[Federal Register Volume 81, Number 84 (Monday, May 2, 2016)]
[Notices]
[Pages 26272-26274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-10150]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77709; File No. SR-NSCC-2016-001]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of a Proposed Rule Change To Remove From 
the DTCC Limit Monitoring Tool the 50% Early Warning Limit Alert and 
Make Technical Revisions to the Rules

April 26, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 18, 2016, 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 the clearing agency. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of amendments to NSCC's Rules and 
Procedures (``Rules'') to remove from the DTCC Limit Monitoring tool 
the alert that is sent to Members when trading activity in any of their 
Risk Entities reaches 50% of the pre-set trading limits for that Risk 
Entity and to make technical revisions, as described in greater detail 
below.\3\
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    \3\ Terms not defined herein are defined in the Rules, available 
at http://dtcc.com/~/media/Files/Downloads/legal/rules/
nscc_rules.pdf.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency 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. The clearing agency 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
(i) Reasons for Adopting the Proposed Rule Change
    NSCC provides its Members with a risk management tool called DTCC 
Limit Monitoring, for which certain types of Members are required to 
register.\4\ DTCC Limit Monitoring enables Members that use the tool to 
monitor post-trade activity and to be notified when pre-set trading 
limits are reached. To use the tool, Members must (1) define one or 
more ``Risk Entities,'' which may include (i) the trading activity of a 
single trading desk within the firm; (ii) for Members that clear trades 
for other firms, i.e., their correspondents, the trading activity of a 
correspondent firm; (iii) for Members acting as a Special 
Representative or a QSR, as such terms are defined in the Rules,\5\ the 
trading activity of a firm with which it has a clearing relationship; 
(iv) the trading activity of a single clearing number within the 
Member's NSCC account structure; or (v) all trading activity of the 
Member submitted to NSCC for clearing; and (2) set a trading limit, at 
a net notional value, for each Risk Entity. DTCC Limit Monitoring then 
sets early warning limits at 50%, 75%, and 90% of those trading 
limits.\6\ Members receive alerts when trading activity for their Risk 
Entities reaches each of these early warning limits, as well as the 
pre-set trading limits.
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    \4\ Rule 54 (DTCC Limit Monitoring) and Procedure XVII (DTCC 
Limit Monitoring), supra note 3; see Securities Exchange Act Release 
No. 71637 (February 28, 2014), 79 FR 12708 (March 6, 2014) (File No. 
SR-NSCC-2013-12).
    \5\ Rule 7 (Comparison and Trade Recording Operation) and 
Procedure IV (Special Representative Service), supra note 3.
    \6\ Rule 54 (DTCC Limit Monitoring) and Procedure XVII (DTCC 
Limit Monitoring, supra note 3.
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    Since the implementation of DTCC Limit Monitoring in 2014, NSCC has

[[Page 26273]]

periodically met with a working group of its Members to discuss the 
functioning of the tool and to confirm it provides Members with 
effective post-trade surveillance as intended. In response to Member 
feedback provided during these discussions, NSCC is proposing to remove 
the 50% early warning alert for the reasons described below.
    Additionally, NSCC is proposing to make technical revisions to 
Procedure XVII (DTCC Limit Monitoring Procedure) primarily to revise 
the verb tense and add clarity regarding use of the tool.
(ii) Issues the Proposed Rule Change Is Intended To Address
    The proposed rule change would address concerns that (1) the 50% 
early warning alert is set too low and, thus, may not provide Members 
with useful information for purposes of effective post-trade 
monitoring; (2) the frequency of the 50% early warning alert could have 
a negative impact on Member responsiveness to more critical alerts; and 
(3) the verb tense and certain other language in the Rule may be 
unclear and/or technically inaccurate.
(iii) Manner in Which the Proposed Rule Change Would Operate To Resolve 
the Issues
    The proposed rule change would remove the 50% early warning alert 
from DTCC Limit Monitoring. DTCC Limit Monitoring would retain the 75% 
and 90% early warning alerts, which continue to provide Members with 
valuable notice of changes in their post-trade activity for purposes of 
effective risk management.
    Additionally, the proposed rule change would make certain technical 
changes that would clarify the Rule, primarily by updating the verb 
tense from future tense to present tense to reflect the present 
applicability of the Rule and by making certain other technical 
clarifications to language used in the Rule.
(iv) Manner in Which the Proposed Rule Change Would Affect Various 
Persons
    Members that use DTCC Limit Monitoring would no longer receive the 
50% early warning alert, but they would continue to receive alerts when 
their trading activity in each Risk Entity reaches 75% and 90% of their 
pre-set trading limits. No other changes are proposed with respect to 
the functioning of DTCC Limit Monitoring.
    The proposed technical changes are not anticipated to have any 
effect on Members that use DTCC Limit Monitoring.
(v) Significant Problems Known to the Self-Regulatory Organization That 
Persons Affected Are Likely To Have in Complying With the Proposed Rule 
Change
    Members that use DTCC Limit Monitoring would not have to take any 
action as a result of the proposed rule change, and NSCC is not aware 
of any problems that Members would have in continuing to comply with 
the Rules \7\ that address DTCC Limit Monitoring after the 
implementation of the proposed rule change.
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    \7\ Id.
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    As stated above, the proposed technical changes are not anticipated 
to have any effect on Members that use DTCC Limit Monitoring.
(vi) Description of the Proposed Rule Change
    In order to implement this proposed rule change, NSCC would amend 
Section 4 of Procedure XVII (DTCC Limit Monitoring Procedure) of the 
Rules to remove reference to the 50% early warning alert and to make 
certain technical clarifications to language used in the Rule, 
primarily by updating the verb tense used therein. No other changes to 
the Rules are contemplated by this proposed rule change.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act requires, in part, that the Rules 
be designed to promote the prompt and accurate clearance and settlement 
of securities transactions and to protect investors and the public 
interest.\8\
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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    By removing the 50% early warning limit alert, which may not 
provide Members with information that is useful for purposes of post-
trade monitoring, but, rather, may distract Members from such 
information, the proposed rule change would make DTCC Limit Monitoring 
a more effective tool for Members to monitor their post-trade activity 
and would enhance their ability to manage risks, facilitating the 
protection of investors and the public interest from such risks.
    Additionally, the proposed technical changes to the Rule, which 
primarily update the verb tense from future tense to present tense, 
would provide additional clarity to NSCC Members and would ensure the 
accuracy of it [sic] Rules by reflecting the current, rather than the 
future, applicability of the DTCC Limit Monitoring Rule.
    Therefore, NSCC believes the proposed rule change would protect 
investors and the public interest, consistent with the requirements of 
Section 17A(b)(3)(F) of the Act, cited above.

(B) Clearing Agency's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change would have any 
impact on competition because the proposal would apply equally to all 
Members that use DTCC Limit Monitoring.

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

    NSCC has not received any written comments relating to this 
proposal. NSCC will notify the Commission of any written comments 
received by NSCC.

III. Date of Effectiveness of the Proposed Rule Change, 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 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, 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 Number SR-NSCC-2016-001 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NSCC-2016-001. 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

[[Page 26274]]

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 
the filing also will be available for inspection and copying at the 
principal office of NSCC and on DTCC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). 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-2016-001 and should be submitted on or before May 23, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-10150 Filed 4-29-16; 8:45 am]
 BILLING CODE 8011-01-P