transfer protocols and software (e.g., FIX, WebSphere MQ, SWIFT); 
message format standards (e.g., FIX); and message languages and 
metadata (e.g., XML). However, SS&C need not support all existing 
industry standards or those listed above by means of example. Within 
three months of regulatory approval, SS&C shall make publicly known 
those standards supported by SS&C's matching service. To the extent 
that SS&C decides to support other industry standards, including new 
and modified standards, SS&C shall make these standards publicly known 
upon making such decision or within three months of updating its system 
to support such new standards, whichever is sooner. Any translation to/
from these published standards necessary to communicate with SS&C's 
system shall be performed by SS&C without any significant delay or 
service degradation of the linked parties' services.
    (6) SS&C shall make all reasonable efforts to link with each other 
matching service in a timely and efficient manner, as specified below. 
Upon written request, SS&C shall negotiate with each other matching 
service to develop and build an interface that allows the two to link 
matching services (``interface''). SS&C shall involve neutral industry 
participants in all negotiations to build or develop interfaces and, to 
the extent feasible, incorporate input from such participants in 
determining the specifications and architecture of such

[[Page 23622]]

interfaces. Absent adequate business or technological 
justification,\28\ SS&C and the requesting other matching service shall 
conclude negotiations and reach a binding agreement to develop and 
build an interface within 120 calendar days of SS&C's receipt of the 
written request. This 120-day period may be extended upon the written 
agreement of both SS&C and the other matching service engaged in 
negotiations. For each other matching service with whom SS&C reaches a 
binding agreement to develop and build an interface, SS&C shall begin 
operating such interface within 90 days of reaching a binding agreement 
and receiving all the information necessary to develop and operate it. 
This 90-day period may be extended upon the written agreement of both 
SS&C and the other matching service. For each interface and within the 
same time SS&C must negotiate and begin operating each interface, SS&C 
and the other matching service shall agree to ``commercial rules'' for 
coordinating the provision of matching services through their 
respective interfaces, including commercial rules: (A) Allocating 
responsibility for performing matching services; and (B) allocating 
liability for service failures. SS&C shall also involve neutral 
industry participants in negotiating applicable commercial rules and, 
to the extent feasible, take input from such participants into account 
in agreeing to commercial rules. At a minimum, each interface shall 
enable SS&C and the other matching service to transfer between them all 
trade and account information necessary to fulfill their respective 
matching responsibilities as set forth in their commercial rules 
(``trade and account information''). Absent an adequate business or 
technological justification, SS&C shall develop and operate each 
interface without imposing conditions that negatively impact the other 
matching service's ability to innovate its matching service or develop 
and offer other value-added services relating to its matching service 
or that negatively impact the other matching service's ability to 
compete effectively against SS&C.
---------------------------------------------------------------------------

    \28\ The failure of neutral industry participants to be 
available or to submit their input within the 120 day or 90 day time 
periods set forth in this paragraph shall not constitute an adequate 
business or technological justification for failing to adhere to the 
requirements set forth in this paragraph.
---------------------------------------------------------------------------

