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Self-Regulatory Organizations; The National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Set the Effective Date for the Elimination of the Guaranty of Payment With Respect to Its Envelope Settlement Service

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Start Preamble March 29, 2010.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] notice is hereby given that on March 8, 2010, the National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change described in Items I, II, and III below, which items have been prepared primarily by NSCC. NSCC filed the proposal pursuant to section 19(b)(3)(A)(i) of the Act [2] and Rule 19b-4(f)(1) [3] thereunder so that the proposal was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the 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 will set the effective date for the elimination of a guarantee of payment (and associated rule changes) with respect to NSCC's Envelope Settlement Service (“ESS”) as of April 1, 2010.

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.[4]

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

On March 1, 2010, the Commission approved rule filing SR-NSCC-2010-01 (“Approved Filing”) relating to NSCC's elimination of the guarantee of payment in connection with ESS.[5] Specifically, the approval will give effect to specified changes to Rule 9, Addendum D, Addendum K, and Procedure XV of NSCC's rules and procedures as set forth in Exhibit 5 of the Approved Filing, to: (1) Eliminate NSCC's guaranty of the payment to the receiving NSCC member in an ESS delivery, (2) provide that the credits and debits of the payment amount of an envelope may be reversed, and (3) eliminate clearing fund deposits allocated to ESS. In order to afford members a transitional period to prepare for these changes, NSCC is proposing to implement the changes on April 1, 2010.

The proposed rule change is consistent with Section 17A of the Act,[6] as amended, and the rules and regulations thereunder applicable to NSCC. The proposed rule change will protect NSCC's net settlement process while continuing to provide a central delivery point for physical deliveries of envelopes with constrained payment processing. The changes will reduce NSCC's exposure to potential losses from member defaults, insolvencies, mistakes, and fraud and will appropriately shift the risk outside NSCC to the contracting members in an ESS transaction. The interim period for implementation will permit members to adjust their processes and systems as necessary to accommodate the changes.

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

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

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

Written comments relating to the proposed rule change were not and are not intended to be solicited or received. 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 proposed rule change has become effective upon filing pursuant to Section 19(b)(3)(A)(i) of the Act [7] and Rule 19b-4(f)(1) [8] thereunder because the proposed rule change constitutes a stated policy, practice, or interpretation with respect to the meaning, administration or enforcement of an existing rule. At any time within sixty days of the filing of the proposed 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, or 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. Comments may be submitted by any of the following methods:

Electronic Comments

Paper Comments

  • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NSCC-2010-04. This file Start Printed Page 16887number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (​rules/​sro.shtml). 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 Web site viewing and printing in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filings also will be available for inspection and copying at the principal office of NSCC and on NSCC's Web site at​downloads/​legal/​rule_​filings/​2010/​nscc/​2010-04.pdf. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NSCC-2010-04 and should be submitted on or before April 23, 2010.

Start Signature

For the Commission by the Division of Trading and Markets, pursuant to delegated authority.[9]

Florence E. Harmon,

Deputy Secretary.

End Signature End Preamble


2.  15 U.S.C. 78s(b)(3)(A)(i).

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

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5.  See Securities Exchange Act Release No. 61618 (March 1, 2010), 75 FR 10542 (March 8, 2010) (SR-NSCC-2010-01).

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7.  15 U.S.C. 78s(b)(3)(A)(i).

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[FR Doc. 2010-7465 Filed 4-1-10; 8:45 am]