80 FR 79368 - Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change To Provide Mechanism for Sub-Account Settlement With Respect to the Alternative Investment Product Services
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 244 (December 21, 2015)
Federal Register Volume 80, Issue 244 (December 21, 2015)
| Page Range | 79368-79371 | |
| FR Document | 2015-31923 |
[Federal Register Volume 80, Number 244 (Monday, December 21, 2015)] [Notices] [Pages 79368-79371] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-31923] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76652; File No. SR-NSCC-2015-007] Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change To Provide Mechanism for Sub-Account Settlement With Respect to the Alternative Investment Product Services December 15, 2015. On October 30, 2015, National Securities Clearing Corporation (``NSCC'') filed with the Securities and Exchange Commission (``Commission'') proposed rule change SR-NSCC-2015-007 pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ to amend NSCC's Rules and Procedures (``Rules'') \3\ to allow certain users of NSCC's Alternative Investment Product Services (``AIP'') to settle at the sub-account level and to make related technical changes and corrections to the Rules, as more fully described below. The proposed rule change was published for comment in the Federal Register on November 10, 2015.\4\ The Commission did not receive any comment letters on the proposed rule change. For the reasons discussed below, the Commission is granting approval of the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ Available at http://www.dtcc.com/legal/rules-and-procedures. \4\ See Securities Exchange Act Release No. 76348 (November 4, 2015), 80 FR 69728 (November 10, 2015) (SR-NSCC-2015-007). --------------------------------------------------------------------------- I. Description of the Proposed Rule Change The following is a description of the proposed rule change, as provided by NSCC: Background. In 2008, the Commission approved NSCC's proposed rule change to establish AIP, a non-guaranteed processing platform for alternative investment products such as hedge funds, funds of hedge funds, commodities pools, managed futures, [[Page 79369]] and real estate investment trusts.\5\ AIP facilitates, among other things, processing activities such as subscriptions and redemptions, distributions, position reporting, and account maintenance relating to alternative investment products and settles related payments (``AIP Payments''). --------------------------------------------------------------------------- \5\ Securities Exchange Act Release No. 57813 (May 12, 2008), 73 FR 28539 (May 16, 2008) (SR-NSCC-2007-12). --------------------------------------------------------------------------- Settlement of AIP Payments is done on a prefunded basis. On each date for which settlement will occur (``Settlement Date''), an AIP participant (``AIP Member'') that is in a debit position for such day must satisfy its full debit balance before NSCC will settle any contra- side credit positions with respect to such AIP Member. NSCC simply passes AIP Payments from one AIP Member to the contra-side AIP Member without netting and without guaranteeing payment, and settlement of AIP Payments is segregated from all other money settlement at NSCC. Participation in AIP is governed by Rule 53 of NSCC's Rules. A party seeking to be an AIP Member is required to enter into a separate AIP membership agreement with NSCC, even if it is otherwise a participant of other NSCC services. AIP Members are divided into two categories--``AIP Manufacturers'' and ``AIP Distributors''. AIP Manufacturers act on behalf of, or under authority of, the sponsor, general partner, or other party responsible for the creation or manufacturing of an eligible alternative investment product (``Eligible AIP Product''). AIP Manufacturers are generally the fund entities themselves (``Funds''). AIP Distributors act on behalf of, or under authority of, a customer or other investor in an Eligible AIP Product. AIP Distributors are generally the broker/dealers whose clients invest in Eligible AIP Products. Fund Administrators. Within the alternative investments industry, there are parties on the creation/manufacturing side of transactions known as ``fund administrators''. Fund administrators are not the Funds themselves, but rather, agents for the Funds. Where a Fund engages a fund administrator to act on the Fund's behalf, it is typically the fund administrator that handles all of the transaction processing for that Fund. Within AIP, a fund administrator is a party engaged under contract to provide administrative services with respect to one or more Eligible AIP Products and is eligible to be an AIP Member as an AIP Manufacturer (``AIP Fund Administrator''). In general, AIP Fund Administrators process AIP transactions with respect to their various Fund clients by creating separate sub-accounts within AIP, each of which is attributable to a specific Fund client. In this structure, the Fund client generally would not be an AIP Member. Under the current AIP Rules, AIP Fund Administrators are responsible for all activities related to their sub-accounts. These activities include, for