[Federal Register Volume 85, Number 122 (Wednesday, June 24, 2020)]
[Notices]
[Pages 37988-37992]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-13541]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89088; File No. SR-NSCC-2020-010]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of and Immediate Effectiveness of a 
Proposed Rule Change To Amend Rules With Respect to Index Receipts

June 18, 2020.
    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 June 11, 2020, 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 by the clearing agency. NSCC filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(4) thereunder.\4\ The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of amendments to Procedure II 
(Trade Comparison and Recording Service) of the NSCC Rules & Procedures 
(``Rules'') with respect to index receipts, as described in greater 
detail below.\5\
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    \5\ Capitalized terms not defined herein are defined in the 
Rules, available at http://dtcc.com/~/media/Files/Downloads/legal/
rules/nscc_rules.pdf.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency 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. The clearing agency has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to amend Procedure II 
(Trade Comparison and Recording Service) with respect to index receipts 
in order to (i) reflect the publication of ETF portfolio holdings for 
pricing purposes via the Portfolio Report (as defined below and in the 
proposed rule text) and (ii) permit Index Receipt Agents to submit to 
NSCC index receipt creation and redemption instructions with a 
scheduled settlement date that is greater than the standard settlement 
cycle of second business day after the trade date (``T+2''). The 
proposed rule change would also make technical and clarifying changes.
(i) Background
Overview of Exchange-Traded Funds
    Exchange-traded funds (``ETFs'') (referred to as ``index receipts'' 
in the Rules) are marketable securities that track stock indices, 
commodities, bonds, or baskets of assets. ETFs are listed on exchanges 
and are traded throughout the trading day. Shares of ETFs are created 
and redeemed in the primary market and are traded on listed exchanges 
in the secondary market. Each share of an ETF represents an undivided 
interest in the underlying assets of the ETF. NSCC facilitates the in-
kind \6\ clearing and settlement of the creation and redemption of ETF 
shares in the primary market as well as clearing of ETF trades in the 
secondary market.
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    \6\ In the ETF industry, the clearing of ETF creations and 
redemptions ``in-kind'' represents an exchange of ETF shares for a 
basket of component securities rather than cash.
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    The participants in the ETF primary market typically consist of the 
issuers of ETFs (``ETF Sponsors''), custodian banks (``ETF Agents,'' 
also referred to as ``Index Receipt Agents'' in the Rules), and 
brokers/dealers that have agreements directly with ETF Sponsors to 
allow the brokers/dealers to place orders for the creation and 
redemption of ETF shares (``Authorized Participants'' or ``APs''). Both 
the ETF Agents and APs \7\ are Members of NSCC.
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    \7\ Form N-CEN defines AP as a broker-dealer that is also a 
member of a clearing agency registered with the Commission, and 
which has a written agreement with the ETF or one of its designated 
service providers.

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[[Page 37989]]

    As described in more detail below, NSCC understands that ETFs are 
able to realize a tax efficiency that other corporations generally 
cannot because redemptions from ETFs that are made in-kind (that is, by 
delivering certain assets from the ETF's portfolio, rather than in 
cash) do not require the ETF to realize and recognize capital gains if 
such assets have appreciated in value.
Trading Baskets and ETF Portfolio Holdings for Pricing Purposes
    APs create and redeem ETF shares from the ETF Sponsors in blocks 
called ``creation units.'' An AP that purchases a creation unit of ETF 
shares delivers a ``basket'' of securities and other assets to the ETF 
Agent, and then receives the creation unit of ETF shares in return for 
those assets. The redemption process is the reverse of the creation 
process: the AP redeems a creation unit of ETF shares for a basket of 
securities and other assets. These creation and redemption baskets are 
referred to as ``trading baskets.''
    A trading basket is generally representative of the ETF's portfolio 
and, together with a cash balancing amount, equal in value to the 
aggregate net asset value (``NAV'') of the ETF shares in the creation 
unit. There are two types of trading baskets: standard trading baskets 
and custom trading baskets. Trading baskets that reflect a pro rata 
representation of the ETF's portfolio are referred to as ``standard 
trading baskets.'' Trading baskets that are not standard trading 
baskets are referred to as ``custom trading baskets.'' A custom trading 
basket is a basket that contains a non-representative selection of the 
ETF's portfolio holdings and does not reflect a pro rata representation 
of the ETF's portfolio holdings. Custom trading baskets may, pursuant 
to recently adopted Rule 6c-11 under the Investment Company Act of 1940 
\8\ (``Rule 6c-11'') or applicable exemptive relief, substitute other 
securities or cash in the basket for some (or all) of the ETF's 
portfolio holdings.
