[Federal Register Volume 77, Number 218 (Friday, November 9, 2012)]
[Notices]
[Pages 67410-67412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27357]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68159; File No. SR-NSCC-2012-08]
Self-Regulatory Organizations; The National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Modify Rule 52 (Mutual Fund Services) and Addendum A
(NSCC's Fee Structure)
November 5, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on October 22, 2012, the
National Securities Clearing Corporation (``NSCC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change described in Items I and II below, which Items have been
prepared primarily by NSCC. NSCC filed the proposal pursuant to Section
19(b)(3)(A)(iii) \2\ of the Act, Rule 19b-4(f)(2),\3\ and Rule 19b-
4(f)(4)(i) \4\ 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78s(b)(3)(A)(iii).
\3\ 17 CFR 240.19b-4(f)(2).
\4\ 17 CFR 240.19b-4(f)(4)(i).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change modifies Rule 52 (Mutual Fund Services)
and Addendum A (NSCC's Fee Structure) of NSCC's Rules.
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.\5\
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\5\ The Commission has modified the text of the summaries
prepared by NSCC.
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[[Page 67411]]
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
Pursuant to the rule change proposal, NSCC will (i) rename the
``Mutual Fund Commission Settlement'' service under Rule 52 (the
``Service'') as the ``DTCC Payment aXis'' service in order to better
align the name of the Service with the various commission and other fee
data transmission and payment settlement functionalities available
through the Service (i.e., not solely commission settlement), (ii) make
clear that the Service permits for the transmission of commission and
other fee related data, and the settlement of such payments, among
users of the Service without regard to whether the flow of funds is
from the fund company (``Fund'') to the retail broker-dealer
(``Distributor''), from the Distributor to the Fund, from a Distributor
to another Distributor, or otherwise, (iii) specify that commission and
other fee data transmission, and the settlement of such payments, with
regard to investor accounts held on an omnibus account basis at the
Fund (``Omnibus'') may be made through the Service, (iv) specify the
process for the payment of 12b-1 fees \6\ with regard to investor
accounts held in Omnibus, and (v) establish the fees that NSCC will
charge users of the Service with regard to investor accounts held in
Omnibus.
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\6\ This is a category of fees paid out by the Fund out of Fund
assets to cover distribution expenses and sometimes shareholder
service expenses.
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Background. The Service was initially approved by the Commission on
December 9, 1992 (``1992 Rule Filing'').\7\ In the 1992 Rule Filing,
NSCC described that the new service would provide for the automation of
payments of commissions owed in respect of mutual fund transactions,
explaining that under the new service, Funds would be able to transmit
commission debit data to NSCC on a daily basis. NSCC's role in this new
commission service would be to transmit data between the Funds (i.e.,
the payers of commission payments) and the Distributors (i.e., the
receivers of commission payments). In 2005 (``2005 Rule Filing''),\8\
NSCC expanded the scope of the Service to permit Distributors to submit
fee data through NSCC to other Distributors and to settle the fee
payments in respect thereof through NSCC, expanding the Service to
allow for more than the exchange of commission-related information from
the Funds to Distributors.
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\7\ Securities Exchange Act Release No. 34-31579 (December 9,
1992), 57 FR 60018 (December 17, 1992).
\8\ Securities Exchange Act Release No. 34-52458 (September 16,
2005), 70 FR 56200 (September 26, 2005).
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The Proposed Rule Changes. There has been a growing trend in the
mutual fund industry toward omnibus processing, a practice pursuant to
which Distributors maintain a single account at a Fund, which account
represents multiple investor positions of that Distributor in that
Fund's securities. Where multiple investor positions are held in
Omnibus, the Distributor maintains the individual investor account
records on the Distributor's books and records. The trend toward
omnibus processing is anticipated to continue growing into the
foreseeable future; however, invoicing for the fees related to these
investor accounts is not standardized. The current state of fee
invoicing with regard to such investor accounts is manually intensive,
involving the exchange of reports and spreadsheets via fax, email, and
regular mail, and the settlement of payments thereof generally occurs
by check or wire. Due to the lack of standardization and automation,
the industry has sought NSCC's assistance to create a standardized file
for omnibus invoicing. As a result, NSCC has enhanced the Service's
functionality to permit for fee data transmission and settlement of
payments with regard to investor accounts held in Omnibus. By this
proposed rule change, NSCC seeks to do the following:
a. Rename Service: The Service will be renamed ``DTCC Payment
aXis'' to better represent the broadened functionality of fee data
exchange and settlement capabilities offered by the Service today, as
opposed to its capabilities at initial implementation in 1992.
