[Federal Register Volume 87, Number 249 (Thursday, December 29, 2022)]
[Notices]
[Pages 80228-80231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-28298]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96571; File No. SR-NSCC-2022-016]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change To Amend Certain Fees

December 22, 2022.
    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 December 20, 2022, 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. 
NSCC filed the proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act \3\ and Rule 19b-4(f)(2) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change modifies Addendum A (Fee Structure) 
(``Addendum A'') of NSCC's Rules & Procedures (``Rules'') to reduce 
certain trade clearance fees, as described below.\5\
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    \5\ Capitalized terms used herein and not otherwise defined 
shall have the meaning assigned to such terms 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
    The purpose of this proposed rule change is to amend Addendum A 
(Fee Structure) of the Rules to modify the ``value into the net'' and 
``value out of the net'' components of NSCC's Clearance Activity Fees 
effective January 1, 2023. The proposed fee change is discussed in 
detail below.
Background
    NSCC provides clearance and settlement services for trades executed 
by its Members in the U.S. equity, corporate and municipal bond, and 
unit investment trust markets and for equities securities financing 
transactions (``SFTs'') entered into by Members, certain firms that are 
sponsored into NSCC membership by a Sponsoring Member, and Agent 
Clearing Members on behalf of their customers, as provided in the 
Rules. Members are charged fees in accordance with Addendum A based 
upon Members' activities and the NSCC services utilized.
    As part of the annual budgeting process, NSCC reviews price levels 
against its cost of operations and evaluates potential expense 
reductions and/or fee changes to correct any misalignment of costs and 
fees. NSCC's fees are cost-based plus a markup as approved by the Board 
of Directors or management (pursuant to authority delegated by the 
Board), as applicable. This markup is applied to recover development 
costs and operating expenses and to accumulate capital sufficient to 
meet regulatory and economic requirements.\6\
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    \6\ NSCC maintains procedures to control costs and regularly 
review pricing levels against costs of operation. See NSCC 
Disclosure Framework for Covered Clearing Agencies and Financial 
Market Infrastructures, available at https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf, at 120.
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    During the 2023 budgeting process, management identified 
opportunities to better align fees and costs for NSCC, which were 
approved by the Businesses, Technology and Operations Committee of the 
Board of Directors. As a result of this review, NSCC is proposing to

[[Page 80229]]

