[Federal Register Volume 66, Number 130 (Friday, July 6, 2001)]
[Notices]
[Pages 35685-35686]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16880]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44485; File No. SR-NSCC-2001-12]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Order Granting Accelerated Approval 
of a Proposed Rule Change Regarding the Discontinuance of Trade 
Comparison Services for Transactions Matched at or by the Relevant 
Market

June 28, 2001.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 14, 2001, the 
National Securities Clearing Corporation (``NSCC'') filed with the 
Securities and Exchange Commission (``Commission'') and on June 22, 
2001, amended the proposed rule change as described in Items I and II 
below, which items have been prepared primarily by NSCC. The Commission 
is publishing this notice and order to solicit comments from interested 
persons and to grant accelerated approval of the proposal.
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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 modifies NSCC's Rules and Procedures to 
provide that as the various securities markets move to assume the full 
responsibility for trade comparison, NSCC will discontinue providing 
trade comparison services for trades executed in those markets.

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 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

    Having the trade comparison function and locking-in trades at the 
marketplace where the trades occur is necessary step as the securities 
industry moves towards straight-through-processing and shortening the 
clearance and settlement cycle. Over the years, the stock exchanges and 
marketplaces have increasingly assumed this responsibility because it 
is faster and more efficient for comparison to be done by the 
marketplace at the time of execution. Comparison at the exchanges and 
marketplaces allows discrepancies to be identified and resolved more 
quickly and thus reduces the risk of failed trades. As a result, today 
close to 99 percent of all streetside equity trades are compared at the 
time of execution on a real-time basis and are submitted to NSCC as 
locked-in for trade recording. NSCC's Rules and Procedures currently 
recognize and provide for trades to be submitted on a locked-in basis 
from self-regulatory organizations, service providers, and special 
representatives.\3\ The remaining transactions are sent to NSCC for 
trade comparison.
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    \3\ NSCC's Rule 7 (Comparison Operation) and Rule 39 (Special 
Representative/Index Receipt Agent).
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    In preparation for the move towards shortened settlement cycles, 
NSCC has been working with the securities exchanges and markets as they 
move to assume the entire responsibility for comparing their respective 
trades. The first entity that will assume full repsonsibility for 
comparing or locking-in all its equity trades is the New York Stock 
Exchange (``NYSE''). The NYSE will take on this responsibility 
effective June 28, 2001. As a result, from and after June 28, 2001, 
NSCC will cease providing comparison services for equity transactions 
executed on the NYSE.
    Subsequently, it is anticipated that the Amex and Nasdaq 
marketplace will assume full responsibility for comparison of equity 
trades executed on their marketplaces by year-end 2001 and by the end 
of the first quarter 2002, respectively. As each entity fully assumes 
the responsibility for comparing such trades, NSCC will

[[Page 35686]]

discontinue the trade comparison process for all such trades.\4\
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    \4\ The Nasdaq Stock Market, Inc. has filed an application for 
exchange registration. Before NSCC ceases providing comparison 
services for the Nasdaq marketplace, it will make sure that market 
participants at both the National Association of Securities Dealers, 
Inc. and The Nasdaq Stock Market, Inc. have access to comparison 
services. Securities Exchange Act Release No. 44396 (June 7, 2001), 
66 FR 31952 (June 13, 2001) (Notice of The Nasdaq Stock Market, 
Inc.'s application for exchange registration).
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    Accordingly, NSCC is modifying its Rules and Procedures to reflect 
this development. Rules 5 (General Provisions) and 7 (Comparison 
Operation), and Procedure II (Trade Comparison Service) will be amended 
to provide that as the various marketplaces and exchanges assume the 
responsibility for comparing trades executed in their respective 
markets, NSCC will cease providing comparison services with respect to 
the trades executed in those markets. NSCC will notify its members by 
Important Notice prior to the occurrence of each such 
``discontinuance.''
    This rule change provides for trades to be compared at the time of 
execution at the markets when the market provides comparison services 
and thereby permits discrepancies to be identified and corrected more 
quickly and reduces the risk of failed trades. Accordingly, NSCC 
believes that this change should facilitate the prompt and accurate 
clearance and settlement of securities transactions. NSCC states that 
the proposed rule change is therefore consistent with the requirements 
of Section 17A of the Act and the rules and regulations thereunder.

(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 relating to the proposed rule change have been 
solicited or received. NSCC will notify Commission of any written 
comments it receives.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder and particularly with the requirements of Section 
17A(b)(3)(F).\5\ 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. Having the trade 
comparison function occur at the marketplace where the trades occur 
should help reduce the risk of failed trades and thus should promote 
prompt and accurate clearance and settlement of securities 
transactions.
    NSCC has requested that the Commission approve the proposed rule 
change prior to the thirtieth day after publication of the notice of 
the filing. The Commission finds good cause for approving the rule 
change prior to the thirtieth day after publication because such 
approval will allow NSCC to cease providing comparison services for the 
NYSE when the NYSE assumes full responsibility for comparing all its 
equity trades on June 28, 2001.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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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 Room, 450 Fifth Street, NW., Washington, 
DC 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-2001-12 and should be submitted by July 27, 
2001.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\6\ that the proposed rule change (File No. SR-NSCC-2001-12) be and 
hereby is approved.
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    \6\ 15 U.S.C. 78s(b)(2).

    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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Jonathan G. Katz,
Secretary.
[FR Doc. 01-16880 Filed 7-5-01; 8:45 am]
BILLING CODE 8010-01-M