[Federal Register Volume 69, Number 183 (Wednesday, September 22, 2004)]
[Notices]
[Page 56813]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2294]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50395; File No. SR-NSCC-2003-09]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving Proposed Rule Change To Amend the 
Procedure for Determining Intraday Mark-to-the-Market Payments

September 16, 2004.

I. Introduction

    On May 20, 2003, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') proposed rule change SR-NSCC-2003-09 pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'').\1\ 
On October 20, 2003, NSCC filed an amendment to the proposed rule 
change. Notice of the proposal was published in the Federal Register on 
March 8, 2004.\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. 49353 (March 2, 2004), 
69 FR 10789.
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II. Description

    NSCC is amending Procedure XV (Clearing Fund Formula and Other 
Matters) to give NSCC more flexibility in determining the intraday 
mark-to-the market amount it will collect from its members.
    NSCC Rule 15 (Financial Responsibility and Operational Capability) 
provides that NSCC may obtain such adequate assurances of a member's 
financial responsibility and operational capability as NSCC may at any 
time or from time to time deem necessary or advisable in order to 
protect NSCC, Settling Members, Municipal Comparison Only Members, Fund 
Members, Insurance Carrier Members, creditors, or investors.
    Currently, Procedure XV describes the criteria for determining 
which positions in high risk/volatile issues NSCC will require 
additional mark-to-the-market payments for and provides specific 
formulas that are used to determine additional deposit amounts. 
Generally, NSCC assesses on an intraday basis an additional mark-to-
the-market charge to a member when the member maintains a position in a 
security where the intraday exposure to NSCC is in excess of 10% of the 
member's excess net capital. In addition, with respect to illiquid 
unsettled positions, NSCC may request additional collateral if the 
member's net unsettled position in any one security is greater than 25% 
of the security's average daily volume.
    NSCC is replacing the formulas currently reflected in its 
procedures with a more generalized provision to give NSCC the 
flexibility to determine what amount, if any, should be collected based 
on conditions that exist at that time.\3\ In addition, the reference to 
NSCC's authority to make such charges is being corrected to reflect 
NSCC Rule 15, Section 4.
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    \3\ Additional factors that NSCC may use in determining intraday 
mark-to-the-market requirements include but are not limited to (1) 
Percent of total security float, (2) average daily security volume, 
(3) position size (quantity and value), (4) portfolio concentration, 
and (5) industry/sector concentration.
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III. Discussion

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of funds and 
securities for which it is responsible.\4\ The Commission finds that 
NSCC's proposed rule change is consistent with this requirement because 
it should permit the safeguarding of funds and securities for which 
NSCC is responsible by permitting NSCC to more appropriately collect 
collateral to cover its exposure from its members' unsettled positions.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A of 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-2003-09) 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).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-2294 Filed 9-21-04; 8:45 am]
BILLING CODE 8010-01-P