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Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving a Proposed Rule Change Relating to Buy-In Rules and Procedures

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Information about this document as published in the Federal Register.

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Start Preamble October 22, 2001.

On April 27, 2001, the National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change (File No. SR-NSCC-2001-07) pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”).[1] On April 30, 2001, NSCC filed an amendment to the proposed rule change. Notice of the proposal was published in the Federal Register on August 29, 2001.[2] No comment letters were received. For the reasons discussed below, the Commission is approving the proposed rule change.

I. Description

NSCC is modifying its buy-in rules and procedures to further automate and improve the processing of buy-ins of CNS positions.[3] The revised procedures provide that a Buy-In Notice may be filed by an originator on successive days provided the succeeding Buy-In Notice does not specify a quantity of securities covered by the prior Buy-In Notice and the quantity of securities representing the sum of all Buy-In Notices does not exceed the member's total long position.[4]

The Retransmittal Notice is being revised to include the identity of the originator on the Retransmittal Notice so that the member owing securities can contact the originator to arrange delivery.[5] Regardless of any agreements that may have been entered into between a member owing securities and an originator, unless the originator notifies NSCC in a timely manner that its Buy-In Order should not be executed, members who receive Retransmittal Notices and do not satisfy them assume liability for the loss, if any, which occurs as a result of an originator's Buy-In Order.[6]

The revisions also require members to electronically transmit Buy-In Notices and Buy-In Orders through an automated format determined by NSCC thereby eliminating the practice of hand and facsimile deliveries. Similarly, NSCC will transmit through an automated format Retransmittal Notices to members.[7]

Members will be advised of the specific implementation date of the Buy-In changes prior to implementation.

II. Discussion

Section 17A(b)(3)(F) 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.[8] The Commission believes that NSCC's rule change is consistent with this section because it will facilitate the prompt and accurate clearance and settlement of buy-in transactions by further automating and improving the processing of buy-ins.

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III. Conclusion

On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of 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-2001-07) be and hereby is approved.

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[9]

End Preamble


2.  Securities Exchange Act Release No. 44736 (August 22, 2001), 66 FR 45715.

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3.  Changes are being made to: NSCC Rule 11, Sections 7(b) and (c); NSCC Procedure VII, section J; and NSCC Procedure X, section A. Also, proposed changes to NSCC Procedure VII, section E3 to conform its language to the language proposed in NSCC Procedure VII, section J.

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4.  NSCC Procedure VII, section J.

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5.  NSCC Rule 11, section 7(b).

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6.  NSCC Procedure X, section A1.

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7.  NSCC Rule 11, sections 7(b) and (c).

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8.  15 U.S.C. 78q-1(b)(3)(F).

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[FR Doc. 01-27128 Filed 10-26-01; 8:45 am]