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    \8\ See Exchange-Traded Funds, Release Nos. 33-10695; IC 33646 
(September 25, 2019), available at https://www.sec.gov/rules/final/2019/33-10695.pdf (the ``Adopting Release'').
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    In contrast to trading baskets, the ``ETF portfolio holdings for 
pricing purposes'' reflects an ETF's entire portfolio holding 
information and is not used for creations and redemptions.\9\ The ETF 
portfolio holdings for pricing purposes provides information such as a 
comprehensive list of securities and assets held by an ETF, as well as 
the associated asset types, i.e., fixed income, commodities, swaps, and 
futures.\10\ Accordingly, the ETF portfolio holdings for pricing 
purposes can be used by APs to facilitate valuing an ETF's portfolio on 
an intraday basis, which, in turn, enables APs to identify any 
potential premiums and discounts for the ETF in the secondary market. 
The ability to identify an ETF's potential premiums and discounts in 
the secondary market is necessary for keeping the market prices of the 
ETF shares at or close to the NAV per share of the ETF. The ETF 
portfolio holdings for pricing purposes may include information beyond 
the disclosure required of an ETF under Rule 6c-11.\11\
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    \9\ As an example, the trading basket for the Financial Select 
Sector SPDR[supreg] Fund (an ETF that tracks an index of S&P 
500[supreg] financial stocks) would include the underlying 
securities of the relevant financial institutions while the 
portfolio holdings for pricing purposes for the ETF may include 
futures, swaps, options, and fractional shares of those underlying 
securities.
    \10\ NSCC recognizes that an ETF would be able to provide NSCC 
with such portfolio information only to the extent consistent with 
its obligations under the federal securities laws governing the 
disclosure of non-public portfolio information. See Adopting Release 
Footnote 271 and accompanying text, supra note 8.
    \11\ Rule 6c-11 requires any ETF relying upon Rule 6c-11 to 
disclose prominently on its website, publicly available and free of 
charge, the portfolio holdings that will form the basis for each 
calculation of NAV per share, and any cash balancing amount. The 
rule requires that the portfolio holdings information contain 
specified information, including description and amount of each 
position. Rule 6c-11 also requires an ETF to disclose on its website 
(i) the ETF's NAV per share, market price, and premium or discount, 
each as of the end of the prior business day; (ii) a tabular chart 
and line graph showing the ETF's premiums and discounts for the most 
recently completed calendar year and the most recently completed 
calendar quarters of the current year (or for the life of the ETF if 
shorter); and (iii) the ETF's median bid-ask spread over the last 30 
calendar days. See Adopting Release Footnotes 675, 676 and 677 and 
accompanying text, supra note 8.
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ETF Portfolio Reporting Service
    NSCC's ETF portfolio reporting service is an optional service that 
is available to Members by subscription.\12\ This service is covered in 
Procedure II (Trade Comparison and Reporting Service), Section F, of 
the Rules.
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    \12\ Firms that are not Members can obtain Portfolio Reports via 
the DTCC ETF Portfolio Data Service provided by DTCC Solutions LLC, 
an affiliate of NSCC.
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    On the business day preceding the trade date (``T-1''), an ETF's 
NAV is calculated by the ETF Sponsor or the ETF Agent after the market 
closes. Following the calculation of the NAV, these firms calculate 
trading baskets for use on the trade date (``T''). Pursuant to 
Procedure II, Section F.1. of the Rules, the ETF Agent, on behalf of 
the ETF Sponsor, transmits to NSCC on T-1 files that contain (a) the 
composition of index receipts for creations and redemptions occurring 
on the next business day (T), i.e., the shares and their associated 
quantities, (b) the cash value of the portfolio for creates and redeems 
made solely for cash, and, if applicable, (c) the estimated cash 
amount, representing accrued dividend, cash-in-lieu of components,\13\ 
if applicable, and balancing amount data (``Dividend/Balancing Cash 
Amount''), and (d) such other financial data as NSCC may require or 
permit from time to time.\14\
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    \13\ The ``cash-in-lieu of securities'' portion of the cash 
amount represents cash substituted for a partial quantity of the 
components underlying a creation or redemption rather than acting as 
the sole underlying component.
    \14\ NSCC currently does not require any additional financial 
data.