example, submitting, reviewing, and confirming order instructions, reviewing and confirming settlement statements, and making AIP Payments. With respect to making AIP Payments, the Rules provide that on Settlement Date all sub-account obligations roll up to the AIP Fund Administrator's primary AIP account. These obligations are then presented to the AIP Fund Administrator's settlement bank for gross debit settlement and gross credit settlement. Because AIP Fund Administrators are responsible for settlement of AIP Payments, an AIP Fund Administrator in a debit position on Settlement Date must assure that each applicable Fund client has timely delivered payment to such AIP Fund Administrator's settlement bank. To the extent that a single Fund client fails to deliver its payment on Settlement Date (and the AIP Fund Administrator is not otherwise able to cover such Fund's shortfall), NSCC is required to reverse all of the AIP Fund Administrator's contra-side credit positions for the day, including the contra-side credit positions attributable to Funds that actually did pay. In recent months, NSCC has learned from several fund administrators interested in becoming AIP Members that the responsibility to make AIP Payments at NSCC is a responsibility that fund administrators generally do not undertake outside of AIP. In the current processing environment outside of AIP, fund administrators perform all transaction processing functions for their Funds, but they generally do not control money settlement. As explained by certain fund administrators to NSCC, the current AIP Payment structure as applied to AIP Fund Administrators has slowed adoption of AIP by the fund administrator community. Proposed Rule Change. To address this matter, NSCC has proposed to permit AIP Fund Administrators, at their discretion, to create sub- accounts that settle separately from their primary AIP accounts, as well as from their other AIP sub-accounts, (``AIP Settling Sub- Accounts''). An AIP Fund Administrator choosing to create an AIP Settling Sub- Account will designate to NSCC the applicable Fund client with responsibility for settlement of AIP Payments with respect to such AIP Settling Sub-Account. Such designated Fund will not be an AIP Member (``AIP Non-Member Fund''). Each such AIP Non-Member Fund will enter into a standard agreement pursuant to which an NSCC-approved AIP Settling Bank will perform settlement services directly for the AIP Non-Member Fund (``Appointment of AIP Settling Bank and AIP Settling Bank Agreement''). Under the proposal, AIP Fund Administrators will remain responsible for all activities with respect to their AIP Settling Sub-Accounts, except that AIP Fund Administrators will not be responsible for settling AIP Payments. For example, AIP Fund Administrators will remain responsible for order processing applicable to their AIP Settling Sub- Accounts, including submitting, reviewing, and confirming order instructions. In addition, AIP Fund Administrators will be responsible for informing their AIP Non-Member Funds of their respective daily AIP Payment obligations. All reporting, liability, and indemnification obligations to NSCC under NSCC's Rules will remain with the AIP Fund Administrator. As is the case today, settlement of all AIP Payments will be done on a prefunded basis. NSCC will not net or guarantee any AIP Payments with respect to AIP Settling Sub-Accounts, and all settlement of AIP Payments (including those of AIP Non-Member Funds) will continue to be segregated from all other money settlement at NSCC. Prior to NSCC approving any AIP Settling Sub-Account, NSCC will require the applicable AIP Fund Administrator to enter into documentation and/or agreements, or otherwise procure documentation and/or agreements, in such form as required by NSCC from time to time, which will contain:The AIP Fund Administrator's acknowledgement and agreement that it will be responsible for all matters, activities, liabilities, and obligations applicable to AIP Members under the Rules with respect to such AIP Settling Sub-Account, except for settlement of AIP Payments; the AIP Fund Administrator's agreement to indemnify NSCC for any loss, liability, or expense sustained by NSCC in connection with, arising from, or related to such AIP Settling Sub-Account, including with respect to the [[Page 79370]] Foreign Account Tax Compliance Act (``FATCA''); \6\ --------------------------------------------------------------------------- \6\ 26 U.S.C. 1471 et seq. --------------------------------------------------------------------------- the AIP Fund Administrator's agreement that it will be responsible for (A) all charges incurred and payments due under Rule 26 (Bills Rendered) for the processing of AIP Settling Sub-Account transactions through AIP and (B) any other charges that may be incurred with respect to such AIP Settling Sub-Account under Rule 24 (Charges for Services Rendered); the AIP Fund Administrator's designation of the AIP Non- Member Fund with responsibility for making AIP Payments with respect to such AIP Settling Sub-Account; the AIP Non-Member Fund's consent and approval with respect to such designation; the AIP Fund Administrator's agreement of its obligation to notify NSCC of changes in condition to