80 FR 29138 - Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Clarify NSCC's Rules & Procedures Relating to the Process by Which NSCC Members Submit Buy-Ins Within NSCC's Continuous Net Settlement System

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 97 (May 20, 2015)

[Federal Register Volume 80, Number 97 (Wednesday, May 20, 2015)]
[Notices]
[Pages 29138-29139]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-12145]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74965; File No. SR-NSCC-2015-002]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Clarify NSCC's Rules & Procedures Relating to the 
Process by Which NSCC Members Submit Buy-Ins Within NSCC's Continuous 
Net Settlement System

May 14, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on May 4, 2015, 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 NSCC. NSCC filed the 
proposed rule change pursuant to Section 19(b)(3)(A) \3\ of the Act and 
Rule 19b-4(f)(1) \4\ thereunder. The proposed rule change was effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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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)(1).
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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 NSCC's Rules & 
Procedures (``Rules'') in order to clarify those Rules relating to the 
process by which NSCC Members submit buy-ins within NSCC's Continuous 
Net Settlement (``CNS'') system, as more fully described below.

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, NSCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NSCC has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

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

1. Purpose
    One of NSCC's core services as a central counterparty is trade 
clearance and settlement through CNS, where compared and recorded 
transactions in eligible securities for a particular settlement date 
are netted by issue into one net long (buy) or net short (sell) 
position. As a continuous net system, those positions are further 
netted with positions of the same issue that remain open after their 
originally scheduled settlement date, so that trades or miscellaneous 
activity scheduled to settle on any day are netted with fail positions 
to result in a single deliver or receive obligation for each Member for 
each issue in which it has activity. Currently, under NSCC's Rules, a 
Member with a long position at the end of the day may submit to NSCC a 
Notice of Intention to Buy-In (``Buy-In Notice'') specifying a quantity 
of securities (not exceeding such long position) (``Buy-In Position'') 
that it intends to purchase to satisfy the fail that resulted in that 
long position, or ``buy-in''.\5\ Typically, the day the Buy-In Notice 
is submitted is referred to as N, and N+1 and N+2 refer to the 
succeeding days (N through N+2 is referred to as the ``Buy-In 
Period'').\6\ The Buy-In Position is given high priority for allocation 
from the CNS night cycle on N+1 through completion of the CNS day cycle 
on N+2.
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    \5\ Members are not permitted to submit a Buy-In Notice with 
respect to securities that are subject to a voluntary corporate 
reorganization.
    \6\ NSCC's Rules provide that Members may also submit Buy-in 
Retransmittal Notices on N+1. This proposed rule clarification would 
apply to these Buy-in Retransmittal Notices as well.
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    The CNS position of a long Member that submits a Buy-In Notice can 
change during the Buy-In Period as a result of settling trades or 
miscellaneous activity.\7\ Settling trades or miscellaneous activity 
that reduce a Member's CNS long position is first applied to the 
Member's current CNS position that is not represented by the Buy-In 
Position, and then that activity may be applied to reduce the Member's 
Buy-In Position. If a Member's Buy-In Position is reduced as a result 
of settling trades or miscellaneous activity, its Buy-In Position is 
adjusted to reflect the new amount. If, at any time during the Buy-In 
Period, settling trades or miscellaneous activity reduce the Member's 
long position such that the Member becomes either short or flat in that 
position, or causes the Member's CNS long position to be reduced to 
less than its outstanding Buy-In Position in that security, NSCC will 
consider that Member's Buy-In Position with respect to that security 
complete and satisfied. NSCC will update the Buy-In Notice to reflect 
the reduced Buy-In Position if only a portion of the Buy-In Position is 
satisfied, or the Buy-In Notice will be cancelled if the entire Buy-In 
Position is satisfied by the settling trades or miscellaneous activity.
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    \7\ Miscellaneous activity processed by CNS that updates the net 
position of a security could include, for example, corporate actions 
and stock dividends.
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    This process by which a Buy-In Notice would be updated to reflect 
settling trades or miscellaneous activity is not currently described in 
NSCC's Rules. As such, NSCC is proposing to update Rule 11, Section 7 
of its Rules in order to describe the effect of settling trades or 
miscellaneous activity on a Member's Buy-In Position. Pursuant to this 
proposed rule change, NSCC's Rules will make clear that any portion of 
a Member's Buy-In Position would be considered complete and satisfied 
if, at any time during the Buy-in Period that Member's CNS long 
position is reduced to less than the outstanding Buy-In Position, or 
its Buy-In Position is reduced such that the Member is either flat or 
short in that security. If the entire Buy-In Position is considered 
complete and satisfied, it will be removed from the system. The 
proposed rule change would also make a technical correction to 
Procedure X, as marked on Exhibit 5 hereto.
2. Statutory Basis
    The proposed rule change is consistent with the Act and the rules 
and regulations thereunder, in particular Section 17A(b)(3)(F) \8\ 
because it will promote the prompt and accurate clearance and 
settlement of securities transactions in that it will provide clarity 
to NSCC's Members regarding the process by which a Buy-In Notice would 
be updated to reflect settling trades or miscellaneous activity. 
Additionally, the proposed rule change constitutes a stated policy, 
practice, or interpretation

[[Page 29139]]

with respect to the meaning, administration, or enforcement of an 
existing rule.
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Clearing Agency's Statement on Burden on Competition

    The proposed rule change will not have any impact, or impose any 
burden, on competition.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    Written comments relating to the proposed rule change have not yet 
been solicited or received. NSCC will notify the Commission of any 
written comments received by NSCC.

III. Date of Effectiveness of the Proposed Rule Change, and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \9\ of the Act and paragraph (f) of Rule 19b-4 \10\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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 [email protected]. Please include 
File Number SR-NSCC-2015-002 on the subject line.

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 SR-NSCC-2015-002. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of NSCC and on 
DTCC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NSCC-2015-002 and should be 
submitted on or before June 10, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12145 Filed 5-19-15; 8:45 am]
BILLING CODE 8011-01-P