[Federal Register Volume 68, Number 247 (Wednesday, December 24, 2003)]
[Notices]
[Pages 74677-74678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31648]



[[Page 74677]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48909; File No. SR-NSCC-2003-16]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change Relating to Data Services Only Members

December 11, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 30, 2003, the 
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 adds a new Rule 31 to NSCC's Rules and 
amends miscellaneous other provisions of NSCC's Rules as they pertain 
to data services only members.\2\
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    \2\ The category of data services only member and modifications 
applicable to such category were approved by the Commission in 
Securities Exchange Act Release Nos. 44960 (October 19, 2001), 66 FR 
56383 [File No. SR-NSCC-2001-14] (added data services only members 
as a new category to NSCC rules and permitted them to use limited 
services]; 45560 (March 14, 2002), 67 FR 13200 [File No. SR-NSCC-
2001-18] (permitted data services only members to access Fund/SERV 
for non-settling transactions); 47197 (January 15, 2003), 68 FR 3917 
[File No. SR-NSCC-2002-13] (permitted data services only members to 
access NSCC's insurance processing services for non-settling 
transactions); and 47664 (April 7, 2003), 68 FR 17850 [File No. SR-
NSCC-2003-04] (permitted data services only members and insurance 
carrier members to populate NSCC's new product repository databases 
with information relating to insurance products).
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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.\3\
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    \3\ 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 proposed rule change (i) expands the types of entities that may 
become data services only members under NSCC's rules to include the 
same type of entities that are eligible to use NSCC's mutual fund 
services; (ii) permits data services only members to access NSCC's 
mutual fund profile service; and (iii) consolidates many of NSCC's 
rules applicable to data services only members in a new Rule 31 of 
NSCC's rules.
    The proposed rule change adds new types of entities that may become 
data services only members of NSCC. Data services only members are only 
eligible to access certain limited data and information services of 
NSCC specifically enumerated under NSCC's rules. They are not permitted 
to enter transactions for settlement through NSCC facilities.
    Currently, a data services only member must meet the requirements 
of any clause (i) through (vi) of Section 1 of Rule 2 of NSCC's Rules; 
that is, they must be either a registered broker-dealer, bank or trust 
company, registered clearing agency, insurance company or entity 
licensed to sell insurance products, an investment company that has 
registered under the Investment Company Act of 1940, as amended, or an 
entity that has demonstrated to NSCC's Board of Directors that its 
business and capabilities are such that it could reasonably expect 
material benefit from access to such services in order to be accepted 
as a data services only member.
    These types of entities are identical to the types permitted to be 
NSCC members under Rule 2, subject in the case of Rule 2 membership to 
additional criteria relating to standards of financial responsibility 
and operational capability as set forth in NSCC's procedures. Since 
data services only members do not input transactions for settlement 
through NSCC's facilities and since NSCC is therefore not subject to 
settlement exposure by these members, data services only members are 
not subject to additional NSCC membership standards regarding financial 
responsibility.
    The proposed rule change adds to the types of entities that may 
become data services only members the types that are currently eligible 
to use mutual fund services under rule 52;\4\ that is, they may also be 
either (i) an investment advisor as defined in section 202(a)(ii) of 
the Investment Advisors Act of 1940, as amended; (ii) a principal 
underwriter as defined in section 2(a)(29) of the Investment Company 
Act of 1940, as amended, or a co-distributor, sub-distributor, or 
otherwise authorized to process mutual fund transactions; or (iii) an 
organization or entity that acts as a third-party administrator on 
behalf of defined contribution plans as defined in section 414(i) of 
the Internal Revenue Code of 1986, as amended.
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    \4\ Entities eligible to use mutual fund services include fund 
members admitted under Rule 51 and TPA members admitted under Rule 
60 of NSCC's Rules.
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    The proposed rule change also adds NSCC's mutual fund profile 
service to the types of services available to data services only 
members. Mutual fund profile service (``MFPS'') contains information on 
mutual funds and investment funds as input by the fund, including data 
on commission discounts (``breakpoints'') available to certain 
investors buying shares of certain funds under the criteria established 
by the fund.
    Allowing data services only members to access mutual fund profile 
service and expanding the entities eligible to become data services 
only members will assist in making mutual fund information, including 
breakpoint information, more widely available.
    The proposed rule change also makes technical changes to NSCC's 
Rules by adding a new Rule 31 applicable to data services only members, 
consolidating for ease of reference many NSCC rule provisions 
applicable to data services only members. Consolidation of many of the 
provisions applicable to data services only members in Rule 31 will 
benefit NSCC participants by clarifying the responsibilities and 
entitlements directly applicable to data services only members and by 
making it easier for entities not familiar with clearing agency rules 
to join NSCC.
    The technical changes proposed for consolidation of certain rule 
provisions applicable to data services only members will facilitate 
access to NSCC services by qualified entities. The proposed changes 
which add additional entity types to the ones which may currently 
qualify to become a data services only member and permit data services 
only members to access NSCC's mutual fund profile service will enable a 
wider group of mutual fund industry participants to have automated 
access to MFPS data about mutual funds. These

[[Page 74678]]

proposed changes to NSCC's rules facilitate the prompt and accurate 
clearance and settlement of securities transactions and are therefore 
consistent with the requirements of the Act and the rules and 
regulations thereunder.

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

    NSCC does not believe the proposed rule change will impose a burden 
on competition.

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

    NSCC has not solicited nor received written comments on the 
proposed rule change. NSCC has worked closely with the industry to 
enhance the availability of mutual fund services to a wider range of 
mutual fund industry participants. NSCC will notify the Commission of 
any written comments it receives.

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

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A)(iii) of the Act \5\ and Rule 19b-4(f)(4)\6\ promulgated 
thereunder because the proposal effects a change in an existing service 
of NSCC that (i) does not adversely affect the safeguarding of 
securities or funds in the custody or control of NSCC or for which it 
is responsible and (ii) does not significantly affect the respective 
rights or obligations of NSCC or persons using the service. At any time 
within sixty days of the filing of the proposed rule change, the 
Commission could have summarily abrogated such rule change if it 
appeared to the Commission that such action was necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \5\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \6\ 17 CFR 240.19b-4(f)(4).
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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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-NSCC-2003-16. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your 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 and on NSCC's Web site at http://www.nscc.com/legal/. All submissions should refer to the File No. SR-
NSCC-2003-16 and should be submitted by January 14, 2004.

    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-31648 Filed 12-23-03; 8:45 am]
BILLING CODE 8010-01-P