83_FR_44522 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

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)

Page Range44353-44354
FR Document2018-18782

Federal Register, Volume 83 Issue 169 (Thursday, 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]


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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.
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    \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'').
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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\
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    \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.
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    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\
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    \9\ Notice, 83 FR at 35042.
    \10\ Id.
    \11\ Id.
    \12\ Id.
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    NSCC would implement the proposed changes no later than November 
30, 2018.\13\
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    \13\ Id.
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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\
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    \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).
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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\
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    \16\ 15 U.S.C. 78q-1(b)(3)(F).
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    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\
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    \17\ Id.
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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\
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    \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.
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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.
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    \21\ 15 U.S.C. 78q-1.
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    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\
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    \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\
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    \23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18782 Filed 8-29-18; 8:45 am]
 BILLING CODE 8011-01-P

Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 44353 NSCC–2017–805, as modified by Members’’).6 Commission Billing Commission Billing service and the Amendment No. 1, and that NSCC is Members hold a limited membership at associated membership category. The authorized to implement the proposal as NSCC that allows such firms to proposed change is designed to of the date of this notice or the date of participate in NSCC solely for the eliminate an underutilized service that an order by the Commission approving collection of commissions.7 NSCC takes up NSCC resources (through its proposed rule change SR–NSCC–2017– tabulates all commission payment reliance on manual operations and by 017, as modified by Amendment No. 1, records received on a monthly basis, operating at a financial loss) and is no whichever is later. and either sends amounts to The longer relied on by Members or the By the Commission. Depository Trust Company (‘‘DTC’’) for industry. As NSCC would no longer Eduardo A. Aleman, payment (for Members that are also need to divert resources to the service, Participants of DTC) or processes the proposed rule change would afford Assistant Secretary. payments through the Automated NSCC the opportunity to redeploy those [FR Doc. 2018–18869 Filed 8–29–18; 8:45 am] Clearing House.8 resources in a manner that could better BILLING CODE 8011–01–P NSCC proposes to terminate the support NSCC’s other, more utilized Commission Billing service and the clearance and settlement services. associated membership category.9 NSCC Accordingly, the Commission finds that SECURITIES AND EXCHANGE states that over the years the volumes of COMMISSION the proposed rule change is designed to trades handled by floor brokerage firms promote the prompt and accurate have decreased, leading to a significant [Release No. 34–83937; File No. SR–NSCC– clearance and settlement of securities 2018–004] decrease in the use of this service.10 transactions, consistent with Section NSCC states that the reduced volumes of 