[Federal Register Volume 68, Number 74 (Thursday, April 17, 2003)]
[Notices]
[Pages 19047-19048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-9477]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47662; File No. SR-NSCC-2003-01]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of a Proposed Rule Change Relating to New 
Rule 59, ``Information Services for Investment Products'

April 10, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 17, 2003, 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 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 add new Rule 59, ``Information 
Services for Investment Products,'' to NSCC's rules authorizing NSCC to 
provide services for the transmission and receipt of data and 
information related to investment and financial products.

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

    NSCC currently provides limited information services capabilities 
through its Mutual Fund and Insurance Product services. There is 
significant demand in the financial services industry for NSCC to make 
additional information services containing a broader range of 
information available to a broader range of participants. The proposed 
rule would authorize NSCC to design and offer such information 
services. The services would benefit the financial services industry by 
providing a means whereby information could be transferred in an 
automated and standardized environment using NSCC's connectivity.
    Information services for investment products under Rule 59 would 
not involve money settlement at NSCC or the guarantee of any 
obligation. Access to Rule 59 information services would be available 
to a broader range of participants than other NSCC services that entail 
settlement or counterparty default risk.
    Participants eligible to use Rule 59 information services would 
include any entity that has signed a membership agreement with NSCC in 
any other capacity or an entity meeting any one of the following 
criteria which has entered into an agreement as set forth below:
    (i) It is a broker or dealer registered under the Act;
    (ii) It is a bank or trust company, including a trust company 
having limited power, which is a member of the Federal Reserve System 
or is supervised and examined by state or federal authorities having 
supervision over banks;
    (iii) It is a clearing agency registered with the Commission 
pursuant to Section 19(a) of the Act;
    (iv) It is subject to supervision or regulation pursuant to the 
provisions of state insurance law and either issues insurance contracts 
or is licensed to sell insurance products;
    (v) It is an investment company registered under Section 8 of the 
Investment Company Act of 1940, as amended;
    (vi) It is an organization or entity that acts as a third party 
administrator on

[[Page 19048]]

behalf of defined contribution plans as defined in Section 414(i) of 
the Internal Revenue Code of 1986, as amended;
    (vii) It is an Investment Advisor as defined in Section 202(a)(ii) 
of the Investment Advisors Act of 1940, as amended;
    (viii) If it does not qualify under paragraphs (i) through (vii) 
above, it has demonstrated to the Board of Directors that its business 
and capabilities are such that it could reasonably expect material 
benefit from direct access to NSCC's services.
    Users of Rule 59 information that are not members or participants 
of NSCC in any other capacity would be bound by the terms and 
conditions of a standard NSCC contract applicable to such service, and 
the rules of NSCC would not apply to them. The contract would state 
that the user cannot hold itself out as a member of NSCC unless 
approved for NSCC membership under a different NSCC rule. Such 
contracts would also include terms regarding limitations of liability, 
standard of care, and indemnification substantially similar to those 
contained in NSCC's membership agreement and rules.
    NSCC anticipates that the first such information service to be 
authorized under proposed Rule 59 would be a messaging system used by 
participants in the separately managed accounts industry.\3\ It is 
expected that the Separately Managed Account Service (``SMAS'') would 
be used for the transmission of information between sponsors of 
separately managed account programs and the investment managers 
participating in their programs in order to coordinate information such 
as account opening data and verification of funding amounts.\4\ 
Currently, this information is generally communicated by a combination 
of methods such as multiple vendor platforms, faxes, emails, and 
telephone.
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    \3\ Information about the separately managed account industry is 
available on the website of The Money Management Institute 
(``MMI''): http://www.moneyinstitute.com. The MMI is the national 
organization for the managed account industry, which is comprised 
principally of portfolio management firms and sponsors of investment 
programs.
    \4\ NSCC will file a Section 19(b) proposed rule change with the 
Commission before implementing any new service, such as the 
separately managed account service, under Rule 59.
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    NSCC believes that the proposed rule change would facilitate the 
transmission of information for investment products in a standardized 
and automated format, using NSCC's connectivity. Standardization and 
automation of information on investment products can be expected to 
reduce processing errors that are typically associated with manual 
processes or the use of multiple platforms and methods to transmit 
information. Accordingly, NSCC believes this filing is consistent with 
the requirements of the Act and the rules and regulations thereunder 
because it promotes the prompt and accurate clearance and settlement of 
securities and other related transactions.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change would 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 has, however, worked closely with the MMI 
regarding standardization of information for the separately managed 
accounts industry. 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 the self-regulatory organization 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 
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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-NSCC-2003-01. This file number should be included on the 
subject line if e-mail is used. To help us process and review comments 
more efficiently, comments should be sent in hardcopy or by e-mail but 
not by both methods. 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 will also be available for inspection and copying at the 
principal office of NSCC. All submissions should refer to the File No. 
SR-NSCC-2003-01 and should be submitted by May 8, 2003.

    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. 03-9477 Filed 4-16-03; 8:45 am]
BILLING CODE 8010-01-P