[Federal Register Volume 78, Number 249 (Friday, December 27, 2013)]
[Notices]
[Pages 79028-79030]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-30936]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71156; File No. SR-NSCC-2013-13]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change To Discontinue 
its Stock Borrow Program

December 20, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 79029]]

(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 10, 2013, 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 persons.

I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change
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    \1\ 15 U.S.C. 78s(b)(1). Defined terms that are not defined in 
this notice are defined in Exhibit 5 of the proposed rule change 
filing, available at http://www.sec.gov/rules/sro/nscc.shtml under 
File No. SR-NSCC-2013-13, Additional Materials.
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change consist of amendments to the Rules & 
Procedures (``Rules'') of NSCC to discontinue its Stock Borrow Program, 
as more fully described below.

II. Clearing Agency'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.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    Over the past few years the use of NSCC's Stock Borrow Program, 
which allows NSCC Members to elect to loan their excess positions to 
NSCC's Continuous Net Settlement (``CNS'') System in order to 
facilitate the completion of CNS long allocations, has declined. As 
such, NSCC is proposing to amend its Rules in order to discontinue the 
Stock Borrow Program.
    One of NSCC's core services as a central counterparty is trade 
clearance and settlement through CNS, where compared and recorded 
transactions in eligible securities for a particular settlement date 
are netted by issue into one net long (buy) or net short (sell) 
position. As a continuous net settlement system, those positions are 
further netted with positions of the same issue that remain open after 
their originally scheduled settlement date (usually T+3), so that 
trades scheduled to settle on any day are netted with fail positions to 
result in a single deliver or receive obligation for each Member for 
each issue in which it has activity. Today, NSCC Members may elect to 
participate in the Stock Borrow Program by designating specific 
securities that are in their inventory at DTC to be available to be 
borrowed by CNS. If CNS cannot complete a delivery to a long Member 
because a short Member has not completed its delivery to CNS, NSCC 
looks to those designated securities and initiates deliveries from 
lenders to CNS if the lending Member has free excess positions at DTC. 
In turn, CNS delivers the position to a long Member and sets up a 
pending receive for the lending Member. If the position is not returned 
to the lender by the end of settlement day, i.e., the Member with the 
original obligation to deliver to CNS does not complete that delivery, 
the lender receives full market value for the securities through NSCC 
settlement.
    In 2007, NSCC borrowed a daily average of approximately $1.85 
billion in market value at the close of each day from the approximately 
21 Members that participated in the Stock Borrow Program that year. 
Usage of the Stock Borrow Program has since dropped by almost 95%. In 
October 2013 only three Members participated in the Stock Borrow 
Program, and the average daily value borrowed at the close of day 
during that month was approximately $81 million. Usage of the program 
has continued to drop since the end of October 2013. Given this 
dramatic reduction in the use of the program, NSCC has determined that 
it is not economically efficient to maintain the service, and NSCC is 
proposing to amend its Rules in order to discontinue the Stock Borrow 
Program. NSCC has informed the Members using the Stock Borrow Program 
of its intent to discontinue the program.

Implementation Timeframe

    Subject to approval of this filing, NSCC will implement the 
proposed rule changes on a date announced by Important Notice.

Proposed Rule Changes

    NSCC will remove reference to the Stock Borrow Program from Section 
E of Procedure VII (CNS Accounting Operation), and will remove Addendum 
C (NSCC Automated Stock Borrow Program Program) from its Rules as 
reflected in Exhibit 5 hereto.\3\ Addendum C will be designated as 
reserved for future use.
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    \3\ The Commission notes that Exhibit 5 to the proposed rule 
change is available at http://www.sec.gov/rules/sro/nscc.shtml under 
File No. SR-NSCC-2013-13, Additional Materials.
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2. Statutory Basis
    NSCC believes the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to NSCC, in particular Section 17A(b)(3)(F) of the 
Securities Exchange Act of 1934, as amended (``Act''), which requires 
that NSCC's Rules be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. Given the dramatic 
reduction in the use of the Stock Borrow Program by NSCC's Members, 
NSCC has determined that it is not economically efficient to maintain 
the service, and, as such, its proposed rule change will promote its 
ability to perform the prompt and accurate clearance and settlement of 
securities transactions.

(B) Clearing Agency'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 due to the dramatic 
reduction in use of the Stock Borrow Program by NSCC Members, as 
described above.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    Written comments relating to the proposed rule change have not yet 
been solicited or received. NSCC will notify the Commission of any 
written comments received by NSCC.

III. Date of Effectiveness of the Proposed Rule Change, [sic] and 
Timing for Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove such a 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 
arguments concerning the foregoing,

[[Page 79030]]

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 email to [email protected]. Please include 
File No. SR-NSCC-2013-13 on the subject line.

Paper Comments

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

All submissions should refer to File No. SR-NSCC-2013-13. This file 
number should be included on the subject line if email 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filings also will be available 
for inspection and copying at the principal office of NSCC and on 
NSCC's Web site at (http://dtcc.com/legal/rule_filings/nscc/2013.php).
    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 No. SR-NSCC-2013-13 and 
should be submitted on or before January 17, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30936 Filed 12-26-13; 8:45 am]
BILLING CODE 8011-01-P