[Federal Register Volume 76, Number 10 (Friday, January 14, 2011)]
[Notices]
[Pages 2737-2738]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-666]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63668; File No. SR-NSCC-2010-09]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving Proposed Rule Change Regarding the 
Creation of a Universal Trade Capture Application and Automated Special 
Representative Facility

January 6, 2011.

I. Introduction

    On August 30, 2010, the National Securities Clearing Corporation 
(``NSCC'') filed proposed rule change SR-NSCC-2010-09 with the 
Securities and Exchange Commission (``Commission'') pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 
19b-4 thereunder.\2\ On September 9, 2010, NSCC filed an amendment to 
the proposed rule change. The proposed rule change modifies NSCC's 
rules and procedures to create a new Universal Trade Capture (``UTC'') 
application and an automated Special Representative facility. The 
proposed rule change was published for comment in the Federal Register 
on September 20, 2010.\3\ No comment letters were received. This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 62822 (Sept. 20, 2010), 
75 FR 57318.
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II. Description of the Proposal

A. Uniform Trade Capture

    Pursuant to the proposed rule change, NSCC is replacing its trade 
capture applications, such as the Trade Comparison and Recording 
Operation, with the new UTC application that is designed to 
standardize, streamline, consolidate, and modernize NSCC's system for 
capturing securities transaction information for clearance and 
settlement at NSCC.
    The UTC application will accept and process a common input record 
from all securities marketplaces. It will receive and report data from 
members and self-regulatory organizations (``SROs'') in both real-time 
and intraday batch submissions to and. NSCC will convert the existing 
input format to the new UTC input record format, which will enable the 
UTC to provide members and SROs with their trade output in the format 
of their choice (new or old). UTC will also replace all current locked-
in over-the-counter (``OTC'') and listed trade capture applications 
with one central, real-time validation and reporting process and will 
have the capability to accept, reject, validate, process, and send 
contract output to members in real-time. Members will only have to 
support one standardized input and output format.

B. Correspondent Clearing Service

    Prior to this rule change, NSCC's rules provided that its 
Correspondent Clearing Service could only be used to: (a) Accommodate a 
member with multiple affiliate accounts that wishes to move a position 
resulting from an ``original trade'' in the process of clearance from 
one affiliate account to another or (b) accommodate a member that 
relies on its Special Representative to execute a trade in a market 
that the member is precluded due to membership requirements (e.g., 
membership requirement for access to markets) or applicable regulation 
in order to enable the resulting position to be moved from the Special 
Representative to that member.
    Under this rule change, NSCC will provide that the Correspondent 
Clearing Service may be utilized by members to accommodate a member 
that relies on its Special Representative to execute a trade in any 
market regardless of whether that member maintains direct access to 
that market to enable the resulting position to be moved from the 
Special Representative to that member.

C. Creation of an Automated Special Representative Facility

    To assist members control and monitor their Special Representative 
and Qualified Special Representative relationships, NSCC is creating an 
automated, online, secure facility by which members themselves may 
establish, monitor, and maintain these relationships. Both the Special 
Representative Member and the Correspondent Member will have to submit 
matching instructions within the facility in order for the relationship 
to be established. Either party will be able to submit an entry to 
retire the relationship.
    Members will be reminded, through formatting within the facility, 
of their existing and unchanged obligations

[[Page 2738]]

under NSCC's rules with respect to utilizing these services--namely, 
that by establishing the relationship within the facility both members 
will continue to be bound by NSCC's rules, the Correspondent is bound 
by the details of all transactions submitted on their behalf by the 
Qualified Special Representative or Special Representative, and any 
errors or omissions or disputes relating to such relationships and 
related transactions must be resolved directly between the parties.
    The establishment of relationships through the automated facility 
will meet the written notice requirements for such services as 
otherwise set forth within NSCC's rules and procedures. Members will no 
longer be required to submit signed forms to NSCC for these processes.

D. Implementation Time Frame

    NSCC will implement many of the changes described above by January 
31, 2011.
    With respect to UTC changes and to support the migration period, 
NSCC will provide a conversion process to support those markets that 
are not yet ready to submit transaction data in the new common input 
format (i.e., NSCC will accept data in the old format and convert data 
into the new UTC format). The conversion process will enable NSCC to 
offer members and SROs the new output format regardless of whether the 
market has converted to the new standard. UTC will continue to support 
all existing interfaces with markets, members, and SROs with respect to 
trade input and output.
    To provide maximum flexibility in allowing firms to migrate to the 
new input and output formats according to their own schedules, NSCC 
will continue to support all existing interfaces with markets, members, 
SROs and regulatory agencies for a period of time after UTC is 
implemented.
    Finally, NSCC will establish a plan for the retirement of all 
legacy input and output formats and by the end of the first quarter of 
2012 will reassess the status of those firms utilizing legacy formats. 
At that time, NSCC will work with any members, SROs, and regulatory 
agencies that have not yet converted from legacy reporting, thereby 
affording such firms sufficient lead time for migration.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to NSCC. In particular, the Commission finds that 
the proposal is consistent with Section 17A(b)(3)(F) of the Act,\4\ 
which requires that the rules of a registered clearing agency are 
designed to, among other things, remove impediments to the perfection 
of the mechanism of a national system for the prompt and accurate 
clearance and settlement of securities transactions. NSCC's 
consolidation of its trade capture and reporting applications are 
designed to remediate certain operational inefficiencies associated 
with providing and maintaining redundant transaction submission and 
reporting systems that were created to service different transaction 
sources. As securities marketplaces have ceased providing clearance and 
settlement services for their members and as those members have 
ultimately become direct NSCC members or have entered clearing 
arrangements with other NSCC members, there is little operational basis 
for NSCC to continue to service different data formats and systems. 
Accordingly, consolidating its systems to receive and report 
transaction details while providing new automated services to assist 
NSCC members maintain their correspondent and Special Representative 
relationships should help remove certain impediments to the perfection 
of the mechanism of a national system for the prompt and accurate 
clearance and settlement of securities transactions.
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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 \5\ and the rules and regulations 
thereunder.
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    \5\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\6\ that the proposed rule change (File No. SR-NSCC-2010-09) be and 
hereby is approved.\7\
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    \6\ 15 U.S.C. 78s(b)(2).
    \7\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-666 Filed 1-13-11; 8:45 am]
BILLING CODE 8011-01-P