the AIP Non-Member Fund that would otherwise require notice to NSCC under Rule 2B (Ongoing Membership Requirements and Monitoring) or Rule 20 (Insolvency); the AIP Fund Administrator's agreement of its obligation to notify the applicable AIP Non-Member Fund of such AIP Non-Member Fund's daily AIP Payment balance; and the AIP Non-Member Fund's appointment of an AIP Settling Bank, and such AIP Settling Bank's agreement to act as AIP Settling Bank for such AIP Non-Member Fund. In addition, the applicable AIP Fund Administrator will need to obtain from the applicable AIP Non-Member Fund tax documentation in such form as required by NSCC from time to time, and with respect to any AIP Non-Member Fund that is treated as a non-U.S. entity for U.S. federal income tax purposes, the AIP Fund Administrator will need to provide NSCC with an executed FATCA certification from such AIP Non- Member Fund in the form approved by NSCC. On a going-forward basis with respect to FATCA, AIP Fund Administrators will need to obtain from their AIP Non-Member Funds periodic tax documentation, including FATCA certifications to the extent applicable, and provide such documentation to NSCC. Failure to provide such tax documentation, including FATCA certifications, in the manner and timeframes set forth by NSCC from time to time will result in revocation of NSCC's approval, in NSCC's sole and absolute discretion, of such AIP Settling Sub-Account. Under the proposal, AIP Fund Administrators will be required to indemnify NSCC for any loss, liability, or expense sustained by NSCC in connection with, arising from, or related to FATCA in respect of their AIP Settling Sub-Accounts. The FATCA-related provisions in this proposed rule change are substantially similar to the current provisions in the Rules governing how NSCC monitors and treats its non- U.S. members with respect to FATCA. In connection with this proposal, NSCC will amend the following Rules: Rule 1. Definitions The following new defined terms will be created: ``AIP Fund Administrator'', ``AIP Non-Member Fund'', and ``AIP Settling Sub- Account'', each of which will be defined or further described in Rule 53 (Alternative Investment Product Services and Members). The defined term ``AIP Settling Bank'' will be amended to: Provide that AIP Settling Banks undertake to perform settlement services for AIP Members, as well as for AIP Non-Member Funds; and correct an incorrect Rule citation within the defined term. Rule 2. Members and Limited Members The description of ``AIP Settling Bank Only Member'' as a type of NSCC Limited Member will be amended to provide that AIP Settling Bank Only Members undertake to perform settlement services with respect to AIP on behalf of AIP Members, as well as AIP Non-Member Funds. Rule 53. Alternative Investment Product Services and Members The Rule will be amended to: Permit AIP Fund Administrators to create AIP Settling Sub-Accounts and address the agreements and documents that NSCC will require prior to approving any such AIP Settling Sub-Account; describe the tax and FATCA-related requirements in connection with creating and maintaining such AIP Settling Sub- Accounts; describe the settlement process with respect to AIP Settling Sub-Accounts; state that NSCC will not notify any AIP Non-Member Fund of any debit or credit balance and identify that it is the AIP Fund Administrator's obligation to notify each such AIP Non-Member Fund of its applicable debit or credit balance; state that NSCC will not guarantee AIP Payments to any AIP Non-Member Fund; specify that NSCC will not be liable for the acts, delays, omissions, bankruptcy, or insolvency of any AIP Non-Member Fund unless the Corporation was grossly negligent, engaged in willful misconduct, or in violation of federal securities laws for which there is a private right of action; and address applicable technical changes in connection with the foregoing. Rule 55. Settling Banks and AIP Settling Banks The Rule will be amended to provide that AIP Settling Banks may undertake to: Perform settlement services on behalf of AIP Non-Member Funds; describe the settlement process with respect to AIP Settling Sub-Accounts; and make certain technical corrections. Rule 58. Limitation on Liability The Rule will be amended to specify that NSCC will not be liable for the acts, delays, omissions, bankruptcy, or insolvency of any AIP Non-Member Fund unless the Corporation was grossly negligent, engaged in willful misconduct, or in violation of federal securities laws for which there is a private right of action; and make clear that NSCC will not be responsible for the completeness or accuracy of any AIP data received from or transmitted to an AIP Member (including an AIP Fund Administrator with respect to any AIP Settling Sub-Account thereof), nor for any errors, omissions, or delays which may occur in the transmission of such AIP data to or from an AIP Member (including an AIP Fund Administrator with respect to any AIP Settling Sub-Account thereof). Addendum D (Statement of Policy; Envelope Settlement Service, Mutual Fund Services, Insurance and Retirement Processing Services and other Services Offered by the Corporation) The Rule will be amended to make clear that settlement with respect to AIP Settling Sub-Accounts is not guaranteed and that NSCC will reverse any credit previously given to any AIP Member (including any AIP Settling Sub-Account) that is the contra-side to an AIP Member (including a contra-side AIP Settling Sub-Account) whose payment was not received by NSCC. II. Discussion and Commission Findings Section 19(b)(2)(C) of the Act \7\ directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and rules and regulations thereunder applicable to [[Page 79371]] such organization. The Commission believes the proposal is consistent with section 17A(b)(3)(F) of the Act \8\ and Rule 17Ad-22(d)(12),\9\ as described in detail below. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78s(b)(2)(C). \8\ 15 U.S.C. 78q-1(b)(3)(F). \9\ 17 CFR 240.17Ad-22(d)(12). --------------------------------------------------------------------------- Consistency with Section 17A(b)(3)(F) of the Act. Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of a clearing agency be designed (i) to foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions, and (ii) to remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions.\10\ As described above, under NSCC's current Rules regarding AIP, settlement of AIP Payments is the responsibility of AIP Members, including AIP Fund Administrators. However, NSCC has learned from fund administrators interested in becoming AIP Members that fund administrators generally do not control money settlement for their Fund clients. This disconnect has impeded the adoption of AIP by the fund administrator community. To address this issue, NSCC will now allow AIP Fund Administrators to establish AIP sub-accounts and permit AIP Payments to settle at the sub-account level. Doing so will redirect responsibility for settlement of AIP Payments from AIP Fund Administrators to the AIP Fund Administrator's designated Fund clients. --------------------------------------------------------------------------- \10\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- In allowing settlement at the sub-account level, NSCC (i) will be fostering cooperation and coordination with fund administrators and Funds that are involved in the processing of alternative investment securities transactions, and (ii) will be removing an impediment to the prompt and accurate clearance and settlement of alternative investment securities transactions at the sub-account level. As such, the Commission believes that the proposal is consistent with section 17A(b)(3)(F) of the Act.\11\ --------------------------------------------------------------------------- \11\ Id. --------------------------------------------------------------------------- Consistency with Rule 17Ad-22(d)(12). Rule 17Ad-22(d)(12) under the Act requires a central counterparty, such as NSCC, to ``establish, implement, maintain and enforce written policies and procedures reasonably designed to . . . [e]nsure that final settlement occurs no later than the end of the settlement day . . . .'' \12\ As described above, under the current Rules regarding AIP, if just one of an AIP Fund Administrators' designated Fund clients fails to make its AIP Payment on Settlement Date, and the AIP Fund Administrator does not cover the shortfall, NSCC is required to reverse all of the AIP Fund Administrator's contra-side credit positions, including the contra-side credit positions of Funds that did pay. With this proposed rule change, AIP Fund Administrators can create AIP sub-accounts that settle separately from their primary AIP accounts, as well as from other AIP sub-accounts. Allowing AIP settlement at the sub-account level will enable funded AIP sub-accounts to settle no later than the end of the settlement day, while unfunded sub-accounts can be reversed, separately. As such, the Commission believes that the proposal is consistent with Rule 17Ad-22(d)(12).\13\ --------------------------------------------------------------------------- \12\ 17 CFR 240.17Ad-22(d)(12). \13\ Id. --------------------------------------------------------------------------- III. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of section 17A of the Act \14\ and the rules and regulations thereunder. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78q-1. --------------------------------------------------------------------------- It is therefore ordered, pursuant to section 19(b)(2) of the Act, that proposed rule change SR-NSCC-2015-007 be, and hereby is, approved.\15\ --------------------------------------------------------------------------- \15\ In approving the proposed rule change, the Commission considered the proposal's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). \16\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\16\ Robert W. Errett, Deputy Secretary. [FR Doc. 2015-31923 Filed 12-18-15; 8:45 am] BILLING CODE 8011-01-P
![79368 Federal Register / Vol. 80, No. 244 / Monday, December 21, 2015 / Notices
would rather remove complex change should be approved or For the Commission, by the Division of
functionality and obsolete cross- disapproved. Trading and Markets, pursuant to delegated
references, thereby reducing confusion authority.20
and making the Exchange’s rules easier IV. Solicitation of Comments Robert W. Errett,
to understand and navigate. Deputy Secretary.