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    NSCC compiles the information on the evening of T-1 and provides 
Members that subscribe to the ETF portfolio reporting service with a 
portfolio composition report (``Portfolio Report'') detailing, if 
applicable, the estimated Dividend/Balancing Cash Amount, other 
financial data, and the composition of the next business day's ETFs. 
The Portfolio Reports provide subscribing Members a convenient and 
comprehensive publication of basket data for U.S.-listed ETFs in a 
standardized format. For each U.S.-listed ETF, NSCC currently publishes 
a Portfolio Report that includes one standard trading basket and, if 
applicable, multiple custom trading baskets.\15\
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    \15\ ETFs can, pursuant to Rule 6c-11 or applicable exemptive 
relief, use custom trading baskets to create and redeem shares.
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    On T, based on the Portfolio Report, create and redeem orders for 
the ETF shares can be placed by APs with the ETF Sponsors. The ETF 
Sponsors can, via the ETF Agents, submit those orders to NSCC on a 
locked-in basis for clearing and settlement via NSCC's Continuous Net 
Settlement (``CNS'') System. The delivers and receives are processed 
through NSCC's Universal Trade Capture (``UTC'') system and netted in 
the CNS System for settlement.
    The Rules do not currently provide for the publication of ETF 
portfolio holdings for pricing purposes via the Portfolio Report. In 
addition, the Rules currently only permit the ETF Agents to submit 
creation and redemption instructions with scheduled settlement date of 
one business day after the trade date (``T+1'') or T+2.
(ii) Proposed Enhancements
Publication of ETF Portfolio Holdings for Pricing Purposes via 
Portfolio Reports
    As discussed above, trading baskets and ETF portfolio holdings for 
pricing

[[Page 37990]]

purposes facilitate ETF trading activities; however, because NSCC's 
Rules do not currently provide for the publication of ETF portfolio 
holdings for pricing purposes via the Portfolio Report, Members need to 
obtain ETF portfolio holdings for pricing purposes via means outside of 
the Portfolio Report.\16\ Based on its discussion with the ETF industry 
group,\17\ NSCC understands that obtaining ETF portfolio holdings for 
pricing purposes outside of the Portfolio Report is inefficient for 
Members. Members generally prefer to receive trading baskets and ETF 
portfolio holdings for pricing purposes within one single consolidated 
and standardized file. Therefore, NSCC is proposing to enhance the 
Portfolio Report by publishing ETF portfolio holdings for pricing 
purposes along with trading baskets in a standardized format.\18\
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    \16\ It is NSCC's understanding that Members currently obtain 
ETF portfolio holdings for pricing purposes from ETF Sponsors. In 
addition, Members can also obtain ETF portfolio holdings information 
from an ETF's website. As noted above, Rule 6c-11 requires any ETF 
relying upon Rule 6c-11 to disclose prominently on its website, 
publicly available and free of charge, the portfolio holdings that 
will form the basis for each calculation of NAV per share, and any 
cash balancing amount. Supra note 11.
    \17\ The ETF industry group is comprised of Members that are ETF 
Agents and APs.
    \18\ Based on its discussions with the ETF industry group, NSCC 
understands that, although Rule 6c-11 does not require ETFs to 
publish any trading basket information, Members would nevertheless 
prefer to receive Portfolio Reports that include both trading 
baskets and ETF portfolio holdings for pricing purposes.
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    NSCC is proposing to amend Procedure II (Trade Comparison and 
Recording Service), Section F.1. to reflect the publication of ETF 
portfolio holdings for pricing purposes via the Portfolio Report. 
Unlike trading baskets, ETF portfolio holdings for pricing purposes are 
not used for creations and redemptions. Accordingly, NSCC is proposing 
to add an additional paragraph to Section F.1. that provides each day, 
by such time as determined by NSCC from time to time, the Index Receipt 
Agent may also report to NSCC the composition of index receipts for 
purposes other than creations and redemptions.\19\ NSCC is also 
proposing to add an additional sentence to the last paragraph of 
Section F.1. that provides the Portfolio Report will also include, if 
available, portfolio holdings of the index receipts.
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    \19\ While NSCC believes publication of ETF portfolio holdings 
for pricing purposes via the Portfolio Reports would be an efficient 
and effective means for ETF Agents to transmit ETF portfolio 
holdings for pricing purposes, ETF Agents would not be required to 
use Portfolio Reports.