17A(b)(3)(F) of the Act.17 Self-Regulatory Organizations; transactions have caused this service to National Securities Clearing be provided at a financial loss to B. Rule 17Ad–22(e)(21)(iv) Under the Corporation; Order Approving NSCC.11 Additionally, NSCC states that Act Proposed Rule Change To Terminate due to the use of legacy systems that the Commission Billing Service and lack automation and support features, Rule 17Ad–22(e)(21)(iv) under the Act the Commission Billing Limited the service continues to rely on manual requires a covered clearing agency 18 to Membership processes and requires personnel establish, implement, maintain, and involvement, which can lead to errors.12 enforce written policies and procedures August 24, 2018. NSCC would implement the proposed reasonably designed to be efficient and On July 13, 2018, National Securities changes no later than November 30, effective in meeting the requirements of Clearing Corporation (‘‘NSCC’’) filed 2018.13 its participants and the markets it with the Securities and Exchange serves.19 As described above, use of the Commission (‘‘Commission’’) proposed II. Discussion and Commission Findings Commission Billing service has rule change SR–NSCC–2018–004, significantly decreased, as the industry pursuant to Section 19(b)(1) of the Section 19(b)(2)(C) of the Act directs has change and the service no longer Securities Exchange Act of 1934 the Commission to approve a proposed provides the same value that it had (‘‘Act’’) 1 and Rule 19b–4 thereunder.2 rule change of a self-regulatory historically. As a result, NSCC currently The proposed rule change was organization if it finds that such operates the service at a financial loss. published for comment in the Federal proposed rule change is consistent with As such, NSCC has determined that it Register on July 24, 2018.3 The the requirements of the Act and rules would be more efficient and effective in Commission did not receive any and regulations thereunder applicable to meeting the requirements of its comment letters on the proposed rule such organization.14 The Commission Members and the market NSCC serves to change. For the reasons discussed believes the proposal is consistent with eliminate the service. In doing so, NSCC below, the Commission approves the Act, specifically Section 17A(b)(3)(F) of would be able to redirect the resources proposed rule change. the Act and Rules 17Ad–22(e)(21)(iv) being consumed by the Commission under the Act.15 I. Description of the Proposed Rule Billing service to other, more needed Change A. Section 17A(b)(3)(F) of the Act services. Therefore, the Commission Section 17A(b)(3)(F) of the Act finds that the proposed rule change is The proposed rule change would amend the Rules and Procedures of requires, in part, that the rules of a designed to help ensure that NSCC is NSCC (‘‘Rules’’) 4 to terminate the clearing agency, such as NSCC, be efficient and effective in meeting the Commission Billing service. Currently, designed to promote the prompt and requirements of its participants, the Commission Billing service accurate clearance and settlement of facilitates the payment of commissions securities transactions.16 17 Id. 18 A ‘‘covered clearing agency’’ means, among between NSCC’s members (‘‘Members’’) As described above, the proposed rule other things, a clearing agency registered with the and floor brokerage firms 5 that charge change would terminate the Commission under Section 17A of the Exchange commissions (‘‘Commission Billing Act (15 U.S.C. 78q–1 et seq.) that is designated 6 Notice, 83 FR at 35041. systemically important by the Financial Stability 7 Id. Oversight Counsel (‘‘FSOC’’) pursuant to the 1 15 U.S.C. 78s(b)(1). 8 Notice, 83 FR at 35041–42. Payment, Clearing, and Settlement Supervision Act 2 17 CFR 240.19b–4. 9 Notice, 83 FR at 35042. of 2010 (12 U.S.C. 5461 et seq.). See 17 CFR amozie on DSK3GDR082PROD with NOTICES1 3 Securities Exchange Act Release No. 83666 (July 10 Id. 240.17Ad–22(a)(5)–(6). On July 18, 2012, FSOC 18, 2018), 83 FR 35041 (July 24, 2018) (SR–NSCC– 11 Id. designated NSCC as systemically important. U.S. 2018–004) (‘‘Notice’’). Department of the Treasury, ‘‘FSOC Makes First 12 Id. 4 Available at http://www.dtcc.com/legal/rules- Designations in Effort to Protect Against Future 13 Id. and-procedures. Financial Crises,’’ available at https:// 14 15 U.S.C. 78s(b)(2)(C). 5 Floor brokerage firms are members of the New www.treasury.gov/press-center/press-releases/ 15 15 U.S.C. 78q–1(b)(3)(F); 17 CFR 240.17Ad– Pages/tg1645.asp. Therefore, NSCC is a covered York Stock Exchange (‘‘NYSE’’) and NYSE American. Floor brokerage firms execute trades on 22(e)(21)(iv). clearing agency. behalf of their clients for a commission. 