Interested persons are invited to
[FR Doc. 2015–31920 Filed 12–18–15; 8:45 am]
C. Self-Regulatory Organization’s submit written data, views, and
BILLING CODE 8011–01–P
Statement on Comments on the arguments concerning the foregoing,
Proposed Rule Change Received From including whether the proposed rule
Members, Participants, or Others change is consistent with the Act. SECURITIES AND EXCHANGE
No written comments were solicited Comments may be submitted by any of COMMISSION
or received with respect to the proposed the following methods:
rule change. Electronic Comments [Release No. 34–76652; File No. SR–NSCC–
2015–007]
III. Date of Effectiveness of the • Use the Commission’s Internet
Proposed Rule Change and Timing for comment form (http://www.sec.gov/ Self-Regulatory Organizations;
Commission Action National Securities Clearing
rules/sro.shtml); or
Corporation; Order Approving
The Exchange has filed the proposed • Send an email to rule-comments@ Proposed Rule Change To Provide
rule change pursuant to section sec.gov. Please include File Number SR– Mechanism for Sub-Account
19(b)(3)(A)(iii) of the Act 15 and Rule NYSE–2015–60 on the subject line. Settlement With Respect to the
19b–4(f)(6) thereunder.16 Because the
Paper Comments Alternative Investment Product
proposed rule change does not: (i)
Services
Significantly affect the protection of
investors or the public interest; (ii) • Send paper comments in triplicate December 15, 2015.
impose any significant burden on to Secretary, Securities and Exchange
On October 30, 2015, National
competition; and (iii) become operative Commission, 100 F Street NE.,
Securities Clearing Corporation
prior to 30 days from the date on which Washington, DC 20549–1090. (‘‘NSCC’’) filed with the Securities and
it was filed, or such shorter time as the All submissions should refer to File Exchange Commission (‘‘Commission’’)
Commission may designate, if Number SR–NYSE–2015–60. This file proposed rule change SR–NSCC–2015–
consistent with the protection of number should be included on the 007 pursuant to section 19(b)(1) of the
investors and the public interest, the Securities Exchange Act of 1934
subject line if email is used. To help the
proposed rule change has become (‘‘Act’’),1 and Rule 19b–4 thereunder,2
Commission process and review your
effective pursuant to section 19(b)(3)(A) to amend NSCC’s Rules and Procedures
of the Act and Rule 19b–4(f)(6)(iii) comments more efficiently, please use
only one method. The Commission will (‘‘Rules’’) 3 to allow certain users of
thereunder. NSCC’s Alternative Investment Product
A proposed rule change filed under post all comments on the Commission’s
Internet Web site (http://www.sec.gov/ Services (‘‘AIP’’) to settle at the sub-
Rule 19b–4(f)(6) 17 normally does not account level and to make related
become operative prior to 30 days after rules/sro.shtml). Copies of the
technical changes and corrections to the
the date of the filing. However, pursuant submission, all subsequent
Rules, as more fully described below.
to Rule 19b4(f)(6)(iii),18 the Commission amendments, all written statements The proposed rule change was
may designate a shorter time if such with respect to the proposed rule published for comment in the Federal
action is consistent with the protection change that are filed with the Register on November 10, 2015.4 The
of investors and the public interest. Commission, and all written Commission did not receive any
At any time within 60 days of the communications relating to the comment letters on the proposed rule
filing of such proposed rule change, the proposed rule change between the change. For the reasons discussed
Commission summarily may Commission and any person, other than below, the Commission is granting
temporarily suspend such rule change if those that may be withheld from the approval of the proposed rule change.
