81 FR 54146 - Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Add a Clearing Fund Maintenance Fee

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 157 (August 15, 2016)

Page Range		54146-54147
FR Document		2016-19326
Federal Register, Volume 81 Issue 157 (Monday, August 15, 2016)
[Federal Register Volume 81, Number 157 (Monday, August 15, 2016)]
[Notices]
[Pages 54146-54147]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-19326]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78525; File No. SR-NSCC-2016-002]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change To Add a Clearing Fund Maintenance Fee

August 9, 2016.
    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 July 29, 2016, 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)(2) thereunder.\4\ 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)(2).
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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 modifications to the Addendum 
A (Fee Structure) of the Rules and Procedures (``Rules'') of NSCC in 
order to add a new fee that will be charged to Members and certain 
Limited Members \5\ in connection with the maintenance of the Clearing 
Fund, as described in greater detail below.\6\ Members and applicable 
Limited Members are collectively referred to herein as ``members.''
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    \5\ The proposed new fee will be imposed on Limited Members that 
are required to make deposits to the Clearing Fund. Currently, those 
Limited Members are Mutual Fund/Insurance Services Members and Fund 
Members organized under the laws of the Republic of Ireland.
    \6\ Capitalized terms not defined herein are defined in the 
Rules, available at www.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 proposed rule change will add a fee that will be charged to 
members in connection with the maintenance of the Clearing Fund.
Clearing Fund Maintenance Fee
    Pursuant to the proposed rule change, NSCC proposes to introduce a 
new fee, to be known as the Clearing Fund Maintenance Fee, which will 
be charged to members in arrears on a monthly basis.
    The proposed rule change will (i) diversify NSCC's revenue sources 
and mitigate NSCC's dependence on revenues driven by trading volumes 
and (ii) add a stable revenue source that will contribute to NSCC's 
operating margin by offsetting increasing costs and expenses, as 
further described below.
Diversify Revenue Sources
    NSCC's current revenues are highly variable due to the nature of 
the clearing services, which are primarily driven by trading volumes, 
but, as a utility, NSCC's expenses are largely fixed. The combination 
of fixed costs and variable revenues represents a financial risk for 
NSCC. To mitigate such financial risk, NSCC is seeking to diversify its 
variable revenue base with the proposed new fee, which will introduce a 
revenue source that is not dependent on trading volumes. The Clearing 
Fund Maintenance Fee will be ratably based on the member's Clearing 
Fund average cash deposit.
Offset Increasing Costs and Expenses
    NSCC seeks to achieve a target operating margin to cover operating 
expenses and fund capital expenditures as well as investments in its 
clearing services and risk management infrastructure; however, NSCC 
faces continued increasing risk management costs as well as regulatory 
and compliance-related expenses that need to be offset by revenue 
growth in order to meet the target operating margin. Such increased 
costs and expenses, if not offset by revenue growth, could weaken 
NSCC's financial position over time. As such, NSCC is seeking to 
implement the Clearing Fund Maintenance Fee to add an additional 
revenue source to offset increasing costs and expenses.
    Proceeds of the Clearing Fund Maintenance Fee will be used 
primarily to offset risk management costs, regulatory and compliance 
expenses and for general operating expenses.
Calculation
    The amount of the monthly Clearing Fund Maintenance Fee for a 
member will be calculated monthly, in arrears, as the product of 0.25% 
and the average of the member's actual cash deposit to the Clearing 
Fund as of the end of each day of the month, multiplied by the number 
of days in that month and divided by 360; provided that, the investment 
rate of return on investment by NSCC of cash in the Clearing Fund for 
that month is equal to or greater than 0.25%. No fee will be charged to 
any member for a month in which the monthly rate of return on 
investment of cash in the Clearing Fund is less than 0.25%.
    Based on the 2015 average actual cash deposits to the Clearing 
Fund, the expected annual revenue to be generated by the Clearing Fund 
Maintenance Fee is approximately $16 million.
Member Impact
    The proposed rule change will impose the Clearing Fund Maintenance 
Fee on all members that are required to make deposits to the Clearing 
Fund.
    The Clearing Fund Maintenance Fee is a monthly fee based ratably 
upon the amount of the member's daily actual cash deposited to the 
Clearing Fund; it