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Extending ETF Creation/Redemption Settlement Dates Beyond T+2
    As mentioned above, NSCC understands that an ETF is able to realize 
a tax efficiency for the ETF when redemptions from the ETF are made in-
kind. It is NSCC's understanding that this tax efficiency is 
particularly implicated when an ETF needs to undertake a large 
rebalancing (generally due to a change in an index that the ETF's 
holdings track). This is because when an index changes, the ETF needs 
to rebalance by disposing of its holding in securities that are no 
longer in the index. NSCC understands that the sale of such securities 
would generally incur a capital gain tax liability (assuming the 
securities have appreciated in market value); however, if the ETF 
redeems its shares from the ETF's shareholders in exchange for the 
securities that are no longer in the index, such transaction would 
generally not result in capital gains tax under the current U.S. 
federal income tax laws and regulations.
    As understood by NSCC, this tax efficiency for ETFs is generally 
known in the market as giving rise to so called ``heartbeat trades.'' 
\20\ Market participants refer to heartbeat trades as transactions in 
which an ETF would fulfill a creation order from an AP (AP gets newly 
created ETF shares in exchange for either cash or securities), the AP 
would then place a custom redemption order to exchange the newly 
created ETF shares for that ETF's holding in securities that are no 
longer in the index. NSCC understands that an AP would look to align 
the settlement dates of both the creation and redemption orders in 
order to minimize any overnight positions and related margin impact. In 
addition, NSCC understands that APs would prefer to hold the newly 
created ETF shares for at least one day before placing any redemption 
orders for such shares.
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    \20\ Members interested in heartbeat trades should discuss with 
their legal and tax advisers. By submitting this proposal, NSCC is 
not opining on the practice of heartbeat trades or any related tax 
implications, including, but not limited to, whether the alignment 
of the settlement dates of both the creation and redemption orders 
impacts the tax treatment of these transactions.
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    The Rules currently only permit ETF creation and redemption 
instructions with scheduled settlement dates of T+1 or T+2. This means 
that when an AP submits a creation order on Monday (T), the creation 
order has to settle no later than Wednesday (T+2); however, if the AP 
desires to hold the newly created ETF shares for at least one day 
(i.e., Tuesday), then the earliest that the AP can submit a redemption 
order for those ETF shares would be on Wednesday for settlement on 
Thursday. Therefore, under the current Rules, the settlement dates of 
the creation and redemption orders could not be aligned if the AP were 
to hold the newly created ETF shares for at least one day.\21\
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    \21\ Currently, ETF creations and redemptions with scheduled 
settlement dates beyond T+2 are settled broker-to-broker outside of 
NSCC.
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    NSCC is proposing to modify Procedure II (Trade Comparison and 
Recording Service) Section F.2. to provide APs more flexibility when 
selecting settlement dates for creation and redemption orders while 
still being able to hold the newly created ETF shares for at least one 
day. Specifically, NSCC is proposing to revise the language in the 
second paragraph of Section F.2. so that Index Receipt Agents \22\ 
would be permitted to select a Settlement Date of T+1 or later for 
their index receipts.\23\
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    \22\ Create and redeem orders for the ETF shares are placed by 
APs with the ETF Sponsors. The ETF Sponsors, via the Index Receipt 
Agents, submit those orders to NSCC for clearing and settlement.
    \23\ NSCC believes extending ETF creation/redemption settlement 
date beyond T+2 would be consistent with rule 15c6-1 of the Act. 
Rule 15c6-1 requires that most securities transactions settle within 
two business days of the trade date, unless otherwise expressly 
agreed to by the parties at the time of the transaction. 17 CFR 
240.15c6-1.
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    As proposed, when an AP submits a creation order on Monday (T), it 
would be able to have the creation order settle on Thursday (T+3), 
which could be aligned with a T+1 settlement date of a redemption order 
submitted on Wednesday while enabling the AP to hold the newly created 
ETF shares for one day (i.e., Tuesday). The proposal would thus enable 
the AP to align the settlement dates of both the creation and 
redemption orders (i.e., Thursday) in order to minimize any overnight 
positions and related margin impact while holding the newly created ETF 
shares for one day (i.e., Tuesday) before placing any redemption orders 
for such shares.
Technical and Clarifying Changes
    NSCC is proposing technical and clarifying changes in Sections F.1. 
and F.2 of Procedure II (Trade Comparison and Recording Service). 
Specifically, NSCC is proposing to modify Section F.1. by replacing the 
term ``cash-in-lieu of components'' with ``cash-in-lieu of securities'' 
in order to conform with the current industry terminology usage. 
Likewise, NSCC is proposing technical changes in footnote 1 of Section 
F.1. to ensure consistent placement of hyphens with respect to the term 
``cash-in-lieu of securities.''
