[Federal Register Volume 85, Number 71 (Monday, April 13, 2020)]
[Notices]
[Pages 20556-20558]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07656]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88579; File No. SR-NSCC-2020-009]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change To Remove Access to the Fund/SERV Service by Data Services
Only Members in Rule 52 and Revise the Defined Term for Fund/SERV in
the NSCC Rules
April 7, 2020.
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 April 2, 2020, 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
subparagraph (f)(4) of Rule 19b-4 thereunder.\4\ 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)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
(a) The proposed rule change of NSCC is annexed hereto as Exhibit 5
and consists of modifications to NSCC's Rules & Procedures (``Rules'')
in order to (i) remove access to the Fund/Serv service (``Fund/SERV'')
by Data Services Only Members in Rule 52 of the Rules and (ii) revise
the term ``Fund/Serv'' to ``Fund/SERV'' in the Rules to reflect
conventional use of the term, as described in greater detail below.\5\
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\5\ Terms not defined herein are defined in the Rules, available
at https://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
Background--Data Services Only Members
In 2001, NSCC established a new membership category, called the
Data Services Only Member.\6\ Data Services Only Members are permitted
to participate solely in the transmission of data and information and
have access to only those services specifically enumerated under NSCC's
Rules.\7\ The Data Services Only Members are not permitted to settle
any transactions through NSCC.\8\ Initially the Data Services Only
Members were only permitted to access Networking services in Mutual
Fund Services.\9\ Data Services Only Members were initially granted
permission to access Networking in order to make inquiries regarding
their customer accounts in an automated format using a communications-
translation interface in Extensible Markup Language or ``XML''.\10\
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\6\ Securities Exchange Act Release No. 44960 (October 19,
2001), 66 FR 54045 (October 25, 2001) (SR-NSCC-2001-14) (indicating
that the new membership category is being added at the request of
NSCC's Fund Members and the Investment Company Institute in order to
permit broker-dealers who otherwise do not qualify to be NSCC
members to obtain access to customers account data in an automated
format).
\7\ See Section 2(ii)(a) of Rule 2, supra note 5 (provides that
Data Services Only Members participate ``solely in the transmission
of data and information, and shall utilize only those features of
services that the Corporation may, from time to time, expressly
designate as eligible for access by a Data Services Only Member.'').
\8\ Id.
\9\ Supra note 6.
\10\ See Securities Exchange Act Release No. 45560 (March 14,
2002), 67 FR 13200 (March 21, 2002) (SR-NSCC-2001-18) (``SR-NSCC-
2001-18''). XML is a programming format that allows for the transfer
of structured data between different applications.
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In 2002, the Data Services Only Member access was expanded to
include access to Fund/SERV.\11\ Data Services Only Members were
provided access to Fund/SERV in connection with a new function of Fund/
SERV called Fund/SPEED which was launched to provide firms and
financial advisors with an ability to obtain information on, and
transmit, their clients' mutual fund purchase and redemption
transactions through Fund/SERV in an automated format, with settlement
conducted directly between counterparties and outside of NSCC.\12\
Fund/SPEED was a combination of the XML inquiry functionality that had
been provided to Data Services Only Members for Networking and an XML
communications interface used to transmit data to Fund/SERV.\13\
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\11\ Id. Fund/SERV is a service provided by NSCC to allow
Members and certain Limited Members enumerated in Rule 52 to process
and/or settle, as the case may be, on an automated basis purchase
and redemption orders and transactions in interests in Fund/Serv
Eligible Funds. See Rule 52, supra note 5.
\12\ See SR-NSCC-2001-18, supra note 10.
\13\ Id.
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The Fund/SPEED functionality was discontinued prior to 2013.\14\
Following the discontinuation of Fund/SPEED, a similar functionality
has not been added to Fund/SERV for Data Services Only Members.
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\14\ See Securities Exchange Act Release No. 68562 (January 2,
2013), 78 FR 1292 (January 8, 2013) (SR-NSCC-2012-11) (removing the
fees relating to Fund/SPEED because Fund/SPEED was discontinued).
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NSCC does not believe that there is a need to continue to permit
Data Services Only Members to have access to Fund/SERV because the
Fund/SPEED functionality, which was used by Data Services Only Members
to access and transmit Fund/SERV data, was discontinued. NSCC does not
believe that any Data Services Only Members have utilized Fund/SERV
since Fund/SPEED was discontinued and there are currently no active
Data Services Only Members that access the Fund/SERV service. In
addition, Fund/SERV is primarily a service designed for settlement of
mutual fund transactions and Data Services Only Members are not
permitted to settle transactions through NSCC.\15\ As such, NSCC is
proposing to remove the ability of Data Services Only Members to access
Fund/SERV.
