[Federal Register Volume 59, Number 26 (Tuesday, February 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2827]


[[Page Unknown]]

[Federal Register: February 8, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33558; File No. SR-NSCC-93-14]

 

Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Order Granting Accelerated Approval 
on a Temporary Basis of a Proposed Rule Change Extending a Pilot 
Program Relating to the Handling of Physical Securities and Paper 
Transactions for Participants Located in New York City

January 31, 1994.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 23, 1993, the 
National Securities Clearing Corporation (``NSCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared primarily by NSCC. On January 27, 1994 NSCC filed an amendment 
to the proposal.\2\ The Commission is publishing this notice and order 
to solicit comments from interested persons and to grant accelerated 
approval of the proposed rule change on a temporary basis through 
January 31, 1995. This approval order supersedes a previous order that 
approved the pilot program until April 30, 1994.\3\
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    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\As explained below, the amendment modified the proposal to 
seek approval to offer the limited money settlement services to two 
participant. Letter from Karen L. Saperstein, Vice President/
Director of Legal and Associate General Counsel, NSCC, to Jerry W. 
Carpenter, Branch Chief, Division of Market Regulation, Commission 
(January 27, 1994).
    \3\Securities Exchange Act Release No. 32221 (April 26, 1993), 
58 FR 26570 [File No. SR-NSCC-93-03] (order approving pilot program 
on a temporary basis until April 30, 1994).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change will allow NSCC (1) to continue to operate 
the pilot program relating to the handling of physical securities and 
paper transactions for participants located in New York City and (2) to 
expand the program to offer limited money settlement services to two 
participants.

II. Self-Regulatory Organization's Statement on 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.

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

1. Background
    On April 26, 1993, the Commission approved until April 30, 1994, 
NSCC's proposed rule change that established its pilot program to 
provide direct clearing type services for participants located in New 
York City (``New York Window'' or ``NYW'').\4\ NSCC was asked by 
several participants to provide such services because New York City 
participants have been experiencing a continual decline in their 
activities associated with the processing of physical securities. This 
decline in activities is a result of the increasing depository 
eligibility of securities that previously had been settled physically. 
Consequently, these participants no longer find it desirable to 
maintain their own window operations. NSCC originally requested 
approval of the NYW program on a pilot basis because NSCC was seeking 
to operate the individual participants' window programs at NSCC. After 
operating the pilot for a period of time, NSCC was to evaluate the 
program to determine whether any changes should be made and whether to 
expand and standardize the operations. NSCC is still in the process of 
evaluating the NYW program and at this time is not ready to implement a 
standardized, proprietary program to replace the individual 
participants' operations.\5\ Therefore, NSCC is requesting that the NYW 
pilot program be extended.
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    \4\For a detailed description of the NYW program and a 
discussion of the various legal, regulatory, and operational issues, 
refer to Securities Exchange Act Release No. 32221 supra note 3.
    \5\NSCC is planning to implement a proprietary New York Window 
program during the third quarter of 1994, which will necessitate the 
filing of a proposed rule change under section 19(b)(2) of the Act. 
Telephone conversation between Karen Saperstein, Vice President/
Director of Legal and Associate General Counsel, NSCC, and Jerry W. 
Carpenter, Branch Chief, and Peter R. Geraghty, Attorney, Division 
of Market Regulation, Commission (January 26, 1994).
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2. Limited Money Settlement Service
    At the request of a participant, NSCC studied the feasibility of 
providing limited money settlement services. NSCC found that it is 
feasible to provide such services and, therefore, will provide the 
following limited money settlement services to two participants on a 
limited basis.\6\
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    \6\Prior to its January 27, 1994, amendment, NSCC had requested 
that it be allowed to offer limited money settlement services to one 
participant. Refer to note 2 and accompanying text.
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    To the extent that the NYW processes ``receives'' that result in 
next-day funds debits for each participant, NSCC will issue a check in 
payment of such debits. NSCC will not issue such checks until it has 
verified the receipt of same-day funds from each participant in an 
amount equal to the gross amount of each participant's payment 
obligations for that day. To the extent that the NYW processes 
``deliveries'' that result in next-day funds credits for each 
participant, NSCC will pay each participant the aggregate amount of all 
checks received and deposited by NSCC for the participant each day. The 
payments will be made in same-day funds on the day following receipt 
and deposit by NSCC of the checks. To the extent that receives or 
deliveries processed by the NYW result in same-day funds debits and 
credits, the wire transfers will continue to be made directly between 
the NYW participants and the other parties to the transactions.
    NSCC has stated that the proposed rule change will be implemented 
consistent with NSCC's statutory obligation under section 17A of the 
Act to safeguard securities and funds in NSCC's custody or control.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe a burden will be placed on competition as a 
result of the proposed rule change.

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

    No comments were received.

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

    Section 17A(a)(1)(B) of the Act sets forth Congress findings that 
inefficient procedures for clearance and settlement of securities 
transactions impose unnecessary costs on investors and persons 
facilitating transactions by and acting on behalf of investors.\7\ The 
Commission reasserts its belief, as stated in the previous New York 
Window approval order, that NSCC's proposed pilot program should help 
minimize inefficient procedures employed by individual New York City 
participants by concentrating these operations in one centralized 
facility.\8\ In addition, the Commission also believes that the limited 
money settlement service should provide a more efficient mechanism by 
which the two participants can settle their debits and credits 
generated by the NYW processing.
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    \7\15 U.S.C. 78q-1(a)(1)(B).
    \8\Supra note 3.
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    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in its custody or control or for which it is 
responsible.\9\ The Commission believes that the safety procedures 
established for the pilot program and approved in the previous New York 
Window approval order \10\ continue to enable NSCC to meet its 
obligations under the Section 17A of the Act. In addition, the 
Commission believes the safeguards NSCC will employ in providing 
limited money settlement services to the two participants also enable 
NSCC to fulfill its safeguarding obligations. For example, NSCC will 
not make any payment on behalf of or to the limited money settlement 
services participants until NSCC has received funds sufficient to cover 
the amount of NSCC's payment.
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    \9\15 U.S.C. 78q-1(b)(3)(F).
    \10\Supra note 3.
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    NSCC has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after the 
date of publication of notice of the filing. The Commission finds good 
cause for so approving the proposed rule change because the Commission 
has previously published notice of and has approved the NYW pilot 
program. NSCC's previous proposed rule change did not generate any 
comment letters, and none are expected on this proposal. The limited 
money settlement services have not been previously noticed or approved; 
however, the Commission does not believe the services raised any 
controversial issues. In addition, accelerated approval will allow the 
two participants to begin utilizing the new service immediately and to 
begin benefitting from the efficient and centralized payment procedures 
provided by NSCC. During the temporary approval period, NSCC will 
continue to evaluate the New York Window program and the limited money 
settlement services.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. Copies 
of the submissions, 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, and at the principal offices of NSCC. All 
submissions should refer to File No. SR-NSCC-93-14 and should be 
submitted by March 1, 1994.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (File No. SR-NSCC-93-14) be, and 
hereby is, approved until January 31, 1995.

    \11\15 U.S.C. 78s(b)(2).
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    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\17 CFR 200.30-3(a)(12) (1992).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-2827 Filed 2-7-94; 8:45 am]
BILLING CODE 8010-01-M