16 15 U.S.C. 78q–1(b)(3)(F). 19 17 CFR 240.17Ad–22(e)(21)(iv). 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44354 Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices consistent with Rule 17Ad–22(e)(21)(iv) advance notice was published for notice to amend and replace in its under the Act.20 comment in the Federal Register on entirety the advance notice as originally January 30, 2018.4 In that publication, filed on December 18, 2017.8 On July 6, III. Conclusion the Commission also extended the 2018, the Commission received a On the basis of the foregoing, the review period of the advance notice for response to its request for additional Commission finds that the proposal is an additional 60 days, pursuant to information in consideration of the consistent with the requirements of the Section 806(e)(1)(H) of the Clearing advance notice, which, in turn, added a Act, in particular the requirements of Supervision Act.5 On April 10, 2018, further 60 days to the review period Section 17A of the Act 21 and the rules the Commission required additional pursuant to Section 806(e)(1)(E) and (G) and regulations thereunder. information from NSCC pursuant to of the Clearing Supervision Act.9 The It is therefore ordered, pursuant to Section 806(e)(1)(D) of the Clearing Section 19(b)(2) of the Act, that Commission did not receive any Supervision Act,6 which tolled the comments. This publication serves as proposed rule change SR–NSCC–2018– Commission’s period of review of the 004 be, and hereby is, approved.22 notice that the Commission does not advance notice until 60 days from the object to the proposed changes set forth For the Commission, by the Division of date the information required by the Commission was received by the in the advance notice, as modified by Trading and Markets, pursuant to delegated authority.23 Commission.7 On June 28, 2018, NSCC Amendment No. 1 (hereinafter, Eduardo A. Aleman, filed Amendment No. 1 to the advance ‘‘Advance Notice’’). Assistant Secretary. I. Description of the Advance Notice [FR Doc. 2018–18782 Filed 8–29–18; 8:45 am] January 8, 2018. Securities Exchange Act Release No. 82428 (January 2, 2018), 83 FR 897 (January 8, The Advance Notice consists of BILLING CODE 8011–01–P 2018) (SR–NSCC–2017–018). On February 8, 2018, the Commission designated a longer period within proposed changes to NSCC’s Rules and which to approve, disapprove, or institute Procedures (‘‘Rules’’) 10 in order to (1) SECURITIES AND EXCHANGE proceedings to determine whether to approve or modify the loss allocation process; (2) disapprove the Proposed Rule Change. Securities COMMISSION Exchange Act Release No. 82670 (February 8, 2018), align NSCC’s loss allocation rules with 83 FR 6626 (February 14, 2018) (SR–DTC–2017– the three clearing agencies of The [Release No. 34–83952; File No. SR–NSCC– 022, SR–FICC–2017–022, SR–NSCC–2017–018). On 2017–806] Depository Trust & Clearing Corporation March 20, 2018, the Commission instituted proceedings to determine whether to approve or (‘‘DTCC’’)—The Depository Trust Self-Regulatory Organizations; disapprove the Proposed Rule Change. Securities Company (‘‘DTC’’), Fixed Income National Securities Clearing Exchange Act Release No. 82910 (March 20, 2018), Clearing Corporation (‘‘FICC’’) 83 FR 12968 (March 26, 2018) (SR–NSCC–2017– Corporation; Notice of No Objection to 018). On June 25, 2018, the Commission designated (including the Government Securities an Advance Notice, as Modified by a longer period for Commission action on the Division (‘‘FICC/GSD’’) and the Amendment No. 1, To Amend the Loss proceedings to determine whether to approve or Mortgage-Backed Securities Division Allocation Rules and Make Other disapprove the Proposed Rule Change. Securities (‘‘FICC/MBSD’’)), and NSCC Exchange Act Release No. 83510 (June 25, 2018), 83 Changes FR 30791 (June 29, 2018) (SR–DTC–2017–022, SR– (collectively, the ‘‘DTCC Clearing FICC–2017–022, SR–NSCC–2017–018). On June 28, Agencies’’); 11 (3) reduce the time within August 27, 2018. 