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Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change to Modify Its Rules and Procedures Related to the Collection of Commission Payments

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Start Preamble Start Printed Page 29699 May 16, 2006.

I. Introduction

On December 29, 2005, the National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) and on February 3, 2006, amended proposed rule change SR-NSCC-2005-17 pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”).[1] Notice of the proposal was published in the Federal Register on March 13, 2006.[2] No comment letters were received. For the reasons discussed below, the Commission is approving the proposed rule change.

II. Description

As part of ongoing efforts to increase processing efficiencies, NSCC is modifying its Rule 16, “Settlement of Commissions,” to further standardize and automate the processing of commission bill payments.

In 2001, NSCC modified Rule 16 to implement the use of Automated Clearing House (“ACH”) wire transfers when making payments to non-clearing members utilizing NSCC's Commission Bill Service. As a part of NSCC's move to payment of credits by ACH wire transfer, all non-clearing members were required to execute appropriate ACH documentation in order to receive their credit payments.[3] While NSCC automated the payment of funds from NSCC to non-clearing members, the collection of monies owed to NSCC by non-clearing members was not automated. Non-clearing members continued to pay commission bill settlement funds to NSCC by checks.

NSCC is now further modifying Rule 16 to require the use of ACH preauthorized payments in the collection of funds from those non-clearing members that are indebted to NSCC as a result of their utilization of the Commission Bill Service. Accordingly, at the time as determined and announced to users of the Commission Bill Service by NSCC, NSCC will debit the bank account designated by each non-clearing member an amount equal to the amount owed by the non-clearing member to NSCC.[4] All non-clearing members will be required to execute appropriate ACH documentation.

In addition to the above change, NSCC is also making a technical correction to Rule 16(3) to conform the Rule to practice. NSCC will eliminate text that provides that non-clearing members must deliver information to NSCC on the 10th day of each month. NSCC is eliminating this text because this practice has been discontinued.


NSCC will work with New York Stock Exchange (“NYSE”) and American Stock Exchange (“AMEX”) staff to obtain new ACH documentation from all non-clearing members that currently utilize the Commission Bill Service. Within two weeks of approval by the SEC of this rule filing, NSCC will begin implementing the ACH debit process on a rolling-basis. NSCC anticipates that collection of funds by check from non-clearing members to NSCC will be discontinued in its entirety by the end of the second quarter of 2006.

III. Discussion

Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of a clearing agency be designed to remove impediments to and perfect the mechanism of a national system for prompt and accurate clearance and settlement of securities transactions.[5] By requiring electronic payment of funds from non-clearing members utilizing its Commission Bill Service, NSCC should reduce processing errors and delays that are typically associated with the manual processing of checks. As such, the proposed rule change is consistent with NSCC's statutory obligation to remove impediments to and perfect the mechanism of a national system for prompt and accurate clearance and settlement of securities transactions.

IV. 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,[6] that the proposed rule change (File No. SR-NSCC-2005-17) be and hereby is approved.

Start Signature

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

Nancy M. Morris,


End Signature End Preamble


2.  Securities Exchange Act Release No. 53424 (March 6, 2006), 71 FR 12759.

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3.  Securities Exchange Act Release No. 44550 (July 12, 2001), 66 FR 37509 (July 18, 2001) [File No. SR-NSCC-2001-08].

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4.  Currently, commission bill settlement takes place on the 15th day of each month or on the next preceding business day if the 15th is not a business day.

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5.  15 U.S.C. 78q-1(b)(3)(F).

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[FR Doc. E6-7798 Filed 5-22-06; 8:45 am]