[Federal Register Volume 72, Number 160 (Monday, August 20, 2007)]
[Notices]
[Pages 46528-46529]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-16329]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56250; File No. SR-NSCC-2007-11]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change To Allow As-Of 
Fixed Income Trades To Be Processed in the Continuous Net Settlement 
System

August 14, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 12, 2007, 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 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

    NSCC is seeking to modify its procedures to allow as-of fixed 
income trades to be processed in NSCC's Continuous Net Settlement 
(``CNS'') system.

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.\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

    When NSCC revised and updated CNS in 2004 (referred to as the ``CNS 
Rewrite''), it provided the capability on any settlement day to take in 
and process transactions due for settlement that day provided the 
trades are recorded or compared prior to an established cut-off time in 
the morning.\3\ This capability is currently provided for as-of equity 
transactions but has not yet been expanded to as-of fixed income 
transactions.\4\ Rather, settlement of as-of fixed income corporate 
debt, municipal, and unit investment trust (``UIT'') trades (corporate 
debt, municipal, and UIT trades are collectively referred to as ``CMU'' 
trades) matched on or after their designated settlement date currently 
occurs on the business day following the day they are compared. Given 
that settlement risks associated with CMU trades would be reduced if 
they settled on an accelerated basis in the same manner that as-of 
equity trades are settled, NSCC is proposing to enhance its fixed 
income processing to permit same day settlement of as-of fixed income 
transactions.\5\ To accomplish this, NSCC proposes to amend Procedure 
II (Trade Comparison and Recording Service) so that CNS-eligible as-of 
CMU trades matched on or after their originally designated settlement 
date would be processed in CNS on the day they are submitted for 
comparison so long as they compare prior to the cut-off time 
established for same day settlement, which currently is 11:30 a.m.\6\ 
As-of trades not eligible for CNS processing will settle on a trade-
for-trade basis. Trades that match after the designated cut-off time 
will continue to be assigned a settlement date on the next business 
day.
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    \3\ Securities Exchange Act Release No. 50026 (July 15, 2004), 
69 FR 43650 [File No. SR-NSCC-2004-01].
    \4\ NSCC's systems did not have the capacity for same day 
settling trades for fixed income transactions in 2004.
    \5\ The settlement of cash and next day CMU trades which are 
compared by NSCC will continue to be the responsibility of the 
parties to the trades.
    \6\ In addition, references in Procedure VII (CNS Accounting 
Operation) that currently note that debt securities are not eligible 
for such accelerated settlement would be removed.
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    In addition, because these trades are effectively guaranteed upon 
comparison, risk associated with the trades will be mitigated through 
the existing component of the Clearing Fund formula, as set forth in 
Procedure XV (Clearing Fund Formula and Other Matters), that is 
designed to mitigate the risk to NSCC associated with trades that are 
processed on a settlement cycle shorter than three days. Under this 
component, activity specified for a shortened settlement cycle is 
isolated and a charge is calculated.\7\
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    \7\ The component calculates a charge based on the average of a 
member's charges for the specified activity on the three days with 
the highest charges calculated for the specified activity over the 
most recent twenty day period. Securities Exchange Act Release No. 
54816 (November 27, 2006), 71 FR 69604 [File No. SR-NSCC-2006-09].
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    NSCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \8\ and the rules and 
regulations thereunder applicable to NSCC because it should facilitate 
the prompt and accurate clearance and settlement of securities by 
increasing automated trade processing and by expanding the types of 
trades eligible for CNS netting.
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    \8\ 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 would 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. 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

    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 such 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

[[Page 46529]]

arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2007-11 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NSCC-2007-11. 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 Section, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. 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 www.nscc.com/legal. 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-2007-11 and should be submitted on or before 
September 10, 2007.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-16329 Filed 8-17-07; 8:45 am]
BILLING CODE 8010-01-P