[Federal Register Volume 65, Number 243 (Monday, December 18, 2000)]
[Notices]
[Pages 79144-79145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32114]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43699; File No. SR-NSCC-00-10]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change Relating to 
Certain Securities Undergoing Reorganization

December 11, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 10, 2000, the 
National Securities Clearing Corporation (``NSCC'') filed with the 
Securities and Exchange 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 persons.
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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 would modify NSCC's procedures to permit 
the processing of securities subject to certain voluntary corporate 
action in NSCC's continuous net settlement (``CNS'') system.

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 such statements.\2\
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    \2\ The Commission has modified parts of these statements.
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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 filing is to modify NSCC's Rules 
and Procedures to permit securities that are subject to certain 
voluntary corporate action which would normally cause them to be exited 
from NSCC's CNS system to continue to be processed in CNS.\3\ From time 
to time a security may become subject to an offer that has a feature 
which would normally require it to be exited from CNS. Consistent with 
the industry's goal to increase automated transaction processing, NSCC 
has been working to enhance the CNS system to enable it to process 
securities with reorganization events that have a wider and more varied 
range of features. The proposed rule change would provide that when 
NSCC determines that it has the operational capability to continue to 
process such an issue, the issue would continue to be CNS eligible, and 
NSCC would establish procedures necessary for NSCC to accommodate the 
issue in CNS. NSCC would issue an Important Notice to its members 
detailing how the security would be processed.
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    \3\ As a part of its filing, NSCC is proposing to modify its 
Rules and Procedures to refer to reorganization events as voluntary 
and mandatory instead of as voluntary and involuntary.
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    NSCC's Rules and Procedures permit NSCC to continue to process 
certain securities undergoing corporate reorganizations and specify how 
NSCC shall handle those issues. For example, currently NSCC's Procedure 
VII provides for the processing in CNS of securities subject to tender 
offers with protect periods of three or more days. Securities subject 
to tender offers with protect periods of less than three days cannot 
currently be processed in CNS, and NSCC would normally exit such 
securities from the CNS system. In that case, NSCC would issue receive/
deliver instructions to participants with long or short positions in 
the subject security. The proposed rule change would allow securities 
subject to tender offers with no protect periods or protect periods of 
less than three days to be processed in CNS.
    Another example, would be issues subject to multiple tender offers. 
Currently, NSCC's Rules and Procedures provide for the establishment of 
up to two CNS reorganization subaccounts for issues subject to two 
tender offers. Under NSCC's proposal, it could, provided it has the 
operation capability to do so, establish multiple CNS subaccounts for 
issues subject to multiple tender offers.
    In addition, in order to eliminate the possibility of error which 
arises from manual processing, NSCC has determined not to continue 
providing certain features which were processed on a manual basis. For 
example, the rule would no longer permit new input on the last day of 
the protect period.
    NSCC intends to implement these changes, subject to SEC approval, 
on or about February 9, 2001.
    NSCC believes that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder. In 
particular, NSCC believes that because the proposed rule change would 
allow additional corporate actions to be processed in a CNS 
environment, it would facilitate the prompt and accurate clearance and 
settlement of such securities transactions.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will have an 
impact on or impose a burden on competition.

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

    No written comments have been solicited or received. However, NSCC 
has worked closely with the Securities Industry Association's Corporate 
Action division in developing the proposed CNS modifications, and they 
concur with the proposed changes. NSCC will notify the Commission of 
any written comments received by NSCC.

III. Date of Effectiveness of the 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 NSCC consents, the Commission will:
    (a) By order approve the proposed rule change or
    (b) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule

[[Page 79145]]

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, N.W., Washington, D.C. 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, N.W., 
Washington, D.C. 20549. Copies of such filing will also be available 
for inspection and copying at the principal office of NSCC. All 
submissions should refer to File No. SR-NSCC-00-10 and should be 
submitted by January 8, 2001.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\
Margaret H. McFarland,
Deputy Secretary.
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    \4\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 00-32114 Filed 12-15-00; 8:45 am]
BILLING CODE 8010-01-M