b. Clarify Scope of Commission and other Fee Data Transmission and
Flow of Funds: Although the Service, as described in Rule 52, does not
specify from whom and to whom the transmission of commission and fee
related data, and settlement of such payments, may be made, the
previous rule filing descriptions do identify a specific flow. In the
1992 Rule Filing, the type of fee payment and the flow of data and
payments were specified to be commission data and settlements by the
Fund to the Distributors. The 2005 Rule Filing expanded the scope to
permit the transmission of other fee payment data and settlement
thereof by one Distributor to another Distributor. In the current rule
filing, NSCC seeks to make clear that the Service permits for the
transmission of commission and other fee related data, and the
settlement of such payments, among users of the Service without regard
to whether the flow of funds is from the Fund to the Distributor, from
the Distributor to the Fund, from a Distributor to another Distributor,
or otherwise.
c. Specify Omnibus Invoicing within the Service: NSCC proposes to
specify in Rule 52 that the transmission of commission and other fee
data with regard to investor accounts held in Omnibus, and the
settlement of payments thereof, shall be included within the suite of
functionalities offered by the Service. In all events, the Fund or
Distributor being debited will either be the initiator of the
commission or other fee payment transaction, or will otherwise confirm
the debit that will be charged against its account.
d. Specify 12b-1 Fee Payment Process with regard to Omnibus
Invoicing: NSCC will specify in Rule 52 the process for 12b-1 fee
payments with regard to investor accounts held in Omnibus. Unlike the
process applicable to all other commission and other fee payments
within the Service, 12b-1 fee payment instructions with regard to
investor accounts held in Omnibus in all events must be initiated by
the Distributor. When NSCC receives the 12b-1 fee payment instruction
with regard to these accounts, NSCC will transmit such instruction to
the contra-side Fund. The contra-side Fund will then either (i) confirm
or reject the payment instruction, or (ii) release settlement (either
with or without a confirmation). If NSCC receives a confirmation or
rejection instruction, NSCC will transmit such confirmation or
rejection to the initiating Distributor.
e. Establish Fees to be charged by NSCC: NSCC proposes to update
Addendum A of its Rules and Procedures to incorporate the fees
associated with omnibus invoicing. The NSCC fees for omnibus invoicing
will be as follows:
a. From 1 to 500,000 records $0.10 per 1 record.
b. From 500,001 to 1,000,000 records $0.08 per 1 record.
c. More than 1,000,000 records $0.06 per 1 record.
d. Monthly Fee $500.
As with all of NSCC's Mutual Fund Services, the Service is a non-
guaranteed service of NSCC and shall remain so after the effectiveness
of this proposed rule change.
The proposed rule change is consistent with the requirements of the
Act and the rules and regulations issued thereunder applicable to NSCC
because it will promote processing efficiencies between Funds and
Distributors, thereby facilitating the prompt and accurate processing
of commission and other fee related payment data
[[Page 67412]]
transmissions and settlement with respect to such payments.
(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 have not 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
The foregoing proposed rule change has become effective upon filing
pursuant to Section 19(b)(3)(A)(iii) \9\ of the Act, Rule 19b-
4(f)(2),\10\ and Rule 19b-4(f)(4)(i) \11\ thereunder because it effects
changes in an existing service of NSCC that do not adversely affect the
safeguarding of securities or funds in the custody or control of NSCC
or for which NSCC is responsible and do not significantly affect the
respective rights or obligations of NSCC or persons using the service.
NSCC's Mutual Fund Services are non-guaranteed services, and therefore,
the funds in NSCC's control are not adversely affected by the proposed
rule change. Further, the proposed rule change does not provide any
greater or lesser rights to or obligations on either NSCC or the users
of the Service in comparison to the current rights and obligations of
the respective parties with regard to the Service as it is currently
offered. In addition, the proposed rule change establishes fees charged
by NSCC applicable only to members. The implementation date for the
proposals in this proposed rule change filing other than the change in
the Service's name will be December 1, 2012.
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(2).
\11\ 17 CFR 240.19b-4(f)(4)(i).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend 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
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NSCC-2012-08 on the subject line.
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-2012-08. This file
number should be included on the subject line if email 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 (http://www.sec.gov/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
10:00 a.m. and 3:00 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 http://www.dtcc.com/downloads/legal/rule_filings/2012/nscc/SR-NSCC-2012-08.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-2012-08
and should be submitted on or before November 30, 2012.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27357 Filed 11-8-12; 8:45 am]
BILLING CODE 8011-01-P