    (7) In order to facilitate fair and reasonable linkages between 
SS&C and other matching services, SS&C shall publish or make available 
to any other matching service the specifications for any interface and 
its corresponding commercial rules that are in operation within 20 days 
of receiving a request for such specifications and commercial rules. 
Such specifications shall contain all the information necessary to 
enable any other matching services not already linked to SS&C through 
an interface to establish a linkage with SS&C through an interface or a 
substantially similar interface. SS&C shall link to any other matching 
service, if the other matching service so opts, through an interface 
substantially similar to any interface and its corresponding commercial 
rules that SS&C is currently operating. SS&C shall begin operating such 
substantially similar interface and commercial rules with the other 
matching service within 90 days of receiving all the information 
necessary to operate that link. This 90-day period may be extended upon 
the written agreement of both SS&C and the other matching service that 
plans to use that link.
    (8) SS&C and respective other matching services shall bear their 
own costs of building and maintaining an interface, unless otherwise 
negotiated by the parties.
    (9) SS&C shall provide to all other matching services and end-user 
representatives that maintain linkages with SS&C sufficient advance 
notice of any material changes, updates, or revisions to its interfaces 
to allow all parties who link to SS&C through affected interfaces to 
modify their systems as necessary and avoid system downtime, 
interruption, or system degradation.
    (10) SS&C and each other matching service shall negotiate fair and 
reasonable charges and terms of payment for the use of their interface 
with respect to the sharing of trade and account information 
(``interface charges''). In any fee schedule adopted under conditions 
C.2(10), C.2(11), or C.2(12) herein, SS&C's interface charges shall be 
equal to the interface charges of the respective other matching 
service.
    (11) If SS&C and the other matching service cannot reach agreement 
on fair and reasonable interface charges within 60 days of receipt of 
the written request, SS&C and the other matching service shall submit 
to binding arbitration under the rules promulgated by the American 
Arbitration Association. The arbitration panel shall have 60 days to 
establish a fee schedule. The arbitration panel's establishment of a 
fee schedule shall be binding on SS&C and the other matching service 
unless and until the fee schedule is subsequently modified or abrogated 
by the Commission or SS&C and the other matching service mutually agree 
to renegotiate.
    (12)(A) The following parameters shall be considered in determining 
fair and reasonable interface charges: (i) The variable cost incurred 
for forwarding trade and account information to other matching 
services; (ii) the average cost associated with the development of 
links to end-users and end-user representatives; and (iii) SS&C's 
interface charges to other matching services. (B) The following factors 
shall not be considered in determining fair and reasonable interface 
charges: (i) The respective cost incurred by SS&C or the other matching 
service in creating and maintaining interfaces; (ii) the value that 
SS&C or the other matching service contributes to the relationship; 
(iii) the opportunity cost associated with the loss of profits to SS&C 
that may result from competition from other matching services; (iv) the 
cost of building, maintaining, or upgrading SS&C's matching service; or 
(v) the cost of building, maintaining, or upgrading value added 
services to SS&C's matching service. (C) In any event, the interface 
charges shall not be set at a level that unreasonably deters entry or 
otherwise diminishes price or non-price competition with SS&C by other 
matching services.
    (13) SS&C shall not charge its customers more for use of its 
matching service when one or more counterparties are customers of other 
matching services than SS&C charges its customers for use of its 
matching service when all counterparties are customers of SS&C. SS&C 
shall not charge customers any additional amount for forwarding to or 
receiving trade and account information from other matching services 
called for under applicable commercial rules.
    (14) SS&C shall maintain its quality, capacity, and service levels 
in the interfaces with other matching services (``matching services 
linkages'') without bias in performance relative to similar 
transactions processed completely within SS&C's service. SS&C shall 
preserve and maintain all raw data and records necessary to prepare 
reports tabulating separately the processing and response times on a 
trade-by-trade basis for (A) completing its matching service when all 
counterparties are customers of SS&C (B) completing its matching 
service when one or more counterparties are customers of other matching 
services; or (C) forwarding trade information to other matching 
services called for under applicable commercial rules. SS&C shall 
retain the data and records for a period not less than six years. 
Sufficient information shall be maintained to demonstrate that the 
requirements of condition C.2(15) below are being met. SS&C and its 
service providers shall provide the

[[Page 23623]]