[[Page 54147]]

is applicable when the monthly rate of return on investment of cash in 
the Clearing Fund is equal to or greater than 0.25%.
    Because the Clearing Fund Maintenance Fee per member is 
proportional to the average monthly cash deposit of the member to the 
Clearing Fund, members that generate higher levels of activity and make 
greater use of NSCC's services will generally be subject to a higher 
fee, because such members typically maintain higher Clearing Fund 
deposits pursuant to the Rules.
    NSCC views the proposed implementation of the Clearing Fund 
Maintenance Fee as a prudent way to minimize the magnitude of, and 
mitigate the need for, potential future increases in other fees.
    The proposed change will take effect on August 1, 2016.
2. Statutory Basis
    Section 17A(b)(3)(D) of the Act \7\ requires that NSCC's Rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its participants. The proposed fee is equitably 
allocated among members because it is based on each member's 
utilization of NSCC's services, as measured by their Clearing Fund 
deposits. In addition, NSCC believes that the proposed fee is 
reasonable because it will enable NSCC to better align its revenue with 
the costs and expenses required for NSCC to provide services to its 
members with a nominal impact on members. Therefore, NSCC believes the 
proposed rule change is consistent with Section 17A(b)(3)(D).\8\
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    \7\ 15 U.S.C. 78q-1(b)(3)(D).
    \8\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will impose a 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, because the proposed fee will 
be equitably allocated among members based on each member's utilization 
of NSCC's services. Members that have a higher level of activities and 
greater use of NSCC's services will generally be subject to a higher 
Clearing Fund Maintenance Fee and members with lower usage will pay 
less.

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

    NSCC has not received or solicited any written comments relating to 
this proposal. 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-2016-002 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-2016-002. 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-2016-002 and should be 
submitted on or before September 6, 2016.

    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. 2016-19326 Filed 8-12-16; 8:45 am]
 BILLING CODE 8011-01-P
54146 Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices

Reference Room, 100 F Street NE., Structure) of the Rules and Procedures NSCC is seeking to diversify its variable
Washington, DC 20549 on official (‘‘Rules’’) of NSCC in order to add a new revenue base with the proposed new
business days between the hours of fee that will be charged to Members and fee, which will introduce a revenue
10:00 a.m. and 3:00 p.m. Copies of such certain Limited Members 5 in source that is not dependent on trading
filing also will be available for connection with the maintenance of the volumes. The Clearing Fund
inspection and copying at the principal Clearing Fund, as described in greater Maintenance Fee will be ratably based
office of the Exchange. All comments detail below.6 Members and applicable on the member’s Clearing Fund average
received will be posted without change; Limited Members are collectively cash deposit.
the Commission does not edit personal referred to herein as ‘‘members.’’
Offset Increasing Costs and Expenses
identifying information from
II. Clearing Agency’s Statement of the NSCC seeks to achieve a target
submissions. You should submit only
Purpose of, and Statutory Basis for, the operating margin to cover operating
information that you wish to make
Proposed Rule Change expenses and fund capital expenditures
available publicly. All submissions
should refer to File Number SR–C2– In its filing with the Commission, the as well as investments in its clearing
2016–016, and should be submitted on clearing agency included statements services and risk management
or before September 6, 2016. concerning the purpose of and basis for infrastructure; however, NSCC faces
For the Commission, by the Division of
the proposed rule change and discussed continued increasing risk management
Trading and Markets, pursuant to delegated any comments it received on the costs as well as regulatory and
authority.9 proposed rule change. The text of these compliance-related expenses that need
Robert W. Errett, statements may be examined at the to be offset by revenue growth in order
Deputy Secretary. places specified in Item IV below. The to meet the target operating margin.
clearing agency has prepared Such increased costs and expenses, if
[FR Doc. 2016–19313 Filed 8–12–16; 8:45 am]
summaries, set forth in sections A, B, not offset by revenue growth, could
BILLING CODE 8011–01–P
and C below, of the most significant weaken NSCC’s financial position over
aspects of such statements. time. As such, NSCC is seeking to
SECURITIES AND EXCHANGE implement the Clearing Fund
(A) Clearing Agency’s Statement of the
COMMISSION Maintenance Fee to add an additional
Purpose of, and Statutory Basis for, the
revenue source to offset increasing costs
[Release No. 34–78525; File No. SR–NSCC– Proposed Rule Change
and expenses.
2016–002] 1. Purpose Proceeds of the Clearing Fund
The proposed rule change will add a Maintenance Fee will be used primarily
Self-Regulatory Organizations;
fee that will be charged to members in to offset risk management costs,
National Securities Clearing
connection with the maintenance of the regulatory and compliance expenses
Corporation; Notice of Filing and
Clearing Fund. and for general operating expenses.
Immediate Effectiveness of a Proposed
Rule Change To Add a Clearing Fund Clearing Fund Maintenance Fee Calculation
Maintenance Fee The amount of the monthly Clearing
Pursuant to the proposed rule change,
August 9, 2016. Fund Maintenance Fee for a member
NSCC proposes to introduce a new fee,
Pursuant to Section 19(b)(1) of the will be calculated monthly, in arrears,
to be known as the Clearing Fund
Securities Exchange Act of 1934 as the product of 0.25% and the average
Maintenance Fee, which will be charged
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 of the member’s actual cash deposit to
to members in arrears on a monthly
notice is hereby given that on July 29, the Clearing Fund as of the end of each
basis.
2016, National Securities Clearing The proposed rule change will (i) day of the month, multiplied by the
Corporation (‘‘NSCC’’) filed with the diversify NSCC’s revenue sources and number of days in that month and
Securities and Exchange Commission mitigate NSCC’s dependence on divided by 360; provided that, the
(‘‘Commission’’) the proposed rule revenues driven by trading volumes and investment rate of return on investment
change as described in Items I, II and III (ii) add a stable revenue source that will by NSCC of cash in the Clearing Fund
below, which Items have been prepared contribute to NSCC’s operating margin for that month is equal to or greater than
by the clearing agency. NSCC filed the by offsetting increasing costs and 0.25%. No fee will be charged to any
proposed rule change pursuant to expenses, as further described below. member for a month in which the
Section 19(b)(3)(A) of the Act 3 and Rule monthly rate of return on investment of
19b–4(f)(2) thereunder.4 The proposed Diversify Revenue Sources cash in the Clearing Fund is less than
rule change was effective upon filing NSCC’s current revenues are highly 0.25%.
with the Commission. The Commission variable due to the nature of the clearing Based on the 2015 average actual cash
is publishing this notice to solicit services, which are primarily driven by deposits to the Clearing Fund, the
comments on the proposed rule change trading volumes, but, as a utility, expected annual revenue to be
from interested persons. NSCC’s expenses are largely fixed. The generated by the Clearing Fund
combination of fixed costs and variable Maintenance Fee is approximately $16
I. Clearing Agency’s Statement of the revenues represents a financial risk for million.
Terms of Substance of the Proposed NSCC. To mitigate such financial risk,
Rule Change Member Impact
sradovich on DSK3GMQ082PROD with NOTICES

