83 FR 44353 - Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change To Terminate the Commission Billing Service and the Commission Billing Limited Membership

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 169 (August 30, 2018)

[Federal Register Volume 83, Number 169 (Thursday, August 30, 2018)]
[Notices]
[Pages 44353-44354]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-18782]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83937; File No. SR-NSCC-2018-004]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving Proposed Rule Change To Terminate the 
Commission Billing Service and the Commission Billing Limited 
Membership

August 24, 2018.
    On July 13, 2018, National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') proposed rule change SR-NSCC-2018-004, pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder.\2\ The proposed rule change was published 
for comment in the Federal Register on July 24, 2018.\3\ The Commission 
did not receive any comment letters on the proposed rule change. For 
the reasons discussed below, the Commission approves the proposed rule 
change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 83666 (July 18, 2018), 
83 FR 35041 (July 24, 2018) (SR-NSCC-2018-004) (``Notice'').
---------------------------------------------------------------------------

I. Description of the Proposed Rule Change

    The proposed rule change would amend the Rules and Procedures of 
NSCC (``Rules'') \4\ to terminate the Commission Billing service. 
Currently, the Commission Billing service facilitates the payment of 
commissions between NSCC's members (``Members'') and floor brokerage 
firms \5\ that charge commissions (``Commission Billing Members'').\6\ 
Commission Billing Members hold a limited membership at NSCC that 
allows such firms to participate in NSCC solely for the collection of 
commissions.\7\ NSCC tabulates all commission payment records received 
on a monthly basis, and either sends amounts to The Depository Trust 
Company (``DTC'') for payment (for Members that are also Participants 
of DTC) or processes payments through the Automated Clearing House.\8\
---------------------------------------------------------------------------

    \4\ Available at http://www.dtcc.com/legal/rules-and-procedures.
    \5\ Floor brokerage firms are members of the New York Stock 
Exchange (``NYSE'') and NYSE American. Floor brokerage firms execute 
trades on behalf of their clients for a commission.
    \6\ Notice, 83 FR at 35041.
    \7\ Id.
    \8\ Notice, 83 FR at 35041-42.
---------------------------------------------------------------------------

    NSCC proposes to terminate the Commission Billing service and the 
associated membership category.\9\ NSCC states that over the years the 
volumes of trades handled by floor brokerage firms have decreased, 
leading to a significant decrease in the use of this service.\10\ NSCC 
states that the reduced volumes of transactions have caused this 
service to be provided at a financial loss to NSCC.\11\ Additionally, 
NSCC states that due to the use of legacy systems that lack automation 
and support features, the service continues to rely on manual processes 
and requires personnel involvement, which can lead to errors.\12\
---------------------------------------------------------------------------

    \9\ Notice, 83 FR at 35042.
    \10\ Id.
    \11\ Id.
    \12\ Id.
---------------------------------------------------------------------------

    NSCC would implement the proposed changes no later than November 
30, 2018.\13\
---------------------------------------------------------------------------

    \13\ Id.
---------------------------------------------------------------------------

II. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act 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 such 
organization.\14\ The Commission believes the proposal is consistent 
with Act, specifically Section 17A(b)(3)(F) of the Act and Rules 17Ad-
22(e)(21)(iv) under the Act.\15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(2)(C).
    \15\ 15 U.S.C. 78q-1(b)(3)(F); 17 CFR 240.17Ad-22(e)(21)(iv).
---------------------------------------------------------------------------

A. Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, in part, that the rules 
of a clearing agency, such as NSCC, be designed to promote the prompt 
and accurate clearance and settlement of securities transactions.\16\
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    As described above, the proposed rule change would terminate the 
Commission Billing service and the associated membership category. The 
proposed change is designed to eliminate an underutilized service that 
takes up NSCC resources (through its reliance on manual operations and 
by operating at a financial loss) and is no longer relied on by Members 
or the industry. As NSCC would no longer need to divert resources to 
the service, the proposed rule change would afford NSCC the opportunity 
to redeploy those resources in a manner that could better support 
NSCC's other, more utilized clearance and settlement services. 
Accordingly, the Commission finds that the proposed rule change is 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions, consistent with Section 17A(b)(3)(F) of the 
Act.\17\
---------------------------------------------------------------------------

    \17\ Id.
---------------------------------------------------------------------------

B. Rule 17Ad-22(e)(21)(iv) Under the Act

    Rule 17Ad-22(e)(21)(iv) under the Act requires a covered clearing 
agency \18\ 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.\19\ As described above, use of the Commission 
Billing service has significantly decreased, as the industry has change 
and the service no longer provides the same value that it had 
historically. As a result, NSCC currently operates the service at a 
financial loss. As such, NSCC has determined that it would be more 
efficient and effective in meeting the requirements of its Members and 
the market NSCC serves to eliminate the service. In doing so, NSCC 
would be able to redirect the resources being consumed by the 
Commission Billing service to other, more needed services. Therefore, 
the Commission finds that the proposed rule change is designed to help 
ensure that NSCC is efficient and effective in meeting the requirements 
of its participants,

[[Page 44354]]

consistent with Rule 17Ad-22(e)(21)(iv) under the Act.\20\
---------------------------------------------------------------------------

    \18\ A ``covered clearing agency'' means, among other things, a 
clearing agency registered with the Commission under Section 17A of 
the Exchange Act (15 U.S.C. 78q-1 et seq.) that is designated 
systemically important by the Financial Stability Oversight Counsel 
(``FSOC'') pursuant to the Payment, Clearing, and Settlement 
Supervision Act of 2010 (12 U.S.C. 5461 et seq.). See 17 CFR 
240.17Ad-22(a)(5)-(6). On July 18, 2012, FSOC designated NSCC as 
systemically important. U.S. Department of the Treasury, ``FSOC 
Makes First Designations in Effort to Protect Against Future 
Financial Crises,'' available at https://www.treasury.gov/press-center/press-releases/Pages/tg1645.asp. Therefore, NSCC is a covered 
clearing agency.
    \19\ 17 CFR 240.17Ad-22(e)(21)(iv).
    \20\ Id.
---------------------------------------------------------------------------

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act, in particular 
the requirements of Section 17A of the Act \21\ and the rules and 
regulations thereunder.
---------------------------------------------------------------------------

    \21\ 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-2018-004 be, and hereby is, 
approved.\22\
---------------------------------------------------------------------------

    \22\ In approving the proposed rule change, the Commission 
considered the proposals' impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18782 Filed 8-29-18; 8:45 am]
 BILLING CODE 8011-01-P