[Federal Register Volume 66, Number 47 (Friday, March 9, 2001)]
[Notices]
[Pages 14238-14239]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-5798]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44031; File No. SR-NSCC-00-10]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving a Proposed Rule Change Relating to 
Processing Certain Securities Undergoing Reorganization

March 2, 2001.
    On October 10, 2000, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-NSCC-00-10) 
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 December 18, 2000.\2\ No comment letters were received. For 
the reasons discussed below, the Commission is approving the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 43699 (December 11, 
2000), 65 FR 79144.
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I. Description

    The proposed rule change modifies NSCC's Rules and Procedures to 
permit securities that are subject to certain voluntary corporate 
action which previously would have caused them to be exited from NSCC's 
continuous net settlement (``CNS'') system to continue to be processed 
in CNS.\3\ NSCC has enhanced 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 provides that when NSCC 
determines that it has the operational capability to continue to 
process such an issue, the issue will continue to be CNS eligible, and 
NSCC will establish procedures necessary for NSCC to accommodate the 
issue in CNS. NSCC will issue an Important Notice to its members 
detailing how the security will be processed.
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    \3\ The proposed rule change also modified NSCC's 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 tree 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 allows 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 proposed rule change, it could, provided it 
has the operation capability to do so, establish multiple CNS 
subaccount 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 no longer permits new input on the list day of the 
protect period.

II. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirement of the Act and the rules and regulations 
thereunder and particularly with the requirements of section 
17A(b)(3)(F).\4\ Section 17A(b)(3)(F) requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. The Commission 
believes that NSCC's rule change meets this standard because the 
proposed rule change allows additional corporate actions to be 
processed in and receive the benefits of NSCC's CNS system. Thus, the 
proposed rule change facilitates the prompt and accurate clearance and 
settlement of such securities transactions.
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    \4\ 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 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of section 17A(b)(3)(F) of

[[Page 14239]]

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-00-10) be and hereby is 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-5798 Filed 3-8-01; 8:45 am]
BILLING CODE 8010-01-M