[Federal Register Volume 65, Number 2 (Tuesday, January 4, 2000)]
[Notices]
[Pages 311-312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-39]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42273; File No. SR-NSCC-99-12]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Granting Accelerated Approval of a Proposed Rule 
Change Relating to the Global Clearance Network and the International 
Link Service

December 27, 1999.
    On September 23, 1999, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-NSCC-99-12) 
pursuant to Section 19(b)(1) of the Securities Exchange Act

[[Page 312]]

of 1934 (``Act'') \1\ to allow NSCC to offer the Global Clearance 
Network (``GCN'') and the International Link Service (``ILS''), 
services which were previously offered by the International Securities 
Clearing Corporation (``ISCC''). Notice of the proposal was published 
in the Federal Register on December 1, 1999.\2\ No comment letters were 
received. For the reasons discussed below, the Commission is granting 
accelerated approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 42176 (November 23, 
1999), 64 FR 67364.
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I. Description

    The rule change establishes new Rules 61 and 62 and Addendum U to 
NSCC's Rules. These new rules permit NSCC to offer the GCN and the ILS 
previously offered by ISCC.\3\ ISCC, a wholly owned subsidiary of NSCC, 
is proposing to stop providing clearance and settlement services, to 
transfer its clearance and settlement services to NSCC, and to withdraw 
its registration as a clearing agency. The new rules are substantially 
similar to the applicable ISCC rules and procedures. NSCC Rule 62, 
which authorizes NSCC to provide the GCN service, is based on previous 
ISCC Rule 50; NSCC Rule 61, which authorizes NSCC to provide the ILS 
service, is based on previous ISCC Rule 40; and NSCC Addendum U, the 
GCN service data processing procedures, is based on ISCC Addendum E.
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    \3\ According to NSCC, it is no longer cost-effective to provide 
international clearance and settlement services through a separate 
company. Concurrently with this rule filing, ISCC has submitted a 
proposed rule change to withdraw from the clearance and settlement 
business (File No. SR-ISCC-99-01).
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    The transfer of service will be transparent to current ISCC members 
because GCN and ILS as offered by NSCC will be substantially similar to 
the services previously offered by ISCC and will be offered under the 
same terms and conditions. Further, no new programming or system format 
changes will be required to utilize GCN and ILS as offered by NSCC. 
Accordingly, all current ISCC participants using GCN and ILS will be 
able to continue to utilize such services when they are offered by 
NSCC.\4\
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    \4\ Currently there are thirty users of GCN and three users of 
ILS.
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    The GCN service \5\ facilitates and centralizes the processing of 
international transactions by providing a standardized platform to 
communicate clearance, settlement, and custody information. GCN will 
allow users, NSCC members, utilizing standardized input and output 
formats, to transmit data to NSCC several times throughout the day. 
Upon receipt, NSCC will validate the data and, if accepted, will 
translate the data into the format of specified agent banks and will 
transmit the data to agent banks where processing will occur under the 
agent banks' normal terms, conditions, and operating framework.
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    \5\ The GCN service was originally approved by the Commission in 
1991. Securities Exchange Act Release No. 29841 (October 18, 1991), 
56 FR 55960. ISCC subsequently modified its processing procedures 
for GCN through the addition of Addendum E to ISCC's Rules and 
Procedures. Securities Exchange Act Release No. 35392 (February 16, 
1995), 60 FR 10415.
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    The ILS facilitates the establishment of links with foreign 
financial institutions (``FFIs''). ISCC previously sponsored accounts 
at the Depository Trust Company (``DTC'') for the purpose of providing 
FFIs with custody services for their U.S. securities.\6\ Deliveries and 
receives of securities on deposit at DTC, based on instructions from 
the FFI, will occur through DTC free of payment.
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    \6\ ISCC provided ILS since its inception in 1989 as a clearing 
corporation.
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    ISCC also provides facilities management services the Emerging 
Markets Clearing Corporation. In connection with ISCC's deregistration 
as a clearing agency, these services will be provided by NSCC.

II. Discussion

    Section 17A(b)(3)(F) \7\ of the Act requires that the rules of a 
clearing agency be designed to assure the prompt and accurate clearance 
and settlement of securities transactions. One of the primary reasons 
for ISCC's registration as a clearing agency was to enable it to 
provide for the safe and efficient clearance and settlement of 
international securities. Under the rule change NSCC will offer 
substantially similar services under the same terms and conditions as 
ISCC. Because NSCC will continue ISCC's role as a provider of clearance 
and settlement services for international securities transactions, the 
Commission believes that NSCC's rule change is consistent with NSCC's 
obligations under the Act.
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    \7\ 15 U.S.C. Sec. 78q-1(b)(3)(F).
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    NSCC has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after the 
date of publication of notice of the filing. The Commission finds good 
cause for so approving the proposed rule change because accelerated 
approval will permit NSCC to provide GCN and ILS services before the 
end of the year.

II. 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-99-12) be and hereby is 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-39 Filed 1-3-00; 8:45 am]
BILLING CODE 8010-01-M