    NSCC is also proposing a technical change to define Portfolio 
Report in

[[Page 37991]]

Section F.1., which is a term currently used in the Rules but has not 
been defined. Specifically, NSCC is proposing to delete the first 
instance of ``Portfolio Report'' from the last paragraph of Section 
F.1. and replace it with ``report.'' In addition, NSCC is proposing to 
define the term ``Portfolio Report'' at the end of the first sentence 
in the last paragraph of Section F.1.
    In the second paragraph of Section F.2., NSCC is proposing a 
technical change to replace ``Index Receipts'' with ``index receipts'' 
because it is not a defined term under the Rules.
    In addition, NSCC is proposing a clarifying change in the last 
paragraph of Section F.1. The clarifying change would make it clear 
that the composition data within the Portfolio Report may be used by 
NSCC to process index receipt creations and redemptions on the next 
business day.
(iii) Member Outreach
    Beginning in October 2017, NSCC has conducted ongoing outreach to 
each Member in order to provide them with notice of the proposed 
changes. As of the date of this filing, no written comments relating to 
the proposed changes have been received in response to this outreach. 
The Commission will be notified of any written comments received.
(iv) Implementation Timeframe
    NSCC would implement the proposed changes by no later than August 
31, 2020 and would announce the effective date of the proposed changes 
by an Important Notice, posted to its website. As proposed, a legend 
would be added to Procedure II stating there are changes that became 
effective upon filing with the Commission but have not yet been 
implemented. The proposed legend also would include a date by which 
such changes would be implemented and the file number of this proposal, 
and state that, once this proposal is implemented, the legend would 
automatically be removed from Procedure II.
2. Statutory Basis
    NSCC believes this proposal is consistent with the requirements of 
the Act, and the rules and regulations thereunder applicable to a 
registered clearing agency. Specifically, NSCC believes this proposal 
is consistent with Section 17A(b)(3)(F) \24\ of the Act and Rule 17Ad-
22(e)(21),\25\ as promulgated under the Act, for the reasons described 
below.
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    \24\ 15 U.S.C. 78q-1(b)(3)(F).
    \25\ 17 CFR 240.17Ad-22(e)(21).
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    Section 17A(b)(3)(F) of the Act requires, in part, that the Rules 
be designed to promote the prompt and accurate clearance and settlement 
of securities transactions and to protect investors and the public 
interest.\26\ NSCC believes that the proposed rule change to provide 
for the publication of ETF portfolio holdings for pricing purposes via 
the Portfolio Report would protect investors and the public interest. 
This is because publishing the ETF portfolio holdings for pricing 
purposes via the Portfolio Report would provide Members with the 
necessary information to facilitate their valuation of the ETF 
portfolios on an intraday basis, which, in turn, would help enable them 
to assess whether any potential ETF trading premiums or discounts exist 
in the secondary market when comparing to the ETF NAVs. The ability to 
identify potential premiums and discounts in the secondary market is 
necessary for keeping the market prices of ETF shares at or close to 
the NAV per share of the ETF, thereby helping to ensure ETF investors 
are treated equitably when buying and selling ETF shares. Therefore, 
NSCC believes that the proposed rule change to provide for the 
publication of ETF portfolio holdings for pricing purposes via the 
Portfolio Report would protect investors and the public interest, 
consistent with Section 17A(b)(3)(F) of the Act.
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    \26\ 15 U.S.C. 78q-1(b)(3)(F).
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    The proposed rule change to make technical and clarifying changes 
would help ensure that the Rules remain accurate and clear to Members. 
Having accurate and clear Rules would help Members to better understand 
their rights and obligations regarding NSCC's clearance and settlement 
services. NSCC believes that when Members better understand their 
rights and obligations regarding NSCC's clearance and settlement 
services, they can act in accordance with the Rules. NSCC believes that 
better enabling Members to comply with the Rules would promote the 
prompt and accurate clearance and settlement of securities transactions 
by NSCC. As such, NSCC believes the proposed rule changes to make 
technical and clarifying changes are consistent with Section 
17A(b)(3)(F) of the Act.