reduce the ``value into the net'' and ``value out of the net'' 
components of its Clearance Activity Fees.
Proposed Fee Changes
    Pursuant to Section II.A. of Addendum A, NSCC charges Clearance 
Activity Fees for SFT and non-SFT transactions. For transactions 
excluding SFTs, NSCC charges a (i) ``value into the net'' fee of $0.47 
per million of processed value (i.e., for CNS and Balance Order 
netting, the sum of the contract amount and any CNS fail value) and 
(ii) a ``value out of the net'' fee of $2.56 per million of settling 
value (i.e., the absolute value of the CNS Long and Short Positions). 
The ``value into the net'' fee is the value of transactions for which a 
broker is buyer or seller (excluding non-DTCC settling trades, non-CNS 
municipal bond transactions, flip trades, and foreign security trades) 
and is calculated as the gross cleared value prior to netting. The 
``value into the net'' fee also includes any fails re-entered into CNS. 
The into the net value reflects the aggregate of each opening CNS 
security position multiplied by the current market price for each 
security. The ``value out of the net'' fee is based on the daily 
aggregate market value of all settling CNS positions after netting.\7\
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    \7\ Additional details regarding NSCC's equity trade capture 
fees, including the ``value into the net'' and ``value out of the 
net'' fees, can be found on the DTCC Learning Center website, 
available at https://dtcclearning.com/products-and-services/equities-clearing/utc/utc-users.html.
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    Based on its annal budgeting review, NSCC proposes to (i) decrease 
its ``value into the net'' fee from $0.47 to $0.46 per million of 
processed value and (ii) decrease its ``value out of the net'' fee from 
$2.56 to $2.16 per million of settling value in order to achieve a 
targeted annual fee revenue reduction of approximately $30 million. The 
``value into the net'' and ``value out of the net'' fees affect all 
participants using NSCC's trade capture and CNS Accounting Operation 
services. The ``value into the net'' fee, specifically, is the largest 
fee type for NSCC. As a result, the proposed reduction in this fee from 
$0.47 to $0.46 is expected to result in the largest portion of the 
aggregate fee reduction. However, NSCC would be unable to completely 
align its targeted projected revenue reduction based on a decrease in 
the ``value into the net'' fee alone. NSCC therefore proposes to also 
reduce its ``value out of the net'' fee from $2.56 to $2.16 to achieve 
its targeted cost-revenue alignment. To effectuate the proposed fee 
change, NSCC would amend Section II.A. of Addendum A concerning 
Clearance Activity Fees for transactions other than SFTs to reflect the 
new ``value into the net'' fee of $0.46 per million of processed value 
and ``value out of the net'' fee of $2.16 per million of settling 
value.
Expected Member Impact
    The proposed rule change would result in reduced ``value into the 
net'' and ``value out of the net'' fees for NSCC Members, the impact of 
which would vary based on their usage of the underlying NSCC services. 
The proposed fee change is expected to decrease NSCC's overall annual 
fee revenue by approximately $30 million. Individual Member impacts are 
estimated to range from an approximately 0-13% reduction in fees 
depending on their ``value into the net'' and ``value out of the net'' 
activity.
Member Outreach
    NSCC has conducted ongoing outreach to Members in order to provide 
them with notice of the proposed changes and the anticipated impact for 
the Member. As of the date of this filing, no written comments relating 
to the proposed changes have been received in response to this 
outreach. The Commission will be notified of any written comments 
received.
Implementation Timeframe
    NSCC would implement this proposal on January 1, 2023. As proposed, 
a legend would be added to Addendum A stating there are changes that 
became effective upon filing with the Commission but have not yet been 
implemented. The proposed legend also would include the date on which 
such changes would be implemented and the file number of this proposal, 
and state that, once this proposal is implemented, the legend would 
automatically be removed.
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 a registered clearing agency. Specifically, NSCC believes 
the proposed rule change is consistent with Section 17A(b)(3)(D) of the 
Act \8\ and Rule 17Ad-22(e)(23)(ii) \9\ thereunder for the reasons set 
forth below.
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    \8\ 15 U.S.C. 78q-1(b)(3)(D).
    \9\ 17 CFR 240.17Ad-22(e)(23)(ii).
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    Section 17A(b)(3)(D) of the Act \10\ requires that the rules of a 
clearing agency provide for the equitable allocation of reasonable 
dues, fees, and other charges among its participants. NSCC believes the 
proposed fees would be allocated equitably among its full-service 
Members. The proposed rule change would result in reduced ``value into 
the net'' and ``value out of the net'' fees for NSCC Members. The 
proposed ``value into the net'' and ``value out of the net'' fee 
changes would be fairly applied to all Members using NSCC's trade 
capture and CNS Accounting Operation services. While the impact of the 
proposed fees would vary based on Members' usage of the underlying NSCC 
services, the proposed rule change would not alter how the Clearance 
Activity Fees are calculated or how such fees are allocated to Members. 
As mentioned above, the ``value into the net'' component of the 
Clearance Activity Fee is based on the Member's gross cleared value 
prior to netting. As such, and as is currently the case, Members that 
make greater use of NSCC's guaranteed services would generally be 
subject to larger ``value into the net'' fees, and therefore would see 
a greater reduction in fees as a result of the proposed fee change, 
because such Members would typically have a higher value of gross 
positions prior to netting. And conversely, Members that use NSCC's 
guaranteed services less would generally be subject to smaller ``value 
into the net'' fees, and therefore would see smaller fee reductions, 
because such Members would typically have a lower value of gross 
positions. Similarly, the ``value out of the net'' component of the 
Clearance Activity Fee is based on a Member's daily aggregate market 
value of all settling CNS positions after netting. Members that make 
greater use of NSCC's guaranteed services are generally subject to 
larger ``value out of the net'' fees, and therefore would see greater 
fee reductions as a result of the proposed fee change, because such 
Members typically have higher value out of the net positions after 
netting. Conversely, Members that use NSCC's guaranteed services less 
would generally be subject to a smaller ``value out of the net'' fees, 
and therefore would see smaller fee reductions, because such Members 
would typically have lower value of net positions after netting. The 
proposed changes to the ``value into the net'' and ``value out of the 
net'' components of the Clearance Activity Fee would not adjust these 
allocations or the manner in which the fees are applied. As a result, 
NSCC believes the proposed fees would continue to be allocated 
equitably among its Members.
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    \10\ 15 U.S.C. 78q-1(b)(3)(D).
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    NSCC also believes that the proposed fee changes are reasonable. 
The proposed fees were selected based on an analysis of projected 
market volumes and revenues for NSCC during its