Commission with reports regarding the time it takes SS&C to process 
trades and forward information under various circumstances within 30 
days of the Commission's request for such reports. However, SS&C shall 
not be responsible for identifying the specific cause of any delay in 
performing its matching service where the fault for such delay is not 
attributable to SS&C.
    (15) SS&C shall process trades or facilitate the processing of 
trades by other matching services on a first-in-time priority basis. 
For example, if SS&C receives trade and account information that SS&C 
is required to forward to other matching services under applicable 
commercial rules (``pass-through information'') prior to receiving 
trade and account information from SS&C's customers necessary to 
provide matching services for a trade in which all parties are 
customers of SS&C (``intra-hub information''), SS&C shall forward the 
pass-through information to the designated other matching service prior 
to processing the intra-hub information. If, on the other hand, the 
information were to come in the reverse order, SS&C shall process the 
intra-hub information before forwarding the pass-through information.
    (16) SS&C shall sell access to its databases, systems or 
methodologies for transmitting settlement instructions (including 
settlement instructions from investment managers, broker-dealers, and 
custodian banks) and/or transmitting trade and account information to 
and receiving authorization responses from settlement agents on fair 
and reasonable terms to other matching services and end-user 
representatives. Such access shall permit other matching services and 
end-user representatives to draw information from those databases, 
systems, and methodologies for transmitting settlement instructions 
and/or transmitting trade and account information to and receiving 
authorization responses from settlement agents for use in their own 
matching services or end-user representatives' services. The links 
necessary for other matching services and end-user representatives to 
access SS&C's databases, systems or methodologies for transmitting 
settlement instructions and/or transmitting trade and account 
information to and receiving authorization responses from settlement 
agents will comply with conditions C.2(3), C.2(5), C.2(9), C.2(14) and 
C.2(15) above.
    (17) For the first five years from the date of an exemptive order 
issued by the Commission with respect to SS&C's matching service, SS&C 
shall provide the Commission with reports every six months sufficient 
to document SS&C's adherence to the obligations relating to interfaces 
set forth in conditions C.2(6) through C.2(13) and C.2(16) above. SS&C 
shall incorporate into such reports information including but not 
limited to (A) all other matching services linked to SS&C (B) the 
time, effort, and cost required to establish each link between SS&C and 
other matching services; (C) any proposed links between SS&C and other 
matching services as well as the status of such proposed links; (D) any 
failure or inability to establish such proposed links or fee schedules 
for interface charges; (E) any written complaint received from other 
matching services relating to its established or proposed links with 
SS&C and (F) if SS&C failed to adhere to any of the obligations 
relating to interfaces set forth in conditions C.2(6) through C.2(13) 
and C.2(16) above, its explanation for such failure. The Commission 
shall treat information submitted in accordance with this condition as 
confidential, non-public information, subject to the provisions of 
applicable law. If any other matching service seeks to link with SS&C 
more than five years after issuance of an exemptive order issued by the 
Commission with respect to SS&C's matching service, SS&C shall notify 
the Commission of the other matching service's request to link with 
SS&C within ten days of receiving such request. In addition, SS&C shall 
provide reports to the Commission in accordance with this paragraph 
commencing six months after the initial request for linkage is made 
until one year after SS&C and the other matching service begin 
operating their interface. The Commission reserves the right to request 
reports from SS&C at any time. SS&C shall provide the Commission with 
such updated reports within thirty days of the Commission's request.
    (18) SS&C shall also publish or make available upon request to any 
end-user representative the necessary specifications, protocols, and 
architecture of any interface created by SS&C for any end-user 
representative.

V. Statutory Standards

A. Statutory Process for Registering or Exempting Clearing Agencies

    Section 17A(b)(1) of the Exchange Act requires all clearing 
agencies to register with the Commission before performing any of the 
functions of a clearing agency.\29\ However, Section 17A(b)(1) also 
states that, upon its own motion or upon a clearing agency's 
application, the Commission may conditionally or unconditionally exempt 
said clearing agency from any provisions of Section 17A or the rules or 
regulations thereunder if the Commission finds that such exemption is 
consistent with the public interest, the protection of investors, and 
the purposes of Section 17A, including the prompt and accurate 
clearance and settlement of securities transactions and the 
safeguarding of securities and funds.
---------------------------------------------------------------------------

    \29\ See 15 U.S.C. 78q-1(b) and 17 CFR 240.17Ab2-1.
---------------------------------------------------------------------------

    In the Matching Release, the Commission stated that an entity that 
limited its clearing agency functions to providing matching services 
might not have to be subject to the full range of clearing agency 
regulation. The Matching Release stated that the Commission anticipated 
that an entity seeking an exemption from clearing agency registration 
for matching would be required to: (1) Provide the Commission with 
information on its matching services and notice of material changes to 
its matching services; (2) establish an electronic link to a registered 
clearing agency that provides for the settlement of its matched trades; 
(3) allow the Commission to inspect its facilities and records; and (4) 
make periodic disclosures to the Commission regarding its operations.
    In 2001, the Commission approved an application by Omgeo, then a 
joint venture between DTCC and Thomson Financial, for an exemption from 
registration as a clearing agency to provide matching services.\30\ 
Omgeo's exemption from clearing agency registration was subject to 
conditions that were substantially similar to the conditions set forth 
in Part IV.C above.
---------------------------------------------------------------------------

    \30\ See supra note 10.
---------------------------------------------------------------------------

B. SS&C's Compliance With Statutory Standards

    SS&C's matching service would be the only clearing agency function 
that it would perform under an exemptive order. SS&C believes that the 
undertakings it has proposed as a condition of obtaining an exemption 
from clearing agency registration are consistent with the public 
interest, the protection of investors, and the purposes of Section 17A 
of the Exchange Act.
    SS&C represents in its Form CA-1 that it will comply with all of 
the conditions described in Part IV.C above. Preliminarily, the 
Commission does not believe, however, that SS&C, in the absence of 
performing the functions of a clearing agency other than the matching 
service described here, raises

