[Federal Register Volume 62, Number 86 (Monday, May 5, 1997)]
[Notices]
[Pages 24522-24523]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11604]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38556; File No. SR-NSCC-97-01]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Granting Approval of a Proposed Rule Change To 
Eliminate NSCC's Securities Transfer Service

April 29, 1997.
    On January 22, 1997, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change (File No. SR-NSCC-97-01) 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'').\1\ Notice of the proposal was published in the Federal 
Register on March 7, 1997.\2\ No comment letters were received. For the 
reasons discussed below, the Commission is granting approval of the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 38352 (February 28, 
1997), 62 FR 10602
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I. Description

    The proposed rule change eliminates NSCC's Securities Transfer 
Service (``STS'') \3\ by deleting NSCC Rule 42. NSCC developed STS in 
1976 to provide assistance with the manual processing of securities 
certificates that were not eligible for deposit at the Depository Trust 
Company (``DTC''). STS was an optional service that could be used by 
full settling participants to transfer and reregister physical 
securities, including DTC ineligible items, through various transfer 
agencies in the United States and Canada. To use STS, participants 
first sent envelopes containing securities certificates to an NSCC 
office. Pursuant to the participant's transfer instructions, NSCC then 
forwarded the envelopes to the offices of the indicated transfer 
agents. Upon completion of the reregistration, transfer agents returned 
the certificates to NSCC's office for pick up. Participants could also 
use STS to deliver book closing items, legal transfers, and 
accommodation transfers. As a result of the elimination of STS, 
participants will process items directly through the appropriate 
transfer agent.
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    \3\ STS is commonly referred to as the National Transfer 
Service.
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    NSCC wants to eliminate STS because of a decrease in its usage.\4\ 
NSCC expects to eliminate STS thirty business days after notification 
to participants that this proposed rule change is approved by the 
Commission.
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    \4\ During the 1980s, STS processed approximately 670 securities 
certificates per day. However, after 1987 volume fell dramatically 
because DTC began increasing the number of securities eligible for 
deposit and because of the Group of 30 initiatives which encouraged 
the brokerage industry to move towards a book-entry registration 
environment. By 1994, STS' volume fell 82% to 120 securities 
certificates processed per day. STS processed just over twenty-five 
items per day in October 1996 or about an 80% decrease from its 1994 
volume and a 96% decrease from its 1980s volume.
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II. Discussion

    Section 17A(b)(3)(F) \5\ provides that the rules of a clearing 
agency must be designed to remove impediments to and perfect the 
mechanism for a national system for the prompt and accurate clearance 
and settlement of securities transactions. When STS was first begun, 
its use enhanced the transfer of physical securities. Because of the 
high volume processed through STS, it was more efficient for 
participants to deliver all of their physical certificates to one 
location, NSCC, instead of to many different transfer agents. In turn, 
because NSCC could aggregate multiple delivers to transfer agents, it 
could reduce the costs of delivery.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F)
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    However, because of the low volumes of securities being processed 
through STS, STS has become an inefficient means of transferring 
securities. Because NSCC does not receive enough items to aggregate 
deliveries to transfer agents, it cannot provide lower costs. Because 
STS no longer provides a more economical means by which participants 
can make deliveries to transfer agents, there no longer is any reason 
to have an extra securities movement in the process (i.e., the delivery 
to NSCC before delivery to transfer agents only increases the number of 
deliveries that must be made). Thus, requiring participants to send 
their securities directly to the transfer agents may result in a better 
national clearance and settlement system. Furthermore, by eliminating 
an inefficient service that is not used by many participants, NSCC may 
be better able to devote its resources to other services that provide 
greater efficiencies to the clearance and settlement process.

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A 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-

[[Page 24523]]

 NSCC-97-01) be and hereby is approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-11604 Filed 5-2-97; 8:45 am]
BILLING CODE 8010-01-M