The proposed rule change consists of 5 The proposed new fee will be imposed on
The proposed rule change will impose
modifications to the Addendum A (Fee Limited Members that are required to make deposits the Clearing Fund Maintenance Fee on
to the Clearing Fund. Currently, those Limited all members that are required to make
9 17
Members are Mutual Fund/Insurance Services deposits to the Clearing Fund.
CFR 200.30–3(a)(12). Members and Fund Members organized under the
1 15 U.S.C. 78s(b)(1). The Clearing Fund Maintenance Fee
laws of the Republic of Ireland.
2 17 CFR 240.19b–4. 6 Capitalized terms not defined herein are defined is a monthly fee based ratably upon the
3 15 U.S.C. 78s(b)(3)(A).
in the Rules, available at www.dtcc.com/∼/media/ amount of the member’s daily actual
4 17 CFR 240.19b–4(f)(2). Files/Downloads/legal/rules/nscc_rules.pdf. cash deposited to the Clearing Fund; it

VerDate Sep<11>2014 19:23 Aug 12, 2016 Jkt 238001 PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 E:\FR\FM\15AUN1.SGM 15AUN1
Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices 54147

is applicable when the monthly rate of (C) Clearing Agency’s Statement on Commission and any person, other than
return on investment of cash in the Comments on the Proposed Rule those that may be withheld from the
Clearing Fund is equal to or greater than Change Received From Members, public in accordance with the
0.25%. Participants, or Others provisions of 5 U.S.C. 552, will be
NSCC has not received or solicited available for Web site viewing and
Because the Clearing Fund
any written comments relating to this printing in the Commission’s Public
Maintenance Fee per member is
proposal. NSCC will notify the Reference Room, 100 F Street NE.,
proportional to the average monthly Washington, DC 20549 on official
cash deposit of the member to the Commission of any written comments
received by NSCC. business days between the hours of
Clearing Fund, members that generate 10:00 a.m. and 3:00 p.m. Copies of the
higher levels of activity and make III. Date of Effectiveness of the filing also will be available for
greater use of NSCC’s services will Proposed Rule Change and Timing for inspection and copying at the principal
generally be subject to a higher fee, Commission Action office of NSCC and on DTCC’s Web site
because such members typically The foregoing rule change has become (http://dtcc.com/legal/sec-rule-
maintain higher Clearing Fund deposits effective pursuant to Section filings.aspx). All comments received
pursuant to the Rules. 19(b)(3)(A) 9 of the Act and paragraph (f) will be posted without change; the
NSCC views the proposed of Rule 19b–4 10 thereunder. At any time Commission does not edit personal
implementation of the Clearing Fund within 60 days of the filing of the identifying information from
Maintenance Fee as a prudent way to proposed rule change, the Commission submissions. You should submit only
summarily may temporarily suspend information that you wish to make
minimize the magnitude of, and
such rule change if it appears to the available publicly. All submissions
mitigate the need for, potential future
Commission that such action is should refer to File Number SR–NSCC–
increases in other fees. 2016–002 and should be submitted on
necessary or appropriate in the public
The proposed change will take effect interest, for the protection of investors, or before September 6, 2016.
on August 1, 2016. or otherwise in furtherance of the For the Commission, by the Division of
2. Statutory Basis purposes of the Act. Trading and Markets, pursuant to delegated
authority.11
IV. Solicitation of Comments
Section 17A(b)(3)(D) of the Act 7 Robert W. Errett,
requires that NSCC’s Rules provide for Interested persons are invited to Deputy Secretary.