it appears to the Commission that such public in accordance with the
action is necessary or appropriate in the provisions of 5 U.S.C. 552, will be I. Description of the Proposed Rule
public interest, for the protection of Change
available for Web site viewing and
investors, or otherwise in furtherance of printing in the Commission’s Public The following is a description of the
the purposes of the Act. If the Reference Room, 100 F Street NE., proposed rule change, as provided by
Commission takes such action, the Washington, DC 20549, on official NSCC:
Commission shall institute proceedings business days between the hours of Background. In 2008, the Commission
under section 19(b)(2)(B) 19 of the Act to 10:00 a.m. and 3:00 p.m. Copies of the approved NSCC’s proposed rule change
determine whether the proposed rule filing also will be available for to establish AIP, a non-guaranteed
inspection and copying at the principal processing platform for alternative
15 15 U.S.C. 78s(b)(3)(A)(iii). office of the Exchange. All comments investment products such as hedge
16 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
received will be posted without change; funds, funds of hedge funds,
4(f)(6)(iii) requires a self-regulatory organization to commodities pools, managed futures,
give the Commission written notice of its intent to the Commission does not edit personal
mstockstill on DSK4VPTVN1PROD with NOTICES
file the proposed rule change, along with a brief identifying information from 20 17
description and text of the proposed rule change, CFR 200.30–3(a)(12).
submissions. You should submit only
at least five business days prior to the date of filing 1 15 U.S.C. 78s(b)(1).
of the proposed rule change, or such shorter time information that you wish to make 2 17 CFR 240.19b–4.
as designated by the Commission. The Exchange available publicly. All submissions 3 Available at http://www.dtcc.com/legal/rules-
has satisfied this requirement. should refer to File Number SR–NYSE– and-procedures.
17 17 CFR 240.19b–4(f)(6). 4 See Securities Exchange Act Release No. 76348
18 17 CFR 240.19b–4(f)(6)(iii).
2015–60, and should be submitted on or
(November 4, 2015), 80 FR 69728 (November 10,
19 15 U.S.C. 78s(b)(2)(B). before January 11, 2016. 2015) (SR–NSCC–2015–007).
VerDate Sep<11>2014 17:38 Dec 18, 2015 Jkt 238001 PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 E:\FR\FM\21DEN1.SGM 21DEN1](https://thefederalregister.org/doc/80_FR_79612/page/1.svg)
![Federal Register / Vol. 80, No. 244 / Monday, December 21, 2015 / Notices 79371
such organization. The Commission Fund Administrators’ designated Fund notice is hereby given that, on December
believes the proposal is consistent with clients fails to make its AIP Payment on 2, 2015, NYSE Arca, Inc. (the
section 17A(b)(3)(F) of the Act 8 and Settlement Date, and the AIP Fund ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
Rule 17Ad–22(d)(12),9 as described in Administrator does not cover the the Securities and Exchange
detail below. shortfall, NSCC is required to reverse all Commission (the ‘‘Commission’’) the
Consistency with Section 17A(b)(3)(F) of the AIP Fund Administrator’s contra- proposed rule change as described in
of the Act. Section 17A(b)(3)(F) of the side credit positions, including the Items I and II below, which Items have
Act requires, among other things, that contra-side credit positions of Funds been prepared by the self-regulatory
the rules of a clearing agency be that did pay. With this proposed rule organization. The Commission is
designed (i) to foster cooperation and change, AIP Fund Administrators can publishing this notice to solicit
coordination with persons engaged in create AIP sub-accounts that settle comments on the proposed rule change
the clearance and settlement of separately from their primary AIP from interested persons.
securities transactions, and (ii) to accounts, as well as from other AIP sub-
remove impediments to and perfect the accounts. Allowing AIP settlement at I. Self-Regulatory Organization’s
mechanism of a national system for the the sub-account level will enable Statement of the Terms of the Substance
prompt and accurate clearance and funded AIP sub-accounts to settle no of the Proposed Rule Change
settlement of securities transactions.10 later than the end of the settlement day, The Exchange proposes to change a
As described above, under NSCC’s while unfunded sub-accounts can be representation relating to the number of
current Rules regarding AIP, settlement reversed, separately. As such, the components in the CBOE S&P 500 Put
of AIP Payments is the responsibility of Commission believes that the proposal Write Index, the index underlying the
AIP Members, including AIP Fund is consistent with Rule 17Ad– WisdomTree Put Write Strategy Fund
Administrators. However, NSCC has 22(d)(12).13 (‘‘Fund’’). The Securities and Exchange
learned from fund administrators Commission (‘‘Commission’’) has
III. Conclusion
interested in becoming AIP Members approved listing and trading of shares of
that fund administrators generally do On the basis of the foregoing, the the Fund on the Exchange under
not control money settlement for their Commission finds that the proposal is Commentary .01 to NYSE Arca Equities
Fund clients. This disconnect has consistent with the requirements of the Rule 5.2(j)(3) (‘‘Investment Company
impeded the adoption of AIP by the Act and in particular with the Units’’).4 Shares of the Fund have not
fund administrator community. To requirements of section 17A of the commenced listing and trading on the
address this issue, NSCC will now allow Act 14 and the rules and regulations Exchange. The proposed rule change is
AIP Fund Administrators to establish thereunder. available on the Exchange’s Web site at
AIP sub-accounts and permit AIP It is therefore ordered, pursuant to www.nyse.com, at the principal office of
Payments to settle at the sub-account section 19(b)(2) of the Act, that the Exchange, and at the Commission’s
level. Doing so will redirect proposed rule change SR–NSCC–2015– Public Reference Room.
