[Federal Register Volume 61, Number 175 (Monday, September 9, 1996)]
[Notices]
[Pages 47534-47535]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22938]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37631; File No. SR-NSCC-96-08]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving a Proposed Rule Change Modifying Rules and 
Procedures Relating to the New York Window System

September 3, 1996.
    On April 3, 1996, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-NSCC-96-08) 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ to modify its rules and procedures relating to the New 
York Window (``NYW'') service. Notice of the proposal was published on 
June 27, 1996, in the Federal Register to solicit comments on the 
proposed rule change.\2\ No comment letters were received. On August 
30, 1996, NSCC amended the proposal.\3\ For the reasons discussed 
below, the Commission is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1) (1988).
    \2\ Securities Exchange Act Release No. 37347 (June 21, 1996), 
61 FR 33565.
    \3\ Letter from Julie Beyers, Associate Counsel, NSCC, to Jerry 
Carpenter, Commission (August 30, 1996). The Commission is not 
noticing the amendment because the change is technical in nature.
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I. Description

    NSCC's proposed rule change modifies NSCC's rules and procedures 
regarding the NYW service (i) to allow members to use the NYW through 
their individual systems, (ii) to modify the terms and conditions under 
which NYW services are provided with respect to the use of the NYW 
through NSCC's proprietary system, and (iii) to clarify that members 
may elect to use all or some of the services offered under the NYW 
service.\4\
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    \4\ For a complete description of NYW services, refer to 
Securities Exchange Act Release No. 34629 (September 1, 1994), 59 FR 
46680 [File No. SR-NSCC-94-12] (order granting permanent approval of 
the NYW service).
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    NSCC's NYW service provides for the processing of receives and 
deliveries of physical securities and for related services. The NYW 
service also provides custodial services and custodial related 
services. When NSCC sought permanent approval of the NYW service, it 
anticipated that members accessing the NYW through their own systems 
eventually would migrate to using NSCC's proprietary system. However, 
because of the number of industry initiatives currently underway and 
the resulting demand on members' technological resources, a number of 
participants continue to access the NYW through their own systems. This 
proposed rule change clarifies NSCC's NYW rules to explicitly allow 
members to take advantage of the NYW through the use of their 
individual systems.\5\
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    \5\ NSCC Rule 31, Section 1.
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    Presently, reimbursement for losses related to the use of the NYW 
service is within the sole discretion of NSCC. In order to encourage 
members to use NSCC's proprietary system for the NYW service, NSCC will 
accept responsibility for certain categories of losses with respect to 
members who access the NYW service through NSCC's proprietary system. 
Under the proposed rule change, NSCC will be responsible for: (1) the 
replacement cost of certificates lost while in the care, custody, or 
control of NSCC employees or agents, (2) with respect to a lost 
security, the cost to carry the lost security from the date of the 
scheduled delivery or the redemption date until the date when 
replacement securities are delivered or presented,\6\ and (3) the cost 
to carry the lost security for the number of days that NSCC is unable 
to complete a scheduled delivery if such failure is due to 
circumstances other than those set forth in clause (1) above. However, 
with respect to the NSCC's obligations under clauses (2) and (3) above, 
NSCC will have no obligations unless (a) instructions regarding 
delivery and the subject securities are delivered to NSCC within time 
parameters established by NSCC from time to time, (b) the final 
delivery destination is within the New York City downtown financial 
district, and (c) other NYW services operational criteria, as 
established by NSCC from time to time, are met. Notwithstanding clauses 
(1), (2), and (3) above, NSCC will not be liable for (a) special, 
incidental, or consequential damages or any direct or indirect damages 
other than the cost to carry or (b) the cost to carry resulitng from 
any failure or delay arising out of conditions beyond NSCC's reasonable 
control including, but not limited to, work stoppages, fire, civil 
disobedience, riots, rebellions, storms, electrical failures, acts of 
God, and similar occurrences. These revised terms will be offered to 
current users of NSCC's NYW services as well as prospective NYW service 
users that access the NYW service through NSCC's proprietary system.
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    \6\ The cost to carry a security represents the interest costs 
associated with a participant's failure to receive timely payment.
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    NSCC is adding a section to Addendum K, Interpretation of the Board 
of Directors, Application of

[[Page 47535]]

Clearing Fund to Excess Losses and Losses Outside of a System, which 
will provide that if NSCC were to have an unsatisfied loss due to a 
member's use of the NYW service, the loss may be satisfied from the 
entire clearing fund.\7\
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    \7\ Interpretation of the Board of Directors, Application of 
Clearing Fund, Addendum K, II, 2.
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    An additional purpose of the filing is to clarify that members may 
choose to use only some of the NYW services (e.g., custodial and 
custodial related services). Members may enter into agreement(s) with 
NSCC limiting their access to specified NYW services which they desire 
to access.

II. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder and particularly with the requirements of Sections 17A(b)(3) 
(A) and (F).\8\ Sections 17A(b)(3) (A) and (F) require that the rules 
of a clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions and to safeguard 
securities and funds in its custody or control or for which it is 
responsible.
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    \8\ 15 U.S.C. 78q-1(b)(3) (A) and (F) (1988).
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    NSCC's rule change will provide participants with greater access to 
the NYW service by allowing participants to continue to access the 
service through their own systems which should facilitate the prompt 
and accurate clearance and settlement of securities transactions. 
Furthermore, when participants elect to access the NYW service via 
NSCC's proprietary system, NSCC will assume greater responsibility for 
certain losses resulting therefrom. In connection with assuming greater 
responsibility for certain losses, NSCC will apply its usual procedures 
to ensure the safeguarding of securities and funds processed through 
NSCC.

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with Sections 17A(b)(3) (A) and (F) of the Act and the rules 
and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-NSCC-96-08) be and hereby is 
approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12) (1996).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-22938 Filed 9-6-96; 8:45 am]
BILLING CODE 8010-01-M