[Federal Register Volume 61, Number 45 (Wednesday, March 6, 1996)]
[Notices]
[Pages 8997-8998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5149]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36907; File No. SR-NSCC-96-01]


Self-Regulatory Organization; National Securities Clearing 
Corporation; Notice of Filing of a Proposed Rule Change Establishing 
Systemized, Standard Prices for Transfers of Non-Continuous Net 
Settlement Assets Through the Automated Customer Account Transfer 
Service

February 29, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 5, 1996, the 
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 primarily by NSCC. On February 8, and 20, 1996, NSCC 
filed amendments to the proposed rule change.\2\ The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.

    \1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\ Letters from Julie Beyers, Associate Counsel, NSCC, to 
Christine Sibille, Division of Market Regulation, Commission 
(February 7 and 15, 1996),
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change.

    NSCC proposes modifying its rules to coincide with its practice of 
establishing systemized, standard default prices for non-Continuous Net 
Settlement (``CNS'') assets submitted by a member for transfer through 
NSCC's Automated Customer Account Transfer Service (``ACATS''). Such 
prices are to be based on the type of asset being transferred.

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.\3\

    \3\ The Commission has modified the text of the summaries 
prepared by NSCC.
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A Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to modify NSCC's rules 
to coincide with its practice of establishing systemized, standard 
default prices based on asset type for assets not eligible for CNS 
submitted by Members for transfer through ACATS. NSCC, through ACATS, 
currently provides an automated and standardized service for the 
accurate and timely transfer of assets in a customer account from one 
brokerage firm to another.\4\

    \4\ For a complete description of ACATS, refer to Securities 
Exchange Act Release No. 34879 (October 21, 1994), 59 FR 54229 [File 
No. SR-NSCC-94-13] (order approving a proposed rule change modifying 
ACATS). See also NSCC Rule 50.
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    When a customer wants to transfer his or her account to a new 
broker-dealer (``receiving broker-dealer''), the receiving broker-
dealer submits through NSCC a transfer initiation request form to the 
broker-dealer holding the customer's assets (``delivering broker-
dealer''). Within three business days, the delivering broker-dealer 
must submit to NSCC a list of customer assets held at the delivering 
broker-dealer. The list must include prices assigned to the non-CNS 
eligible assets. Transfer of the account generally will take place four 
business days later.
    On settlement date, NSCC automatically debits the delivering 
broker's settlement account at NSCC with the market value of the assets 
being transferred through ACATS and credits the receiving broker's 
settlement account with the same amount. The resulting settlement 
obligations will appear on the members' initial settlement statements 
issued in the afternoon. When the non-CNS-eligible assets are delivered 
through NSCC's envelope delivery service, NSCC will then credit the 
delivering broker's account at NSCC with the value of those assets and 
will debit a corresponding amount from the receiving broker's 
account.\5\ Thus, the delivering broker's initial settlement statement 
will reflect both the debit from the initial ACATS request and a 
corresponding credit from the delivery of assets resulting in no change 
to such member's overall settlement obligations. If the assets are not 
delivered, the delivering broker's settlement bank will be debited the 
assigned value of the assets at the end-of-day settlement. These funds 
will be creditede back to the delivering broker when such broker 
delivers the customer's assets.

    \5\ Assets delivered through NSCC's envelope delivery service 
must be submitted by 11:3 a.m.
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    CNS assets submitted for transfer through the ACATS system are 
systematically priced. However, an asset value needs to be assigned to 
any non-CNS assets (e.g., limited partnerships, mortgaged backed 
securities, zero coupon bonds, foreign securities, U.S. government and 
U.S. agency securities, and thinly traded municipal bonds) submitted 
for transfer through ACATS. NSCC will ascribe non-CNS assets a value by 
using a pricing service.\6\ If there is no price available from a 
pricing service, NSCC will assign a value based on the higher of (i) 
the price submitted by the delivering broker or (ii) the price 
indicated by an industry defined default price matrix. The default 
price matrix will employ security category indicators and will specify 
a default price for each identified security category. For example, 
domestic stock will be valued at $1.00 per share, and municipal bonds 
will be valued at $85 per $100 principle amount. Once the default value 
is established, changes by participants are not permitted.

    \6\ NSCC will use the following pricing services (listed in 
order of preference). Equities: The New York Stock Exchange, the 
American Stock Exchange, NASDAQ, Vancouver Stock Exchange, average 
OTC comparison system price, Interactive Data Financial Times 
information, previous day's system price, or last available price in 
system. Bonds: Average price in the Bond Comparison System for 
trades compared on T or T+1, average price in the Bond Comparison 
System for trades compared on T+2, average price in the Bond 
Comparison System for trades compared on T+3 or older, Interactive 
Data Financial Times information, previous day's system price, last 
available price in system, or for municipal bonds only, if such 
price is five days or older, the price obtained from J.J. Kenny S&P.
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    The pricing of additional assets being transferred through ACATS 
will provide ACATS users with standardized default pricing based on 
asset type. This method of pricing will decrease discrepancies with 
respect to asset valuation by reducing exposure to the delivering 
broker due to the overvaluation of assets and by reducing exposure to 
the receiving broker due to the undervaluation of assets.
    NSCC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act \7\ and the rules and 
regulations thereunder because establishment of systemized standard 
default prices for non-CNS assets transferred through ACATS will 
facilitate the prompt and accurate clearance and settlement of 

[[Page 8998]]
account transfers from one brokerage firm to another.

    \7\ 15 U.S.C. Sec. 78q-1 (1988).
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B. Self-Regulatory Organization's Statement on Burden on Competition.

    NSCC does not perceive that the proposed rule change will have an 
impact on 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.

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 designate 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 self-regulatory organization 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, 450 Fifth Street N.W., 
Washington, D.C. 20549. Copies of such filing will also be available 
for inspection and copying at the principal office of NSCC. All 
submissions should refer to File No. SR-NSCC-96-01 and should be 
submitted by March 27, 1996.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\

    \8\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-5149 Filed 3-5-96; 8:45 am]
BILLING CODE 8010-01-M