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Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Data Services Only Members

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Start Preamble Start Printed Page 54045 October 19, 2001.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“ACT”) [1] , notice is hereby given that on September 24, 2001, 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 primarily by NSCC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The proposed rule change would allow NSCC to add a new membership category (“Data Services Only Member”) to its rules. Data Services Only Members would be able to use certain non-clearing services available at NSCC.

II. Self-Regulatory Organization'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 these statements.[2]

(A) Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, for Proposed Rule Change

The proposed rule change creates a new category of member that its eligible to access certain limited data and information services of NSCC. Such entities will be known as “Data Services Only Members” and would only be permitted access to those services specifically enumerated under NSCC's rules. They would not be permitted to settle any transactions through NSCC's facilities.

Entities seeking access as a Data Services Only Member must only meet the requirements of any of clauses (i) through (vi) of Section 1 of Rule 2; that is, they must be either a registered broker-dealer, bank or trust company, registered clearing agency, insurance company or entity licensed to sell insurance products, an investment company registered under the Investment Company Act of 1940, as amended, or an entity that has demonstrated to NSCC's Board of Directors that its business and capabilities are such that it could reasonably expect material benefit from access to such services in order to be accepted as a Data Services Only Member.[3]

Initially, the only NSCC service that Data Services Only Members would be permitted to access the networking service provided as part of NSCC's Mutual Fund Services.

This new membership category is being added at the request of NSCC's Fund Members and the Investment Company Institute, in order to permit broker-dealers who otherwise do not qualify to be NSCC members to obtain access to customers' account data in an automated format.

NSCC's Rule 52 (Mutual Fund Services) is being amended to permit Data Services Only Members to utilize networking only to request and transmit mutual fund, investment fund and UIT customer account data. (They would not, however, be permitted to settle dividend or other networking payments through NSCC.) [4]

The proposed rule change also makes technical conforming changes to other existing rules in order to include references to Data Services Only Members. In addition, certain technical corrections are being made to update certain cross-references as a result of other recent rule changes.[5]

A proposed fee schedule for Data Services Only Members' use of networking is being developed and will be the subject of a separate rule filing.[6]

The proposed rule change is consistent with the requirements of Section 17A of the Act and the rules and regulations thereunder applicable to NSCC because the rule change will increase the automation of data transmission between fund members, broker-dealers, and other entities and will permit greater access to such information, thus facilitating the prompt and accurate clearance and settlement of securities transactions.

(B) Self-Regulatory Organization's Statement on Burden on Competition

NSCC does not believe that the proposed rule change will have an impact on or impose a burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others

No written comments relating to the proposed rule change have been solicited or received. NSCC has, however, worked closely with the Investment Company Institute and a representative group of mutual fund industry participants in developing the proposed Data Services Only Membership category. 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

The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act and Rule 19b-4(f)(4) thereunder because the proposed rule change effects a change in an existing service that does not adversely affect the safeguarding of securities or funds in the custody or control of the clearing agency or for which it is responsible and it does not significantly affect the respective rights or obligations of the clearing agency or persons using the service. At any time within sixty days of the filing of such rule change, the Commission may summarily abrogate 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, Start Printed Page 54046or otherwise in furtherance of the purposes of the Act.

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. Persons making written submissions should file fix copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 inspection and copying in the Commission's Public Reference Section, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of NSCC. All submissions should refer to File No. SR-NSCC-2001-14 and should be submitted by November 15, 2001.

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[7]

Start Signature

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


2.  The Commission has modified the text of the summaries prepared by NSCC.

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3.  Since Data Services Only Members will not be inputting transactions for settlement through NSCC's facilities and since NSCC will thus not be subject to settlement exposure by these members. Data Services Only Members will not be required to make a clearing fund deposit, and they will not be subject to NSCC's current membership standards.

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4.  Subsequently, it is anticipated that such members would also be permitted to transmit data regarding mutual fund purchase and redemption transaction, which transactions would be settled outside the Corporation's facilities. Such extension would be the subject of a separate rule filing.

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5.  Since recently Addendum M has been deleted (with the applicable provisions now being contained in Addendum K), the reference to Addendum M in Rule 18 has been corrected to refer to Addendum K. In addition, the reference to “TPA Member” in Rule 29 has been deleted as an incorrect reference.

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6.  Until such time as a fee schedule has been agreed upon, this limited service will be provided free.

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[FR Doc. 01-26896 Filed 10-24-01; 8:45 am]