Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to Amendments to By-Laws and Temporary Waiver of Certain Provisions of Shareholders Agreement

[Federal Register Volume 64, Number 119 (Tuesday, June 22, 1999)]
[Notices]
[Pages 33336-33337]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15846]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41520; File No. SR-NSCC-99-08]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Order Granting Accelerated Approval 
of a Proposed Rule Change Relating to Amendments to By-Laws and 
Temporary Waiver of Certain Provisions of Shareholders Agreement

June 11, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 11, 1999, the 
National Securities Clearing Corporation (``NSCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change (File No. SR-NSCC-99-08) as described in Items I and II below, 
which items have been prepared primarily by NSCC. The Commission is 
publishing this notice and order to solicit comments from interested 
persons and to grant accelerated approval of the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Under the proposed rule change, NSCC will amend its By-Laws and 
will temporarily waive certain provisions of its shareholders agreement 
in order to increase the size of its Board of Directors.

[[Page 33337]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NSCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NSCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of such 
statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The Boards of Directors of NSCC and The Depository Trust Company 
(``DTC'') have decided to integrate NSCC and DTC. An initial step in 
the integration is to propose at NSCC's and DTC's annual meetings in 
June the reelection of NSCC's Board of Directors by shareholders of 
NSCC and to propose the reelection of DTC's Board of Directors by the 
shareholders of DTC. Subject to regulatory approval, the two Boards 
will then be restructured so that the same group of individuals will 
serve as the Boards of Directors for each of the two companies.\3\ 
Through this process and with the inclusion of DTC and NSCC management 
directors, the Board of Directors for each company will be comprised of 
twenty-seven people.\4\
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    \3\ Simply combining NSCC's current Board with DTC's current 
Board to achieve uniform Boards would result in certain user and 
marketplace organizations having more than one representative on the 
uniform Boards. As a result, each organization represented will be 
asked to select only one representative.
    \4\ Under the Federal Reserve Act, DTC's may have no more than 
twenty-five members on its Board. As a result, after the uniform 
Boards are elected, DTC's Board will have twenty-five members and 
two non-voting advisors, and NSCC's board will have twenty-seven 
members.
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    To achieve this result, NSCC will amend Article II, Section 1 of 
its By-Laws (which currently provides for a Board of 21 Directors) to 
increase the size of the Board to a maximum of 30 directors. In 
addition, Section 8(A)(ii) of NSCC's shareholders agreement among NSCC, 
the New York Stock Exchange Inc./Stock Clearing Corporation, American 
Stock Exchange Inc./American Stock Exchange Clearing Corporation, and 
National Association of Securities Dealers Inc./National Clearing 
Corporation, dated December 15, 1976, as amended, will be temporarily 
waived.\5\ Further, because some NSCC directors have already served the 
maximum term of 5 years, Section 8(A)(i) of the shareholders agreement 
will also be waived.\6\
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    \5\ Section 8(A)(i) of NSCC's shareholders agreement sets forth 
the process for establishing the nominating committee of NSCC's 
Board of Directors.
    \6\ Section 8(A)(ii) of NSCC's shareholders agreement provides, 
among other things, that no person shall be eligible to serve as a 
participant for more than five consecutive years.
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    NSCC believes that the proposed rule change is consistent with the 
requirements of Section 17A(b)(3)(A) of the Act \7\ and the rules and 
regulations thereunder applicable to NSCC. The proposed rule change 
will not affect the safeguarding of securities and funds in NSCC's 
custody or control or for which it is responsible.
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    \7\ 15 U.S.C. 78q-1(b)(3)(A).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will impact or 
impose a burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    No written comments have been solicited or received. NSCC will 
notify the Commission of any written comments received by NSCC.

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

    Section 17A(b)(3)(C) of the Act \8\ requires that the rules of a 
clearing agency assure a fair representation of its shareholders (or 
members) and participants in the selection of its directors and 
administration of its affairs. The Commission believes that the 
proposed rule change is consistent with NSCC's obligations under 
Section 17A(b)(3)(C) because it should not affect the representation of 
NSCC's shareholders and participants in the selection of its directors 
and the administration of its affairs. 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 and the rules and regulations thereunder.
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    \8\ 15 U.S.C. 78q-1(b)(3)(C).
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the publication of notice of 
the filing. Approving prior to the thirtieth day after publication of 
notice will allow NSCC to proceed at its annual meeting on June 12, 
1999, with the steps necessary to modify its Board of Directors so that 
NSCC and DTC can implement uniform boards.

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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington DC 20549-0609. 
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 inspection and copying in the 
Commission's Public Reference Section, 450 Fifth Street, NW, 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of DTC. All submissions 
should refer to File No. SR-NSCC-99-08 and should be submitted by July 
12, 1999.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-NSCC-99-08) be and hereby is 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-15846 Filed 6-21-99; 8:45 am]
BILLING CODE 8010-01-M