[Federal Register Volume 85, Number 149 (Monday, August 3, 2020)]
[Notices]
[Pages 46768-46771]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16704]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89408; File No. SR-NSCC-2020-015]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change To Modify Fees for the Subscription-Based Portfolio
Composition File Reporting Service
July 28, 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 July 21, 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
Rule 19b-4(f)(2) 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)(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 amendments to Addendum A (Fee
Structure) of the NSCC Rules & Procedures (``Rules'') \5\ with respect
to fees for the subscription-based portfolio composition file reporting
service as well as make other changes, as described in greater detail
below.
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\5\ Capitalized terms not defined herein are defined in the
Rules, available at http://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
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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 purpose of this proposed rule change is to amend Addendum A
(Fee Structure) of the Rules with respect to fees for the subscription-
based portfolio composition file reporting service in order to better
align fees with the costs of services provided by NSCC. Based on the
current subscription volume, NSCC anticipates that the proposed rule
change would increase NSCC's annual revenue from the portfolio
composition file reporting service by approximately $108,000. The
proposed rule change would also make technical and conforming changes.
(i) Background
NSCC provides an exchange-traded fund (``ETF'') portfolio
composition file reporting service whereby NSCC makes available to each
subscribing Member reports which contain information on ETF portfolios
that such Member requests. These reports are available as machine
readable output files, as well as through a web-based interface from
which Members may download and print reports. This reporting service is
covered in Procedure II (Trade Comparison and Reporting Service),
Section F, of the Rules.
Members are assessed fees in accordance with Addendum A (Fee
Structure) of the Rules based on their activities and the services
utilized. With respect to the ETF portfolio composition file reporting
service, the current Fee Structure provides that each Member that
subscribes to such service is charged a fee based on the number of
portfolios subscribed by the Member on an average daily basis per
billing month (referred to as ``units'' in the Fee Structure). Fees are
calculated by applying a tiered fee structure to the average daily
number of units subscribed by the Member in the billing month, subject
to a maximum and a minimum monthly fee. The minimum monthly fee is
designed to offset the costs to NSCC of providing this service to
Members on an on-going basis while the maximum monthly fee is designed
to cap subscribing Members' fees for this service to enable such
Members to benefit from the economies of scale that NSCC realizes as
the number of units being reported increases.
Currently, Members are charged $3.00 per unit per month for the
first zero to 200 average daily units, $2.00 per unit per month for the
next 300 average daily units (201st to 500th units), $1.00 per unit per
month for all average daily units above 500 (501st and above), subject
to a monthly minimum charge of $600 and a monthly maximum charge of
$1,550. The current fees have not been changed for more than five years
and are no longer aligned with NSCC's costs of providing the ETF
portfolio composition file reporting service.\6\ As such, the revenue
from these fees does not cover the costs of such service. Accordingly,
the proposed changes would adjust fees for the subscription-based
portfolio composition file reporting service so that revenue for NSCC
would better align with the costs of providing such service.
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\6\ NSCC made a number of enhancements to the ETF portfolio
composition file reporting service during 2018 and 2019. These
enhancements increased NSCC's costs of providing the ETF portfolio
composition file reporting service.
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(ii) Proposed Fee Changes
NSCC is proposing to modify the Fee Structure to better align fees
for the subscription-based portfolio composition file reporting service
with NSCC's costs of providing such service. Specifically, in Section
V.B. of the Fee Structure, NSCC is proposing to increase the fees for
the subscription-based portfolio composition file reporting service so
that Members would be charged $4.00 (instead of $3.00) per unit per
month for the first zero to 200 average daily units, $3.00 (instead of
$2.00) per unit per month for the next 300 average daily units (201st
to 500th units), $2.00 (instead of $1.00) per unit per month for all
average daily units above 500 (501st and above), subject to a monthly
minimum charge of $800 (instead of $600) and a monthly maximum charge
of $1,800 (instead of $1,550). NSCC has not modified these fees since
2014.\7\
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\7\ See Securities Exchange Act Release No. 72307 (June 4,
2014), 79 FR 33250 (June 10, 2014) (SR-NSCC-2014-06).
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NSCC is also proposing technical and conforming changes.
Specifically, NSCC is proposing to delete an outdated footnote from
Section V.B. of the Fee Structure. Footnote 20 in Section V.B. of the
Fee Structure refers to the minimum monthly charge being $300 until
December 31, 2015 and that it will increase to $600 per month
thereafter and footnote 20 will be deleted then; however, due to a
technical oversight, footnote 20 has not yet been deleted. As such,
NSCC is proposing a technical change to delete footnote 20 from Section
V.B. of the Fee Structure, and a conforming change to renumber footnote
21 as footnote 20 in Section V.C. of the Fee Structure.
(iii) Implementation Timeframe
NSCC would implement this proposal by September 1, 2020. As
proposed, a legend would be added to the Fee Structure stating there
are changes that became effective upon filing with the Commission but
have not yet been implemented. The proposed legend also would include a
date by which such changes would be implemented and the file number of
this proposal, and state that, once this proposal is implemented, the
legend would automatically be removed from the Fee Structure.
2. Statutory Basis
NSCC believes this proposal is consistent with the requirements of
the Act, and the rules and regulations thereunder applicable to a
registered clearing agency. Specifically, NSCC believes this proposal
is consistent with Sections 17A(b)(3)(D) \8\ and 17A(b)(3)(F) \9\ of
the Act and Rule 17Ad-22(e)(23)(ii),\10\ as promulgated under the Act,
for the reasons described below.
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\8\ 15 U.S.C. 78q-1(b)(3)(D).
\9\ 15 U.S.C. 78q-1(b)(3)(F).
\10\ 17 CFR 240.17Ad-22(e)(23)(ii).