[[Page 23624]]

the same concerns as an entity that performs a wider range of clearing 
agency functions. For example, SS&C would not be operating as a self-
regulatory organization with the powers to enforce its rules against 
its members. Accordingly, the Commission preliminarily believes it may 
not be necessary to require SS&C to satisfy all of the standards for 
registrants under Section 17A of the Exchange Act because the proposed 
conditions should establish a sufficiently robust regulatory framework. 
Further, the Commission preliminarily believes that granting SS&C an 
exemption from registration as a clearing agency would be consistent 
with the Commission's past practice, and that additional matching 
service providers should promote innovation and reduce costs for 
investors.
    In evaluating SS&C's application, the Commission intends to 
consider whether SS&C is so organized and has the capacity to be able 
to facilitate prompt and accurate matching services. Subject to the 
specific operational, interoperability and access conditions to which 
it has agreed, the Commission preliminarily believes this to be the 
case. Because the service is flexible in handling part or all of the 
trade matching cycle, SS&C states that its proposed service ``will 
allow easy interfacing with other matching utilities and therefore 
offer market participants a greater choice in selecting their matching 
provider.'' SS&C also states that the proposed matching service will 
provide improved and automated verification which eliminates obstacles 
to settlement as well as losses created by input and data errors, and 
further states that its proposed matching service will strengthen 
industry-wide business continuity efforts in the institutional trading 
space.\31\ SS&C believes that market participants seek flexibility and 
choice in selecting their matching provider and the resulting 
improvements to reliability and stability in the post-trade space would 
flow from its service offering.
---------------------------------------------------------------------------

    \31\ See Form CA-1 at p. 129 (Exhibit S).
---------------------------------------------------------------------------

    The Commission requests comment on whether the conditions are 
sufficient to promote the purposes of Section 17A of the Exchange Act 
and to allow the Commission to adequately monitor the effects of SS&C's 
proposed activities on the national system for the clearance and 
settlement of securities transactions. In addition, the Commission 
invites commenters to address whether granting SS&C an exemption from 
clearing agency registration would impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
Section 17A of the Exchange Act.

VI. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed 
exemption is consistent with the public interest, the protection of 
investors, and the purposes of Section 17A of the Exchange Act. To the 
extent possible, commenters are requested to provide empirical data and 
other factual support for their views. In addition, the Commission 
seeks comment generally on the following issues:
    1. In light of the passage of time since the adoption of the Omgeo 
Exemptive Order, developments in technology and enhancements in market 
practices, are the proposed conditions to the exemptive order 
appropriate? Specifically, are all of the conditions designed to 
facilitate interoperability necessary? Could the Commission continue to 
promote the purposes of Section 17A of the Exchange Act by additional 
modification or elimination of some or all of the conditions? If so, 
which conditions should be modified or eliminated?
    2. What, if any, effect will moving from a single provider to two 
or more providers have on the efficiency of the trade settlement 
process?
    3. What, if any, impact will the introduction of a second provider 
have on pricing, quality of service, and innovation?
    4. Will the introduction of one or more additional providers 
increase or reduce risk in the marketplace?
    5. Does SS&C's application for exemption from registration help 
achieve the underlying policy objectives of the Exchange Act? Why or 
why not? In particular, please address whether granting an exemption 
from registration does or does not further the goals of promoting 
investor protection and the integrity of the securities markets.
    6. Are the proposed conditions to the exemptive order sufficient to 
promote the purposes of Section 17A of the Exchange Act and to allow 
the Commission to adequately monitor the effects of SS&C's proposed 
activities on the national system for the clearance and settlement of 
securities transactions? Why or why not?
    7. Would the links and interfaces with other matching services as 
described in SS&C's application have a positive or negative effect on 
other matching services that are registered with the Commission or that 
receive from the Commission an exemption from clearing agency 
registration? Why or why not? Should the proposed condition to develop 
an interface with another matching service provider be made mandatory, 
rather than only upon request from another provider?
    8. Would the links and interfaces with other matching services as 
described in SS&C's application have a positive or negative effect on 
end-user clients of all matching services, regardless of which matching 
service completes trade matching prior to settlement? Why or why not?
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number 600-34 on the subject line; or

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090. All submissions should refer to File Number 
600-34.
    To help us 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/other.shtml).
    Copies of the submission, all subsequent amendments, all written 
statements with respect to the application that are filed with the 
Commission, and all written communications relating to the application 
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 Section, 100 F Street NE., Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m.

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 600-34 and should 
be submitted on or before May 28, 2015.


[[Page 23625]]


    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(16).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-09841 Filed 4-27-15; 8:45 am]
 BILLING CODE 8011-01-P