[[Page 80230]]

annual budgeting process. The proposed fee changes are intended to 
better align to the projected operating costs and expenses of NSCC and 
would result in an overall reduction of fees imposed on NSCC's Members. 
As discussed above, the ``value into the net'' fee is the largest fee 
type for NSCC. As a result, the proposed reduction in this fee is 
expected to result in the largest portion of the projected aggregate 
fee reduction. However, NSCC also proposes to reduce its ``value out of 
the net'' fee to achieve its targeted cost-revenue alignment. Together, 
the proposed fee changes are designed to achieve a targeted annual fee 
revenue reduction of approximately $30 million, which would better 
align to the projected operating costs and expenses of NSCC. Moreover, 
as noted above, the proposed rule change would not alter how these 
Clearance Activity Fees are calculated or how such fees are allocated 
to Members. For these reasons, NSCC believes the proposed fees would 
continue to be reasonable.
    Rule 17Ad-22(e)(23)(ii) under the Act \11\ requires NSCC to 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to provide sufficient information to 
enable participants to identify and evaluate the risks, fees, and other 
material costs they incur by participating in the covered clearing 
agency. The proposed fees would be clearly and transparently published 
in Addendum A of the Rules, which are available on a public 
website,\12\ thereby enabling Members to identify the fees and costs 
associated with participating in NSCC. As such, NSCC believes the 
proposed rule change is consistent with Rule 17Ad-22(e)(23)(ii) under 
the Act.\13\
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    \11\ 17 CFR 240.17Ad-22(e)(23)(ii).
    \12\ See supra note 5.
    \13\ 17 CFR 240.17Ad-22(e)(23)(ii).
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(B) Clearing Agency's Statement on Burden on Competition

    NSCC does not believe the proposed reduction in Clearance Activity 
Fees would have any impact or burden on competition. As discussed 
above, NSCC believes the proposed fees would be allocated equitably 
among its full-service Members. The proposed fee change would result in 
reduced ``value into the net'' and ``value out of the net'' fees for 
NSCC Members, the impact of which would vary based on their usage of 
the underlying NSCC services. The proposed ``value into the net'' and 
``value out of the net'' fee changes would apply to all Members using 
NSCC's trade capture and CNS Accounting Operation services and would 
not alter how the Clearance Activity Fees are calculated or allocated 
to Members. In the aggregate, NSCC expects the proposed fee change 
would result in a reduction of NSCC's annual fee revenue by 
approximately $30 million. Individual Member impacts are estimated to 
range from an approximately 0-13% reduction in fees depending on their 
``value into the net'' and ``value out of the net'' activity. NSCC 
believes the proposed fee reduction would not unfairly inhibit access 
to NSCC's services by any Member. NSCC therefore believes the proposed 
rule changed would not have any impact or burden on competition.

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

    NSCC has conducted outreach to Members to provide them with notice 
of the proposed fees.
    NSCC has not received or solicited any written comments relating to 
this proposal. If any written comments are received by NSCC, they will 
be publicly filed as an Exhibit 2 to this filing, as required by Form 
19b-4 and the General Instructions thereto.
    Persons submitting comments are cautioned that, according to 
Section IV (Solicitation of Comments) of the Exhibit 1A in the General 
Instructions to Form 19b-4, the Commission does not edit personal 
identifying information from comment submissions. Commenters should 
submit only information that they wish to make available publicly, 
including their name, email address, and any other identifying 
information.
    All prospective commenters should follow the Commission's 
instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/how-to-submit-comments. General 
questions regarding the rule filing process or logistical questions 
regarding this filing should be directed to the Main Office of the 
Commission's Division of Trading and Markets at 
[email protected] or 202-551-5777.
    NSCC reserves the right not to respond to any comments received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \14\ of the Act and paragraph (f) \15\ of Rule 19b-4 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend 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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    \14\ 15 U.S.C 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f).
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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 email to [email protected]. Please include 
File Number SR-NSCC-2022-016 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-2022-016. 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 website (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 website 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 website 
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment

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submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NSCC-2022-016 and should be submitted on or before January 19, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-28298 Filed 12-28-22; 8:45 am]
BILLING CODE 8011-01-P