Skip to Content

Notice

Self-Regulatory Organizations; National Securities Clearing Corporation; Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Submission of Extended Corrections and Time Frames for Confirmation

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble November 20, 2000.

On August 28, 2000, the National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change (File No. SR-NSCC-00-12) pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [1] to permit NSCC to allow Fund Members and Mutual Fund Processors to submit extended (post settlement) corrections in NSCC's Mutual Fund Service's Fund/Serv. Notice of the proposal was published in the Federal Register on October 24, 2000.[2] No comment letters were received. For the reasons discussed below, the Commission is granting accelerated approval of the proposed rule change.

I. Description

Pursuant to NSCC's Rule 52A, section 12, only a Settling Member or TPA Member may currently submit extended (post settlement) correction instructions. These types of instructions are submitted when a Settling Member or TPA Member determines that data with respect to a settled order previously transmitted to a Fund Member or Mutual Fund Processor is in need of correction.[3]

Under the proposed rule change, section 12 will be amended to also permit Fund Members and Mutual Fund Processors to submit extended (post settlement) corrections to Settling Members or TPA Members. No action will be required by a Settling Member or TPA Member if it determines to accept the extended correction of a Fund Member or Mutual Fund Processor. A Settling Member or TPA Member will be able to reject the extended correction instruction within the time frame established by NSCC.[4] In addition, section 12 will be revised to permit extended corrections for exchange orders.

The rule change also proposes to make two additional changes to Rule 52A. Sections 4 and 8 of Rule 52A are being amended to allow NSCC to delete certain orders, corrections, and extended corrections that have not been confirmed or rejected, respectively, within the time frame established by NSCC. Section 21 is being amended to reduce the maximum time frame within which a Delivering Fund Member must confirm the value of Fund/Serv eligible mutual fund shares, investment funds, or UIT units being transferred to a Receiving Fund Member from sixty days to tens days.[5]

Start Printed Page 75331

NSCC intends to implement these changes, subject to SEC approval, on November 20, 2000.

II. Discussion

Section 17A(b)(3)(F) [6] of the Act requires that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions, and to foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions. By permitting Fund Members and Mutual Fund Processors to submit post settlement corrections and by amending the time frames within which the value of the instruments being transferred must be confirmed, the rule change should allow NSCC to provide a mechanism to help facilitate the prompt and accurate clearance and settlement of transactions between users of Fund/Serv. Furthermore, by extending the ability to submit post settlement corrections to Fund Members and Mutual Fund Processors, an ability already granted to Settling Members and TPA Members, NSCC is ensuring that the primary users of Fund/Serv are afforded similar capabilities. These actions should foster cooperation and coordination among Fund/Serv users. Accordingly, the Commission finds that the rule change is consistent with NSCC's obligations under the Act.

NSCC has requested that the Commission find good cause for approving the proposed rule change prior to the thirtieth day after the date of publication of notice of the filing. The Commission finds good cause for so approving the proposed rule change prior to the thirtieth day after publication in the Federal Register because accelerated approval will permit NSCC to implement these Fund/Serv system enhancements, which are designed to accommodate new Internal Revenue Service regulations (which will be effective January 1, 2001),[7] in a manner consistent with industry practices with respect to system enhancements. Furthermore, the Commission has not received any comment letters and does not expect to receive any comment letters on the proposal.

III. 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 and the rules and regulations thereunder.

It is Therefore Ordered, pursuant to section 19(b)(2) of the Act, that the proposed rule change (File No. SR-NSCC-00-12) be and hereby is approved. For the Commission by the Division of Market Regulation, pursuant to delegated authority.[8]

Start Signature

Jonathan G. Katz,

Secretary.

End Signature End Preamble

Footnotes

2.  Securities Exchange Act Release No. 43457 (October 17, 2000) 65 FR 63662 (October 24, 2000).

Back to Citation

3.  Securities Exchange Act Release No. 31937 (March 1, 1993), 58 FR 12609 [SR-NSCC-92-14] (order approving post settlement correction initiated by Settling Members and TPA Members).

Back to Citation

4.  Currently, a Settling Member or TPA Member must reject the extended correction instruction within three days. NSCC will issue an “Important Notice” at least 30 days prior to implementing changes in the time frames required for rejections of extended corrections. Telephone conservation between Richard J. Paley, Associate Counsel, NSCC, and Susan M. Petersen, Special Counsel, Division of Market Regulation, Commission (October 16, 2000).

Back to Citation

5.  Pursuant to Section 21 of Rule 52A, a Fund Member or Mutual Fund Processor (“Receiving Fund Member”) may initiate a request for the transfer of a customer's mutual fund shares, investment fund, or UIT units from another Fund Member or Mutual Fund Processor (“Delivering Fund Member”). The Delivering Fund Member must acknowledge or reject the transfer request within two business days. Once the transfer is acknowledged, the Delivering Fund Member must also confirm the value of the shares to be transferred within the time frame specified under Section 21. Under the proposed rule change, a Delivering Fund Member must submit the confirmation no earlier than one business day and no later than ten business days after acknowledging the transfer.

Back to Citation

6.  15 U.S.C. 78q-1(b)(3)(F).

Back to Citation

7.  The new IRS regulation relates to the certification of foreign accounts, specifically the communication of W8-related registration information. Since fund companies typically do not implement December code or system changes, NSCC requested acceleration of the rule filing so as to implement and test the system changes prior to December.

Back to Citation

[FR Doc. 00-30592 Filed 11-30-00; 8:45 am]

BILLING CODE 8010-01-M