[Federal Register Volume 70, Number 131 (Monday, July 11, 2005)]
[Notices]
[Pages 39840-39842]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3619]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51954; File No. SR-NSCC-2005-07]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Charges for Communications Fees To Continue 
Operating Legacy Communication Networks

June 30, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 17, 2005, the 
National Securities Clearing Corporation (``NSCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change described in Items

[[Page 39841]]

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 parties.
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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 revise the fees charged to members 
that fail to migrate their communications systems from legacy networks 
to The Depository Trust & Clearing Corporation's (``DTCC's'') Securely 
Managed and Reliable Technology (``SMART'') system \2\ or to the 
Securities Industry Automation Corporation's (``SIAC's'') Secure 
Financial Transaction Infrastructure (``SFTI'') networks.
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    \2\ SMART is DTCC's centralized, end-to-end managed 
communications infrastructure that provides connectivity support for 
all post-trade clearance and settlement processing. Most of the 
services offered by DTCC's subsidiaries, The Depository Trust 
Company, the Fixed Income Clearing Corporation, and NSCC are 
accessible through SMART. SMART is interoperable with SFTI.
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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 these 
statements.\3\
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    \3\ 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

    Beginning in 2003, NSCC has periodically informed members of the 
need to migrate their telecommunications connectivity from SIAC's 
legacy based Broker and Access networks to DTCC's SMART system or 
SIAC's SFTI.\4\ While several advantages exist in having all members 
successfully migrate, NSCC's main objective in insourcing these 
services into its own data processing operations is to provide 
consistent business continuity planning capabilities across all NSCC 
services. In the event of a large-scale regional disruption, any member 
accessing NSCC through a legacy network will not have the benefits 
provided by the other communications vehicles which could create 
exposure to these members and their counterparties.\5\
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    \4\ DTCC Important Notices Z0008, Z0009, and 
Z0010.
    \5\ SMART is designed to withstand catastrophic disaster 
scenarios and is set up to operate in DTCC's multiple remote sites 
to ensure its operability in the event of disruption. Legacy network 
connections are not automatically configured to ``fail over'' to 
DTCC's remote processing sites and therefore do not provide members 
using these networks with the resilience that would be needed in the 
event of a large-scale regional disruption.
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    While most NSCC members have complied with stated migration 
requirements, several members continue to access NSCC through legacy 
networks, which is imposing significant unnecessary costs on NSCC for 
continued support of these systems. NSCC rules provide that members 
will be charged for communications charges at cost. Therefore, in order 
to encourage these members to migrate and in order to equitably 
allocate costs among its members, NSCC intends to allocate its costs 
for continued support of legacy networks among the members using such 
systems on a pro rata basis. NSCC plans to soon issue an important 
notice to members specifying the date such fees will become 
effective.\6\
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    \6\ NSCC expects that the migration deadline will be set for the 
end of 2005.
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    In order to avoid bearing these costs, members currently using 
legacy systems are required to take the following actions: (i) As soon 
as possible, ensure adequate communications connectivity through SMART 
and/or SFTI, (ii) successfully complete testing through the newly-
established pathways, (iii) complete full conversion of all input/
output for applicable NSCC applications directly to/from NSCC through 
SMART and/or SFTI, and (iv) cancel the legacy network connections.
    The proposed change is consistent with Section 17A of the Act \7\ 
and the rules and regulations thereunder applicable to NSCC because it 
will enable NSCC to equitably allocate costs among its members.
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    \7\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will have any 
impact or impose any burden on competition.

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

    Written comments were not and are not intended to be solicited with 
respect to the proposed rule change and none have been received.

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

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(ii) of the Act \8\ and Rule 19b-4(f)(2) \9\ 
thereunder because the proposed rule establishes or changes a due, fee, 
or other charge. At any time within sixty days of the filing of the 
proposed rule change, the Commission may summarily abrogate such rule 
change if it appears to the Commission that such action is 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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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
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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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
     Send an e-mail to [email protected]. Please include 
File Number SR-NSCC-2005-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-NSCC-2005-07. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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

[[Page 39842]]

Section, 100 F Street, NE., Washington, DC 20549. Copies of such filing 
also will be available for inspection and copying at the principal 
office of NSCC and on NSCC's Web site at http://www.nscc.com. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NSCC-2005-07 and should be 
submitted on or before August 1, 2005.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-3619 Filed 7-8-05; 8:45 am]
BILLING CODE 8010-01-P