the equitable allocation of reasonable submit written data, views, and [FR Doc. 2016–19326 Filed 8–12–16; 8:45 am]
dues, fees, and other charges among its arguments concerning the foregoing, BILLING CODE 8011–01–P
including whether the proposed rule
participants. The proposed fee is
change is consistent with the Act.
equitably allocated among members
Comments may be submitted by any of SECURITIES AND EXCHANGE
because it is based on each member’s the following methods:
utilization of NSCC’s services, as COMMISSION
measured by their Clearing Fund Electronic Comments [Release No. 34–78514; File No. SR–BOX–
deposits. In addition, NSCC believes • Use the Commission’s Internet 2016–38]
that the proposed fee is reasonable comment form (http://www.sec.gov/
because it will enable NSCC to better Self-Regulatory Organizations; BOX
rules/sro.shtml); or
• Send an email to rule-comments@ Options Exchange LLC; Notice of
align its revenue with the costs and
sec.gov. Please include File Number SR– Filing and Immediate Effectiveness of
expenses required for NSCC to provide
NSCC–2016–002 on the subject line. a Proposed Rule Change To Amend
services to its members with a nominal
the Fee Schedule on the BOX Market
impact on members. Therefore, NSCC Paper Comments LLC (‘‘BOX’’) Options Facility
believes the proposed rule change is
• Send paper comments in triplicate
consistent with Section 17A(b)(3)(D).8 August 9, 2016.
to Secretary, Securities and Exchange Pursuant to Section 19(b)(1) of the
(B) Clearing Agency’s Statement on Commission, 100 F Street NE., Securities Exchange Act of 1934 (the
Burden on Competition Washington, DC 20549. ‘‘Act’’),1 and Rule 19b–4 thereunder,2
All submissions should refer to File notice is hereby given that on July 29,
NSCC does not believe that the Number SR–NSCC–2016–002. This file
proposed rule change will impose a 2016, BOX Options Exchange LLC (the
number should be included on the ‘‘Exchange’’) filed with the Securities
burden on competition that is not subject line if email is used. To help the and Exchange Commission
necessary or appropriate in furtherance Commission process and review your (‘‘Commission’’) the proposed rule
of the purposes of the Act, because the comments more efficiently, please use change as described in Items I, II, and
proposed fee will be equitably allocated only one method. The Commission will III below, which Items have been
among members based on each post all comments on the Commission’s prepared by the Exchange. The
member’s utilization of NSCC’s services. Internet Web site (http://www.sec.gov/ Exchange filed the proposed rule change
Members that have a higher level of rules/sro.shtml). Copies of the pursuant to Section 19(b)(3)(A)(ii) of the
activities and greater use of NSCC’s submission, all subsequent Act,3 and Rule 19b–4(f)(2) thereunder,4
services will generally be subject to a amendments, all written statements which renders the proposal effective
sradovich on DSK3GMQ082PROD with NOTICES

higher Clearing Fund Maintenance Fee with respect to the proposed rule upon filing with the Commission. The
and members with lower usage will pay change that are filed with the Commission is publishing this notice to
less. Commission, and all written
communications relating to the 11 17 CFR 200.30–3(a)(12).
proposed rule change between the 1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
7 15 U.S.C. 78q–1(b)(3)(D). 9 15 U.S.C. 78s(b)(3)(A). 3 15 U.S.C. 78s(b)(3)(A)(ii).
8 Id. 10 17 CFR 240.19b–4(f). 4 17 CFR 240.19b–4(f)(2).

VerDate Sep<11>2014 19:23 Aug 12, 2016 Jkt 238001 PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 E:\FR\FM\15AUN1.SGM 15AUN1
Document Created: 2016-08-13 02:22:21
Document Modified: 2016-08-13 02:22:21
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		81 FR 54146