2018, NSCC filed Amendment No. 1 to the On December 18, 2017, National which NSCC is required to return a Proposed Rule Change, which was published in the Securities Clearing Corporation Federal Register on July 19, 2018. Securities former Member’s Clearing Fund deposit; (‘‘NSCC’’) filed with the Securities and Exchange Act Release No. 83633 (July 13, 2018), 83 and (4) make conforming and technical FR 34227 (July 19, 2018) (SR–NSCC–2017–018). changes. Each of these proposed Exchange Commission (‘‘Commission’’) NSCC submitted a courtesy copy of Amendment advance notice SR–NSCC–2017–806 No. 1 to the Proposed Rule Change through the changes is described below. A detailed pursuant to Section 806(e)(1) of Title Commission’s electronic public comment letter description of the specific rule text VIII of the Dodd-Frank Wall Street mechanism. Accordingly, Amendment No. 1 to the changes proposed in this Advance Proposed Rule Change has been publicly available Reform and Consumer Protection Act on the Commission’s website at https:// 8 Securities Exchange Act Release No. 83748 (July entitled the Payment, Clearing, and www.sec.gov/rules/sro/nscc.htm since June 29, 2018. The Commission did not receive any 31, 2018), 83 FR 38375 (August 6, 2018) (SR– Settlement Supervision Act of 2010 NSCC–2017–806) (‘‘Notice of Amendment No. 1’’). comments. The proposal, as set forth in both the (‘‘Clearing Supervision Act’’) 1 and Rule advance notice and the Proposed Rule Change, each NSCC submitted a courtesy copy of Amendment 19b–4(n)(1)(i) under the Securities as modified by Amendments No. 1, shall not take No. 1 to the advance notice through the Exchange Act of 1934 (‘‘Act’’) 2 to effect until all required regulatory actions are Commission’s electronic public comment letter completed. mechanism. Accordingly, Amendment No. 1 to the amend NSCC’s loss allocation rules, 4 Securities Exchange Act Release No. 82584 advance notice has been publicly available on the accelerate the return of certain deposits (January 24, 2018), 83 FR 4377 (January 30, 2018) Commission’s website at https://www.sec.gov/rules/ to former Members, and make other (SR–NSCC–2017–806) (‘‘Notice’’). sro/nscc-an.htm since June 29, 2018. conforming and technical changes.3 The 5 Pursuant to Section 806(e)(1)(H) of the Clearing 9 12 U.S.C. 5465(e)(1)(E) and (G); see Supervision Act, the Commission may extend the Memorandum from the Office of Clearance and 20 Id. review period of an advance notice for an Settlement Supervision, Division of Trading and 21 15 additional 60 days, if the changes proposed in the Markets, titled ‘‘Response to the Commission’s U.S.C. 78q–1. Request for Additional Information,’’ available at 22 In advance notice raise novel or complex issues, approving the proposed rule change, the subject to the Commission providing the clearing https://www.sec.gov/rules/sro/nscc-an.htm. Commission considered the proposals’ impact on agency with prompt written notice of the extension. 10 Each capitalized term not otherwise defined efficiency, competition, and capital formation. 15 12 U.S.C. 5465(e)(1)(H). The Commission found that herein has its respective meaning as set forth in the U.S.C. 78c(f). the advance notice raised complex issues and, Rules, available at http://www.dtcc.com/∼/media/ 23 17 CFR 200.30–3(a)(12). accordingly, extended the review period of the Files/Downloads/legal/rules/nscc_rules.pdf. amozie on DSK3GDR082PROD with NOTICES1 1 12 U.S.C. 5465(e)(1). advance notice for an additional 60 days until April 11 DTCC is a user-owned and user-governed 2 17 CFR 240.19b–4(n)(1)(i). 17, 2018. See Notice, supra note 4. holding company and is the parent company of 3 On December 18, 2017, NSCC filed the advance 6 12 U.S.C. 5465(e)(1)(D). DTC, FICC, and NSCC. DTCC operates on a shared notice as proposed rule change SR–NSCC–2017– 7 See 12 U.S.C. 5465(e)(1)(E)(ii) and (G)(ii); see services model with respect to the DTCC Clearing 018 with the Commission pursuant to Section Memorandum from the Office of Clearance and Agencies. Most corporate functions are established 19(b)(1) of the Act and Rule 19b–4 thereunder Settlement Supervision, Division of Trading and and managed on an enterprise-wide basis pursuant (‘‘Proposed Rule Change’’). 15 U.S.C. 78s(b)(1) and Markets, titled ‘‘Commission’s Request for to intercompany agreements under which it is 17 CFR 240.19b–4, respectively. The Proposed Rule Additional Information,’’ available at https:// generally DTCC that provides a relevant service to Change was published in the Federal Register on www.sec.gov/rules/sro/nscc-an.htm. a DTCC Clearing Agency. VerDate Sep<11>2014 17:25 Aug 29, 2018 Jkt 244001 PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 E:\FR\FM\30AUN1.SGM 30AUN1


Document Created: 2018-08-30 01:20:55
Document Modified: 2018-08-30 01:20:55
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation83 FR 44353 
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