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Self-Regulatory Organizations; The National Securities Clearing Corporation; Order Granting Approval of a Proposed Rule Change Relating to Execution Time for CNS Buy-Ins

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Information about this document as published in the Federal Register.

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Start Preamble March 2, 2004.

On March 24, 2003, the National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) and on March 14, 2003, amended proposed rule change File No. SR-NSCC-2003-03 pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”).[1] Notice of the proposed rule change was published in the Federal Register on January 16, 2004.[2] No comment letters were received. For the reasons discussed below, the Commission is granting approval of the proposed rule change.

I. Description

The purpose of the proposed rule change is to modify NSCC Procedures VII.J. “CNS Accounting Operation, Recording of CNS Buy-Ins” and X.A.1. “Execution of Buy-Ins, CNS System, Equity Securities and Corporate Debt Securities” with regard to the execution time of CNS buy-ins. Except with respect to securities subject to a voluntary corporate reorganization, a member having a long CNS position at the end of any day may submit to NSCC a notice of intention to buy-in (“buy-in notice”) specifying a quantity of securities (not exceeding such long CNS positions) the member intends to buy-in (“buy-in position”). The day the CNS buy-in notice is submitted is referred to as N, and N+1 and N+2 refer to the succeeding days. Each day commences in the evening and includes both an evening and daytime allocation. The CNS buy-in position is given high priority for allocation through N+2.

Pursuant to NSCC Procedure VII, if a CNS buy-in position is not satisfied at the end of the day cycle on N+2, the CNS buy-in may be executed. In effect, members have from the completion of the day cycle on N+2 to the close of the markets to execute the CNS buy-in. Operationally, as the day cycle generally completes at 3:10 p.m. eastern standard time (“e.s.t.”), participants face a narrow timeframe within which they may execute CNS buy-ins. In the event that settlement and recycle times are extended or delayed, that window of time is further reduced.

At the request of participants and after consultation with the Securities Industry Association Buy-In Committee, NSCC is modifying Procedures VII and X to permit the execution of CNS buy-ins beginning at 3 p.m. e.s.t. or at such time as established by NSCC because of market events (e.g., days the marketplaces close early). NSCC will advise participants of any earlier execution time through an important notice five business days in advance. The change in time is not a requirement for executions of buy-ins but is to give Start Printed Page 10791participants the ability to execute CNS buy-ins in a more efficient manner.

II. Discussion

Section 17A(b)(3)(F) [3] 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. By allowing NSCC to establish an earlier and standard timeframe for CNS buy-ins, the proposed rule change provides NSCC members with a longer and consistent time period in which to execute CNS buy-ins to satisfy their CNS long-positions. As such, the proposed rule change is consistent with NSCC's obligation to facilitate the prompt and accurate clearance and settlement of securities transactions. Therefore, the Commission finds that NSCC's proposed rule change is consistent with its obligations under section 17A(b)(3)(F) of the Act.

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,[4] that the proposed rule change (File No. SR-NSCC-2003-03) be and hereby is approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[5]

Jill M. Peterson,

Assistant Secretary.

End Signature End Preamble


2.  Securities Exchange Act Release No. 49061 (January 12, 2004), 69 FR 2641 (January 16, 2004).

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3.  15 U.S.C. 78q-1(b)(3)(F).

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[FR Doc. 04-5117 Filed 3-5-04; 8:45 am]