[Federal Register Volume 60, Number 238 (Tuesday, December 12, 1995)]
[Notices]
[Pages 63746-63748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30222]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-36552; International Series Release No. 898; File No. 
SR-NASD-95-49]


Self-Regulatory Organizations; National Association of Securities 
Dealers; Notice of Filing of Proposed Rule Change Granting the Canadian 
Depository for Securities Access to the Automated Confirmation 
Transaction Service

December 5, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 12, 1995, the 
National Association of Securities Dealers, Inc., (``NASD'') 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 primarily by the NASD. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.

    \1\ 15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASD proposes to amend its ``Rules of Practice and Procedure 
for the Automated Confirmation Transaction Service'' (``ACT Rules'') to 
permit The Canadian Depository for Securities (``CDS'') to enter trades 
in NASD's Automated Confirmation Transaction Service (``ACT'').

[[Page 63747]]


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

    In its filing with the Commission, the NASD 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 NASD has prepared summaries, set forth in sections 
(A), (B), and (C) below, of the most significant aspects of such 
statements.\2\

    \2\ The Commission has modified the text of the summaries 
prepared by the NASD.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In 1992, the NASD approved an amendment to the ACT Rules to permit 
certain non member clearing organizations and their member broker/
dealers to have access to and participate in ACT.\3\ The rule change 
was adopted with the West Canada Clearing Corporation (``WCCC'') in 
mind, and WCCC was the first non member clearing organization to be 
granted access to and participation in ACT.\4\

    \3\ Generally, ACT facilitates comparison and clearing of 
interdealer over-the-counter equity trades by requiring input of 
trade details within specific time frames, comparing the trade 
details, and submitting matched, locked-in trades for clearing. For 
a complete description of ACT, refer to Securities Exchange Act 
Release Nos. 27229 (September 8, 1989), 54 FR 38484 [File No. SR-
NASD-89-25] (order partially approving proposed rule change to 
permit ACT to be used by self-clearing firms) and 28583 (October 26, 
1990), 55 FR 46120 [File No. SR-NASD-89-25] (order approving 
remainder of File SR-NASD-89-25 to permit ACT to be used by 
introducing and correspondent broker-dealers).
    \4\ The NASD granted access and participation to WCCC in part 
because it submits its transaction data to the Midwest Clearing 
Corporation (``MCC'') through an end-of-day processing transmittal 
that is part of the regional interface between the clearing 
corporations. WCCC also demonstrated sufficient financial strength 
to support the trade guarantee made on behalf of its members.
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    In granting access and participation to non member clearing 
organizations, however, the NASD was concerned about its ability to 
regulate individual non member broker/dealers that enter into 
transactions with NASD member. Accordingly, the NASD determined to 
permit non member participation only for those organizations that would 
guarantee the trades submitted by their members. The amendments to the 
ACT Rules allowing non member clearing organizations access to and 
participation in ACT and specifically approving WCCC participation were 
approved by the Commission on April 19, 1995.\5\

    \5\ Securities Exchange Act Release No. 35625 (April 19, 1995), 
60 FR 20785 [File No. SR-NASD-94-55] (order approving proposed rule 
change relating to the access of WCCC and its members to ACT).
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    The NASD has received another request through the International 
Securities Clearing Corporation to allow member broker/dealers of CDS 
to participate in ACT. After reviewing the financial status of CDS, the 
NASD believes CDS is in a financial position to guarantee the 
performance of its members. In addition, CDS is a member of the 
National Securities Clearing Corporation (``NSCC'') and a Special 
Representative under NSCC's rules.\6\ Furthermore, CDS members submit 
trade data through NSCC's Correspondent Clearing Service \7\ as 
required by ACT Rules.\8\

    \6\ Generally, a Special Representative is a member or a 
registered clearing agency that has been authorized by one or more 
other persons to act on their behalf at NSCC. For a complete 
description of Special Representative, refer to NSCC Rule 39, 
``Special Representative/Index Receipt Agent.''
    \7\ Under the correspondent clearing service, NSCC members 
functioning as Special Representatives (e.g., CDS) submit 
transaction data on behalf of correspondents, which are NSCC members 
or non members of NSCC that are members of an interfaced clearing 
organization (e.g., CDS member). For a complete description of 
NSCC's Correspondent Clearing Service, refer to NSCC Procedure IV., 
C.
    \8\ ACT Rules require that a nonmember clearing organization not 
be given access to ACT unless it (1) is a clearing agency registered 
under the Act, (2) maintains membership in a registered clearing 
agency, or (3) maintains an effective clearing arrangement with a 
registered clearing agency.
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    The NASD believes that permitting CDS broker/dealer members to 
participate in ACT will expand the universe of Canadian brokers 
executing trades with NASD members in the U.S. and will facilitate 
comparison of trades executed by members of CDS in the T+3 settlement 
cycle.
    The NASD believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act \9\ which require that 
the rules of the NASD be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest. The NASD 
believes the rule change is consistent with the Act because the rule 
change will permit CDS broker/dealer members to participate in ACT 
under an agreement by CDS to guarantee its member transactions. It will 
expand the universe of Canadian brokers executing trades with NASD 
members in the U.S., and it will facilitate the comparison of trades 
executed by members of CDS in the T+3 settlement cycle.

    \9\ 15 U.S.C. 78o-3(b)(6) (1994).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The NASD does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

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

    Written comments were neither solicited nor received.

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

    Within thirty five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designated up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the NASD consents, the Commission will:
    A. By order approve such proposed rule change or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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, N.W., Washington, D.C. 20549. 
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. Sec. 552, will be available for inspection and copying in 
the Commission's Public Reference Section. Copies of such filing will 
also be available for inspection and copying at the principal office of 
the NASD. All submissions should refer to File No. SR-NASD-95-49 and 
should be submitted by January 2, 1996.


[[Page 63748]]

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\

    \10\ 17 CFR 200.30-3(a)(12) (1994).
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Jonathan G. Katz,
Secretary.
[FR Doc. 95-30222 Filed 12-11-95; 8:45 am]
BILLING CODE 8010-01-M