[Federal Register Volume 78, Number 249 (Friday, December 27, 2013)]
[Notices]
[Pages 79028-79030]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-30936]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71156; File No. SR-NSCC-2013-13]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change To Discontinue
its Stock Borrow Program
December 20, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 79029]]
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 10, 2013, National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by NSCC. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
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\1\ 15 U.S.C. 78s(b)(1). Defined terms that are not defined in
this notice are defined in Exhibit 5 of the proposed rule change
filing, available at http://www.sec.gov/rules/sro/nscc.shtml under
File No. SR-NSCC-2013-13, Additional Materials.
\2\ 17 CFR 240.19b-4.
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The proposed rule change consist of amendments to the Rules &
Procedures (``Rules'') of NSCC to discontinue its Stock Borrow Program,
as more fully described below.
II. Clearing Agency'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 such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
Over the past few years the use of NSCC's Stock Borrow Program,
which allows NSCC Members to elect to loan their excess positions to
NSCC's Continuous Net Settlement (``CNS'') System in order to
facilitate the completion of CNS long allocations, has declined. As
such, NSCC is proposing to amend its Rules in order to discontinue the
Stock Borrow Program.
One of NSCC's core services as a central counterparty is trade
clearance and settlement through CNS, where compared and recorded
transactions in eligible securities for a particular settlement date
are netted by issue into one net long (buy) or net short (sell)
position. As a continuous net settlement system, those positions are
further netted with positions of the same issue that remain open after
their originally scheduled settlement date (usually T+3), so that
trades scheduled to settle on any day are netted with fail positions to
result in a single deliver or receive obligation for each Member for
each issue in which it has activity. Today, NSCC Members may elect to
participate in the Stock Borrow Program by designating specific
securities that are in their inventory at DTC to be available to be
borrowed by CNS. If CNS cannot complete a delivery to a long Member
because a short Member has not completed its delivery to CNS, NSCC
looks to those designated securities and initiates deliveries from
lenders to CNS if the lending Member has free excess positions at DTC.
In turn, CNS delivers the position to a long Member and sets up a
pending receive for the lending Member. If the position is not returned
to the lender by the end of settlement day, i.e., the Member with the
original obligation to deliver to CNS does not complete that delivery,
the lender receives full market value for the securities through NSCC
settlement.
In 2007, NSCC borrowed a daily average of approximately $1.85
billion in market value at the close of each day from the approximately
21 Members that participated in the Stock Borrow Program that year.
Usage of the Stock Borrow Program has since dropped by almost 95%. In
October 2013 only three Members participated in the Stock Borrow
Program, and the average daily value borrowed at the close of day
during that month was approximately $81 million. Usage of the program
has continued to drop since the end of October 2013. Given this
dramatic reduction in the use of the program, NSCC has determined that
it is not economically efficient to maintain the service, and NSCC is
proposing to amend its Rules in order to discontinue the Stock Borrow
Program. NSCC has informed the Members using the Stock Borrow Program
of its intent to discontinue the program.
Implementation Timeframe
Subject to approval of this filing, NSCC will implement the
proposed rule changes on a date announced by Important Notice.
Proposed Rule Changes
NSCC will remove reference to the Stock Borrow Program from Section
E of Procedure VII (CNS Accounting Operation), and will remove Addendum
C (NSCC Automated Stock Borrow Program Program) from its Rules as
reflected in Exhibit 5 hereto.\3\ Addendum C will be designated as
reserved for future use.
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\3\ The Commission notes that Exhibit 5 to the proposed rule
change is available at http://www.sec.gov/rules/sro/nscc.shtml under
File No. SR-NSCC-2013-13, Additional Materials.
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2. Statutory Basis
NSCC believes the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to NSCC, in particular Section 17A(b)(3)(F) of the
Securities Exchange Act of 1934, as amended (``Act''), which requires
that NSCC's Rules be designed to promote the prompt and accurate
clearance and settlement of securities transactions. Given the dramatic
reduction in the use of the Stock Borrow Program by NSCC's Members,
NSCC has determined that it is not economically efficient to maintain
the service, and, as such, its proposed rule change will promote its
ability to perform the prompt and accurate clearance and settlement of
securities transactions.
(B) Clearing Agency'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 due to the dramatic
reduction in use of the Stock Borrow Program by NSCC Members, as
described above.
(C) Clearing Agency'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 yet
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, [sic] and
Timing for Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such a proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing,
[[Page 79030]]
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 No. SR-NSCC-2013-13 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 No. SR-NSCC-2013-13. 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://dtcc.com/legal/rule_filings/nscc/2013.php).
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 No. SR-NSCC-2013-13 and
should be submitted on or before January 17, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\4\
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\4\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30936 Filed 12-26-13; 8:45 am]
BILLING CODE 8011-01-P