responsibility for settlement of AIP 007 be, and hereby is, approved.15
II. Self-Regulatory Organization’s
Payments from AIP Fund For the Commission, by the Division of
Trading and Markets, pursuant to delegated Statement of the Purpose of, and
Administrators to the AIP Fund
authority.16 Statutory Basis for, the Proposed Rule
Administrator’s designated Fund
Robert W. Errett, Change
clients.
In allowing settlement at the sub- Deputy Secretary. In its filing with the Commission, the
account level, NSCC (i) will be fostering [FR Doc. 2015–31923 Filed 12–18–15; 8:45 am] self-regulatory organization included
cooperation and coordination with fund BILLING CODE 8011–01–P statements concerning the purpose of,
administrators and Funds that are and basis for, the proposed rule change
involved in the processing of alternative and discussed any comments it received
investment securities transactions, and SECURITIES AND EXCHANGE on the proposed rule change. The text
(ii) will be removing an impediment to COMMISSION of those statements may be examined at
the prompt and accurate clearance and the places specified in Item IV below.
[Release No. 34–76646; File No. SR–
settlement of alternative investment NYSEArca–2015–113)
The Exchange has prepared summaries,
securities transactions at the sub- set forth in sections A, B, and C below,
account level. As such, the Commission Self-Regulatory Organizations; NYSE of the most significant parts of such
believes that the proposal is consistent Arca, Inc.; Notice of Filing of Proposed statements.
with section 17A(b)(3)(F) of the Act.11 Rule Change Relating to the Index A. Self-Regulatory Organization’s
Consistency with Rule 17Ad– Underlying the WisdomTree Put Write Statement of the Purpose of, and
22(d)(12). Rule 17Ad–22(d)(12) under Strategy Fund Statutory Basis for, the Proposed Rule
the Act requires a central counterparty,
December 15, 2015. Change
such as NSCC, to ‘‘establish, implement,
maintain and enforce written policies Pursuant to section 19(b)(1) 1 of the 1. Purpose
and procedures reasonably designed to Securities Exchange Act of 1934 (the
The Commission has approved a
. . . [e]nsure that final settlement ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
proposed rule change relating to listing
occurs no later than the end of the and trading on the Exchange of shares
13 Id.
settlement day . . . .’’ 12 As described (‘‘Shares’’) of the Fund on the Exchange
mstockstill on DSK4VPTVN1PROD with NOTICES
14 15 U.S.C. 78q–1.
above, under the current Rules 15 In under Commentary .01 to NYSE Arca
approving the proposed rule change, the
regarding AIP, if just one of an AIP Commission considered the proposal’s impact on Equities Rule 5.2(j)(3) 5 (‘‘Investment
efficiency, competition, and capital formation. 15
8 15 U.S.C. 78q–1(b)(3)(F). U.S.C. 78c(f). 4 See note 6, infra.
9 17 CFR 240.17Ad–22(d)(12). 16 17 CFR 200.30–3(a)(12).
5 NYSE Arca Equities Rule 5.2(j)(3)(A) provides
10 15 U.S.C. 78q–1(b)(3)(F). 1 15 U.S.C. 78s(b)(1).
that an Investment Company Unit is a security that
11 Id. 2 15 U.S.C. 78a.
represents an interest in a registered investment
12 17 CFR 240.17Ad–22(d)(12). 3 17 CFR 240.19b–4. Continued
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Document Created: 2015-12-19 02:56:46
Document Modified: 2015-12-19 02:56:46
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 79368 |
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