[Federal Register Volume 64, Number 230 (Wednesday, December 1, 1999)]
[Notices]
[Pages 67364-67365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-31165]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42176; File No. SR-NSCC-99-12]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change Relating to the 
Transfer of the Global Network and the International Link Service to 
NSCC

November 23, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 23, 1999, 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. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule change will allow NSCC to offer the Global 
Clearance Network Service (``GCN'') and the International Link Service 
(``ILS'') previously offered by the International Securities Clearing 
Corporation (``ISCC'').

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 these 
statements.\2\
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    \2\ 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 permit NSCC to offer 
the GCN and the ILS previously offered by ISCC. ISCC, a wholly owned 
subsidiary of NSCC, is proposing to stop providing clearance and 
settlement services and transfer its core services to NSCC. According 
to NSCC, it is no longer cost-effective to provide international 
clearance and settlement services through a separate company.\3\
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    \3\ Concurrently with this rule filing, ISCC has submitted a 
proposed rule change (File No. SR-ISCC-99-01) to withdraw from the 
clearance and settlement business.
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    GCN was originally approved by the Commission in 1991.\4\ It 
facilitates and centralizes the processing of international 
transactions at a beneficial cost to ISCC members. Under ISCC's Rule 
50, GCN allows ISCC members, utilizing standardized input and output 
formats, to transmit data to ISCC several times throughout the day 
using a standardized trade format. Upon receipt, ISCC validates the 
data and, if accepted, translates the data into the format of specified 
agent banks. Accepted data is transmitted to the agent banks where 
processing occurs under the agent banks' normal terms, conditions, and 
operating framework.
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    \4\ Securities Exchange Act Release No. 29841 (October 18, 
1991), 56 FR 55960. ISCC subsequently modified its processing 
procedures for the GCN Service through the addition of Addendum E to 
ISCC's Rules and Procedures. See Securities Exchange Act Release No. 
35392 (February 16, 1995), 60 FR 10415.
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    ISCC has provided ILS since its inception in 1989 as a clearing 
corporation. In accordance with ISCC's Rule 40, which permits ISCC to 
establish links with foreign financial institutions (``FFIs''), ISCC 
sponsors accounts at The Depository Trust Company (``DTC'') for the 
purpose of providing FFIs with custody services for their U.S. 
securities. Deliveries and receives of securities on deposit at DTC, 
based on instructions from the FFI, occur through DTC free of payment.
    According to NSCC, the current users of ISCC's GCN and ILS will 
receive from NSCC similar services under the same terms and conditions. 
No new programming or system format changes will be required to utilize 
GCN and ILS as offered by NSCC. The transfer of services will be 
transparent to current ISCC participants. NSCC will set the fees for 
these transferred services at prevailing rates.
    All current GCN and ILS participants will be able to continue to 
utilize such services when they are offered by NSCC. Currently there 
are thirty users of GCN and three ILS participants. In order to provide 
these services, NSCC is incorporating rules substantially similar to 
the applicable ISCC rules and procedures: NSCC Rule 62 is based on ISCC 
Rule 50; NSCC Addendum U is based on ISCC Addendum E; and NSCC Rule 61 
is based on ISCC Rule 40.\5\
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    \5\ Because ISCC's members are also NSCC members, there is no 
need for NSCC to adopt ISCC's other rules governing risk management 
and corporate governance. Also, NSCC will not assume ISCC services 
that are currently dormant (e.g., Foreign Netting and Comparison 
Service and ISCC's link with Euroclear).
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    ISCC currently provides facilities management services to the 
Emerging Markets Clearing Corporation (``EMCC''). In connection with 
ISCC's deregistration as a clearing agency, these services will be 
provided by NSCC.
    NSCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \6\ and the rules and 
regulations thereunder applicable to NSCC because it will facilitate 
the prompt and accurate clearance and settlement of securities 
transactions.
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    \6\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The proposed arrangements would impose no burden on competition. 
After consummation of the proposed arrangements, securities industry 
members will continue to have access to high-quality, low-cost clearing 
and custody service.

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

    No written comments relating to the proposed rule change have been 
solicited or received.

III. Date of Effectiveness of 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.

[[Page 67365]]

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 
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. 552, will be available for inspection and copying in the 
Commission's Public Reference Section, 450 Fifth Street, NW, 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of NSCC. All submissions 
should refer to File No. SR-NSCC-99-12 and should be submitted by 
December 22, 1999.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-31165 Filed 11-30-99; 8:45 am]
BILLING CODE 8010-01-M