Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), notice is hereby given that on August 28, 2000, the National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) and on September 25, 2000, amended the proposed rule change as described in Items I and II below, which items have been prepared primarily by NSCC. The Commission is publishing this notice and order to solicit comments from interested parties and to grant accelerated approval of the proposed rule change.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The proposed rule change modifies NSCC's rules and procedures pertaining to acceptance procedures for partial accounts, initiating partial account transfers, and reclaim transfer procedures in the Automated Customer Account Transfer Service (“ACAT Service”).
A copy of the text of NSCC's proposed rule change and the attached exhibits are available at the Commission's Public Reference Section or through NSCC. Please note that Exhibit A also contains rule text additions previously submitted by NSCC in SR-NSCC-00-05, which is pending review by the Commission.
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.
The Commission has modified the text of the summaries prepared by NSCC.
(A) Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
NSCC's ACAT Service facilitates the automated transfer of customer accounts between members. In operation since 1985, the ACAT Service was designed to complement the New York Stock Exchange (“NYSE”) and the National Association of Securities Dealers (“NASD”) rules that require NYSE and NASD members to use automated clearing agency customer account transfer services and to affect customer account transfers within specified timeframes. Under the proposed rule change, NSCC proposes to make three enhancements to the ACAT Service rules and procedures.
Rule 50 of NSCC's Rules and Procedures governs the use of the ACAT Service by members.
NYSE Rule 412 and NASD Rule 11870.
The first enhancement relates to the rejection by Receiving Members of account assets transferred through the ACAT Service. Pursuant to section 8 of Rule 50, Receiving Members may not reject individual account assets but rather they may only accept or reject accounts in their entirety. The proposed rule change will modify Section 8 by providing a Receiving Member with the ability to either accept all assets in the account being transferred or to the extent permitted by the Receiving Member's designated examining authority accept only some of the assets in the account. NSCC proposes to implement these changes in January 2001 and will notify members through distribution of an Important Notice.
The second enhancement relates to transfer requests initiated by a Delivering Member. Under section 12(1), NSCC will reject a Delivering Member initiated transfer if the details contain an edit or format error. The proposed rule change will add language stating that NSCC will report to both the Delivering Member and the Receiving Member the details of the account if no edit or format errors in the asset data are discovered by NSCC.
NSCC also proposes to amend section 12(2) of Rule 50 relating to the treatment of reclaim procedures. Currently, if a Receiving Member is going to reject any transfer request initiated by a Delivering Member, the Receiving Member must do so on the same day it receives the request. In connection with reclaim transfer requests only, NSCC has determined that Receiving Members need additional time to research these types of transfer requests. The proposed rule change will permit a Receiving Member to reject a reclaim transfer request no later than two business days following the day the reclaim transfer request is received. No action is required by the Receiving Member if it determines to accept the reclaim transfer request. Settlement date for all reclaim transfer requests will be one business day following the day the Receiving Member accepts or is deemed to accept the reclaim transfer request. NSCC proposes to implement these changes to section 12(2) in January 2001. NSCC will notify members by Important Notice.
A reclaim occurs when cash or certain securities are mistakenly delivered as part of the ACAT Service transfer.
The third enhancement relates to the ability of Receiving Members to initiate transfers for partial customer accounts. Section 13 of Rule 50 currently provides that a Receiving Member may submit a request to a Delivering Member to initiate the transfer of a partial customer account. The Receiving Member's request is delivered by NSCC to the Delivering Member on the same day that it is received by NSCC. Each day NSCC produces a report that reflects all requests received by it for that day. The Delivering Member is not required to take any action if it determines not to respond.
Under the proposed rule change, section 13 will be revised to provide additional time for a Delivering Member to review a Receiving Member's request for a partial account transfer. NSCC will continue to produce a report reflecting outstanding transfer requests for a period not to exceed three days. NSCC will also require a Delivering Member to indicate a reason for any requests rejected by the member. Pending approval, NSCC plans to implement the revisions to section 13 in November 2000 and will notify members by Important Notices.
NSCC believes the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act and the rules thereunder because it will facilitate the prompt and accurate clearance and settlement of securities transactions and in general, protect investors and the public interest.
(B) Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change will have an impact 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
Industry groups, including the Executive Committee of the Securities Industry Association's Customer Account Transfer Division and the Investment Company Institute's Mutual Fund User Group, were advised of and concur with these modifications to NSCC's rules. No written comments relating to the proposed rule change have been 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
Section 17A(b)(3)(F) of the Act requires that the rules of a clearing agency by designed to remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions. For these reasons set forth below, the Commission believes that NSCC's rule change is consistent with this obligation.
The rule change will permit NSCC to make certain enhancements to its ACAT Service that will afford members more specificity in the manner in which they accept, reject, or initiate transfers of customer account assets. These enhancements should improve the mechanism by which members transfer customer account assets and should improve the communication between members using the ACAT Service. Therefore, the Commission finds that the proposed rule change is consistent with NSCC's obligations to remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions.
NSCC has requested that the Commission find good cause for approving the proposed rule change prior to the thirtieth day after the date of publication of notice of the filing. The Commission finds good cause for so approving the proposed rule change because accelerated approval will permit NSCC to implement it and members and their customers to benefit from these enhancements to the ACAT Service as soon as possible.
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 six 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-00-11 and should be submitted by December 19, 2000.
It Is Therefore Ordered, pursuant to section 19(b)(2) of the Act, that the proposed rule change (File No. SR-NSCC-00-11) be and hereby is approved.
For the Commission by the Division of Market Regulation, pursuant to delegated authority.
Jonathan G. Katz
Secretary.
[FR Doc. 00-30194 Filed 11-27-00; 8:45 am]
BILLING CODE 8010-01-M