[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Notices]
[Pages 27821-27822]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13230]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38632; File No. SR-NSCC-97-02]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Granting Approval of a Proposed Rule Change to 
Modify NSCC's Rules To Permit Unit Investment Trusts To Be Processed 
Through Fund/SERV, Networking, and Mutual Fund Commission Settlement 
Services

May 14, 1997.
    On February 10, 1997, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change (File No. SR-NSCC-97-02) 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ to permit unit investment trust (``UITs'') to be 
processed through NSCC's Fund/SERV, Networking, and Mutual Fund 
Commission Settlement Services.\2\ Notice of the proposal was published 
in the Federal Register on March 28, 1997.\3\ 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\ These services collectively constitute NSCC's Mutual Fund 
Services. For a complete description of NSCC's Fund/SERV, 
Networking, and Mutual Fund Commission Services, refer to Securities 
Exchange Act Release Nos. 31937 (March 1, 1993), 58 FR 12609 [File 
No. SR-NSCC-92-14] (order approving proposed rule change regarding 
Fund/SERV system); 26376 (December 20, 1988), 53 FR 52546 [File No. 
SR-NSCC-88-08] (order approving Networking); and 31579 (December 17, 
1992), 57 FR 60018 [File No. SR-NSCC-92-13] (order approving the 
Mutual Fund Commissions Settlement System and consolidating the 
Mutual Fund Commissions Settlement, Fund/SERV, and Networking 
Systems under NSCC's Mutual Fund Services).
    \3\ Securities Exchange Act Release No. 38428 (March 21, 1997), 
62 FR 14954.
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I. Description

    Under the rule change, NSCC will permit UITs to be processed 
through NSCC's Fund/SERV, Networking, and Mutual Fund Commission 
Settlement Services. Prior to the rule change, UITs were eligible for 
NSCC processing through NSCC's continuous net settlement (``CNS'') 
system only.\4\ Because Mutual Fund Services only members (i.e., 
primarily bank broker-dealers and insurance company subsidiaries) are 
not permitted access to NSCC's CNS system, they had to settle UIT 
trades ex-clearing with their UIT positions held with a trustee in 
book-entry form. The rule change will allow Mutual Fund Services only 
members to process and settle UIT trades through the Fund/SERV, 
Networking, and Mutual Fund Commission Settlement systems.
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    \4\ A group of NSCC participants, bank trustees, and industry 
organizations such as the Securities Industry Association's 
Securities Operation Division, the Regional Municipal Operations 
Association, and National Unit Trust Association requested that NSCC 
permit UITs to be eligible for processing through its Fund/SERV, 
Networking, and Mutual Fund Commission Settlement Services.
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    The settlement process for UIT transactions through NSCC's Mutual 
Fund Services will be processed the same as if these transactions were 
processed in the CNS system, but UIT transactions processed through the 
Mutual Fund Services will not be guaranteed. If a Mutual Fund Services 
only member wants its UIT transactions submitted to NSCC to be 
guaranteed, it must submit or have submitted on its behalf such 
transactions to NSCC's CNS system.

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 of a national system for the prompt and accurate clearance 
and settlement of securities transactions and to assure the 
safeguarding of securities and funds which are in the custody or 
control of the clearing agency or for which it is responsible. The 
Commission believes that the rule change is consistent with NSCC's 
obligations under the Act because it permits Mutual Fund Services only 
member to process UIT transactions within NSCC. By permitting UIT 
transactions to be processed through NSCC's Fund/SERV, Networking, and 
Mutual Fund

[[Page 27822]]

Commissions Settlement systems, Mutual Fund Services only members will 
no longer have to settle UIT transactions through exception processing 
or ex-clearing. As a result, this change should further perfect the 
mechanism of a national clearance and settlement system. At the same 
time, because NSCC does not apply its trade guarantee to transactions 
processed through Mutual Fund Services, processing and settling UIT 
transactions through Mutual Fund Services should not pose any 
significant additional risk to NSCC and therefore should not effect 
NSCC's ability to safeguard securities and funds.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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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-NSCC-97-02) 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. 97-13230 Filed 5-20-97; 8:45 am]
BILLING CODE 8010-01-M