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\15\ See Section 2(ii)(a) of Rule 2, supra note 5.
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Fund/SERV[supreg]
NSCC is also proposing to change the term ``Fund/Serv'' to ``Fund/
SERV'' in several places in the Rules to reflect current conventional
use of the name of the service and the registered trademark of the
service. In addition, the registered trademark symbol would be placed
on the term in Rule 52 in the heading for Section A to reflect that it
is a registered trademark.
[[Page 20557]]
Proposed Rule Change
In order to implement the proposal above, NSCC would remove all of
the references to Data Services Only Member in Section A of Rule 52 of
the Rules,\16\ which is the section relating to Fund/SERV. In addition,
NSCC would remove the sentence referring to orders being submitted by
Data Services Only Members in Section 2 of Section A of Rule 52 \17\ as
that sentence would no longer be applicable if Data Services Only
Members are removed from having access to Fund/SERV. NSCC would also
change the term ``Fund/Serv'' to ``Fund/SERV'' in several places in the
Rules and the registered trademark symbol would be placed on the term
in Rule 52 in the heading for Section A.\18\
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\16\ Section A of Rule 52, supra note 5.
\17\ Id.
\18\ Id.
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2. Statutory Basis
Section 17A(b)(3)(F) of the Act requires, in part, that the Rules
be designed to promote the prompt and accurate clearance and settlement
of securities transactions.\19\ NSCC believes that the proposed rule
change is consistent with this provision because it would provide
enhanced clarity and transparency for participants with respect to
services offered by NSCC by updating the Rules to remove the ability to
access a service that Data Services Only Members do not utilize and are
unlikely to utilize in the future. Fund/SPEED, which was designed to
provide participants access to, and the ability to transmit, certain
Fund/SERV data without the ability to settle, was discontinued. Since
Fund/SPEED has been discontinued, a similar functionality has not been
added to Fund/SERV for Data Services Only Members and Fund/SERV is not
being utilized by any Data Services Only Members. Since Fund/SERV is
primarily a service designed to facilitate settlement of Fund/SERV
Eligible Funds, which Data Services Only Members are not permitted to
do through NSCC, NSCC does not believe that Data Services Only Members
would utilize Fund/SERV in the future.\20\ The proposed change of the
defined term ``Fund/Serv'' to ``Fund/SERV'' in several places would
also provide enhanced clarity for participants because ``Fund/SERV''
reflects the current conventional use of the name of the service and is
the registered trademark for the service.
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\19\ 15 U.S.C. 78q-1(b)(3)(F).
\20\ See Section A.2. of Rule 52, supra note 1 (provides that
``Orders submitted by Data Services Only Members shall not settle
through the facilities of the Corporation.'')
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Therefore, by providing enhanced clarity and transparency in the
Rules regarding the services provided by NSCC and the services to which
Data Services Only Members have access, NSCC believes the proposed rule
change would promote the prompt and accurate clearance and settlement
of securities transactions, consistent with the requirements of the
Act, in particular Section 17A(b)(3)(F), cited above.
(B) Clearing Agency's Statement on Burden on Competition
NSCC does not believe that the proposed rule change would have any
impact on competition. Since Fund/SPEED was discontinued, Data Services
Only Members are not utilizing Fund/SERV. In addition, it is not
anticipated that any Data Services Only Members will utilize Fund/SERV
in the future because there has not been any functionality to replace
Fund/SPEED for Data Services Only Members and Data Services Only
Members are not entitled to use the settlement features of Fund/SERV
which is its primary purpose. Therefore, the proposed rule change
should have no effect on NSCC participants, other than to remove a
right to have access to a service by Data Services Only Members that is
unlikely to be utilized by Data Services Only Members. In addition, the
changes of the term ``Fund/Serv'' to ``Fund/SERV'' and the inclusion of
the registered trademark symbol would also not have any impact on
competition because such changes are clarifications of the Rules and
would not otherwise affect the rights or obligations of NSCC Members.
(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) \21\ of the Act and paragraph (f) \22\ of Rule 19b-4
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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\21\ 15 U.S.C 78s(b)(3)(A).
\22\ 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-2020-009 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-2020-009. 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 website (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 website 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 website
(https://dtcc.com/legal/sec-rule-filings.aspx). All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NSCC-
[[Page 20558]]
2020-009 and should be submitted on or before May 4, 2020.
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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07656 Filed 4-10-20; 8:45 am]
BILLING CODE 8011-01-P