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Section 17A(b)(3)(D) of the Act requires that the Rules provide for
the equitable allocation of reasonable dues, fees, and other charges
among its participants.\11\ NSCC believes the proposed rule changes to
the Fee Structure to better align pricing with costs of services would
provide for the equitable allocation of reasonable fees. The proposed
changes would increase the fees assessed for the subscription-based
portfolio composition file reporting service in order to better align
with the costs of providing such service. NSCC believes the proposed
changes to the fees are equitable because they would apply uniformly to
all Members that utilize the services. NSCC believes the proposed
changes are reasonable because they would be commensurate with the
increased costs of resources allocated by NSCC in providing such
services. Therefore, NSCC believes the proposed rule changes to the Fee
Structure to better align pricing with costs of services are consistent
with Section 17A(b)(3)(D) of the Act.
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\11\ 15 U.S.C. 78q-1(b)(3)(D).
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Section 17A(b)(3)(F) of the Act requires, in part, that the Rules
be
[[Page 46770]]
designed to promote the prompt and accurate clearance and settlement of
securities transactions.\12\ The proposed rule changes to make
technical and conforming changes would help ensure that the Rules,
including the Fee Structure, remain accurate and clear to Members.
Having accurate and clear Rules would help Members to better understand
their rights and obligations regarding NSCC's clearance and settlement
services. NSCC believes that when Members better understand their
rights and obligations regarding NSCC's clearance and settlement
services, they can act in accordance with the Rules. NSCC believes that
better enabling Members to comply with the Rules would promote the
prompt and accurate clearance and settlement of securities transactions
by NSCC. As such, NSCC believes the proposed rule changes to make
technical and conforming changes are consistent with Section
17A(b)(3)(F) of the Act.
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\12\ 15 U.S.C. 78q-1(b)(3)(F).
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Rule 17Ad-22(e)(23)(ii) under the Act requires NSCC to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to provide sufficient information to enable
participants to identify and evaluate the risks, fees, and other
material costs they incur by participating in the covered clearing
agency.\13\ NSCC believes that the proposed rule changes to make
technical and conforming changes would help ensure that the Fee
Structure is transparent and clear to Members. Having a transparent and
clear Fee Structure would help Members, NSCC believes, to better
understand NSCC's fees and help provide Members with increased
predictability and certainty regarding the fees they incur by
participating in NSCC. As such, NSCC believes the proposed rule changes
to make technical and conforming changes are consistent with Rule 17Ad-
22(e)(23)(ii) under the Act.
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\13\ 17 CFR 240.17Ad-22(e)(23)(ii).
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(B) Clearing Agency's Statement on Burden on Competition
NSCC believes the proposed rule changes to increase the fees for
the subscription-based portfolio composition file reporting service may
have an impact on competition, because these changes would likely
increase the fees of those Members that utilize such service when
compared to their fees under the current Fee Structure. NSCC believes
these proposed rule changes could burden competition by negatively
affecting such Members' operating costs. While these Members may
experience increases in their fees when compared to their fees under
the current Fee Structure, NSCC does not believe such change in fees
would in and of itself mean that the burden on competition is
significant. This is because even though the amount of the fee increase
may seem significant in some instances (e.g., going from $1 to $2 per
unit per month for all average daily units above 500), NSCC believes
the increase in fees would similarly affect all Members that utilize
the subscription-based portfolio composition file reporting service,
and therefore the burden on competition would not be significant.
Regardless of whether the burden on competition is deemed
significant, NSCC believes any burden on competition that is created by
these proposed rule changes would be necessary and appropriate in
furtherance of the purposes of the Act, as permitted by Section
17A(b)(3)(I) of the Act.\14\
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\14\ 15 U.S.C. 78q-1(b)(3)(I).
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The proposed rule changes to increase the fees for the
subscription-based portfolio composition file reporting service would
be necessary in furtherance of the purposes of the Act, because the
Rules must provide for the equitable allocation of reasonable dues,
fees, and other charges among its participants.\15\ As described above,
NSCC believes that the proposed rule changes would result in fees that
are equitably allocated (by applying uniformly to all Members that use
the applicable service) and would result in reasonable fees (by better
aligning with the costs of the service). As such, NSCC believes these
proposed rule changes would be necessary in furtherance of the purposes
of the Act, as permitted by Section 17A(b)(3)(I) of the Act.\16\
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\15\ 15 U.S.C. 78q-1(b)(3)(D).
\16\ 15 U.S.C. 78q-1(b)(3)(I).
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NSCC believes any burden on competition that is created by the
proposed rule changes to increase the fees for the subscription-based
portfolio composition file reporting service would also be appropriate
in furtherance of the purposes of the Act. The proposed rule changes
would allow NSCC to assess fees that are better aligned with its costs
of providing the service. Having the ability to assess fees that are
better aligned with NSCC's costs of providing the services would help
NSCC to continue providing dependable and stable clearance and
settlement services to its Members. As such, NSCC believes these
proposed rule changes would be appropriate in furtherance of the
purposes of the Act, as permitted by Section 17A(b)(3)(I) of the
Act.\17\
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\17\ Id.
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NSCC does not believe the proposed rule changes to make technical
and conforming changes would impact competition.\18\ These changes
would apply equally to all Members and would not affect Members' rights
and obligations. As such, NSCC believes these proposed rule changes
would not have any impact on competition.
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\18\ Id.
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
Written comments relating to this proposed rule change have not
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \19\ and paragraph (f) of Rule 19b-4
thereunder.\20\ 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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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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-2020-015 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-2020-015. This file
number should be included on the subject line if email is used. To help
the
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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
(http://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-2020-015 and should be submitted on
or before August 24, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-16704 Filed 7-31-20; 8:45 am]
BILLING CODE 8011-01-P