    Rule 17Ad-22(e)(21) under the Act requires NSCC to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to be efficient and effective in meeting the 
requirements of its participants and the markets it serves.\27\ The 
proposed rule change to provide for the publication of ETF portfolio 
holdings for pricing purposes via the Portfolio Report would enhance 
the efficiency of the current reporting capability by enabling Members 
to receive both ETF portfolio holdings for pricing purposes and trading 
baskets in one single consolidated file instead of having to receive 
them from multiple sources. The proposed rule change to provide for the 
publication of ETF portfolio holdings for pricing purposes via the 
Portfolio Report would enhance the effectiveness of the current 
reporting capability by providing both ETF portfolio holdings for 
pricing purposes and trading baskets in a standardized format, which, 
NSCC believes, would help reduce the need for Members to work with data 
in different formats and, in turn, result in fewer data conversion 
errors and omissions. Therefore, by establishing a more efficient and 
effective reporting capability for ETFs, NSCC believes that the 
proposed rule change to provide for the publication of ETF portfolio 
holdings for pricing purposes via the Portfolio Report is consistent 
with Rule 17Ad-22(e)(21) under the Act.
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    \27\ 17 CFR 240.17Ad-22(e)(21).
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    The proposed rule change to extend ETF creation and redemption 
settlement dates beyond T+2 is designed to meet the requirements of APs 
and ETF Agents by providing them with more flexibility when selecting 
settlement dates for ETF creation and redemption orders. As discussed 
above, in order to minimize any overnight positions and related margin 
impact, NSCC understands that APs and ETF Agents are looking to align 
the applicable ETF creation and redemption settlement dates while 
holding newly created ETF shares for the requisite time frame. The 
proposal to extend ETF creation and redemption settlement dates beyond 
T+2 would provide APs and ETF Agents with additional flexibility when 
selecting settlement dates for ETF creation and redemption orders. 
Having more flexibility when selecting settlement dates for ETF 
creation and redemption orders would enable APs and ETF Agents to align 
the applicable settlement dates more easily while still holding newly 
created ETF shares for the desired time period. Therefore, NSCC 
believes that the proposed rule change to extend ETF creation and 
redemption settlement dates beyond T+2 is consistent with Rule 17Ad-
22(e)(21) under the Act.
(B) Clearing Agency's Statement on Burden on Competition
    NSCC does not believe the proposed rule change to provide for the 
publication of ETF portfolio holdings for pricing purposes via the 
Portfolio

[[Page 37992]]

Report would have any adverse impact, or impose any burden, on 
competition.\28\ This is because the proposed rule change would enhance 
NSCC's reporting capabilities in a manner that would enable Members to 
receive all necessary information to support their ETF trading 
activities in one single consolidated and standardized file. The 
proposed rule change would not disproportionally impact any Members.
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    \28\ 15 U.S.C. 78q-1(b)(3)(I).
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    Moreover, NSCC believes the proposed rule change would have a 
positive effect on competition among ETF industry participants. This is 
because the proposed rule change to provide for the publication of ETF 
portfolio holdings for pricing purposes via the Portfolio Report would 
provide the ETF industry a more efficient and effective method to 
disseminate ETF portfolio holdings for pricing purposes and also enable 
Members to receive all necessary information to support their ETF 
trading activities in one single consolidated and standardized file. 
Therefore, NSCC believes the proposed rule change to provide for the 
publication of ETF portfolio holdings for pricing purposes via the 
Portfolio Report would enhance competition among ETF industry 
participants by allowing information to be distributed more quickly and 
in a more streamlined manner.
    NSCC does not believe the proposed rule change to extend ETF 
creation and redemption settlement dates beyond T+2 would have any 
adverse impact, or impose any burden, on competition.\29\ This is 
because the proposed rule change is designed to meet the requirements 
of APs and ETF Agents by providing them with more flexibility when 
selecting settlement dates for ETF creation and redemption orders. The 
proposed rule change would not disproportionally impact any Members.
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    \29\ Id.
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    NSCC does not believe the proposed rule changes to make technical 
and clarifying changes would impact competition.\30\ These changes 
would apply equally to all Members and would not affect Members' rights 
and obligations. As such, NSCC believes these proposed rule changes 
would not have any impact on competition.
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    \30\ Id.
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others
    Written comments relating to this proposed rule change have not 
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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \31\ and paragraph (f) of Rule 19b-4 
thereunder.\32\ 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.
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    \31\ 15 U.S.C. 78s(b)(3)(A).
    \32\ 17 CFR 240.19b-4(f).
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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 Number SR-NSCC-2020-010 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-NSCC-2020-010. 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 website (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 website 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 the filing also will be available for inspection 
and copying at the principal office of NSCC and on DTCC's website 
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NSCC-2020-010 and should be submitted on 
or before July 15, 2020.
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    \33\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-13541 Filed 6-23-20; 8:45 am]
BILLING CODE 8011-01-P


