[Federal Register Volume 64, Number 13 (Thursday, January 21, 1999)]
[Notices]
[Pages 3328-3329]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1325]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40946; File No. SR-NSCC-98-15]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Order Granting Accelerated Approval
of a Proposed Rule Change Regarding Year 2000 Testing
January 14, 1999.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 29, 1998, the
National Securities Clearing Corporation (``NSCC'') filed with the
Securities and Exchange Commission (``Commission'') and on January 8,
1999, 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
persons and to grant accelerated approval of the proposal.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
Under the proposed rule change, NSCC will require certain NSCC
members to participate in the Security Industry Association's (SIA)
Year 2000 test beginning in March 1999.
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
test 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.\2\
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\2\ The Commission has modified the text of the summaries
prepared by NSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
NSCC's Rule 15 provides, ``The Corporation shall establish, as it
deems necessary or appropriate, standards of financial responsibility,
operational capability, experience and competence for membership.'' In
connection with this standard, NSCC has determined that members who
utilize Equity, Fixed Income, or Mutual Funds services and who settle
transactions through NSCC must validate their Year 2000 readiness
through participation in the SIA Year 2000 test beginning in March
1999. NSCC considers the SIA test appropriate to confirm Year 2000
readiness of its critical members because NSCC's products and services
will be represented in this industry-wide effort.
As a prerequisite to participation in the SIA test, members are
required to perform connectivity and point-to-point testing with NSCC.
NSCC members are required to contact NSCC by January 15, 1999, to
establish a date to perform such prerequisite testing.
On an exception basis, NSCC members subject to this testing mandate
may be represented in the SIA test by their service bureau. To qualify
for this exception (on a per service basis), the member must obtain
prior approval from NSCC and meet all of the following three
conditions: (1) the member cannot rely upon a direct connection into
NSCC (specifically, their input and output must be handled by a service
bureau); (2) the member's volume must not be in the top 90% of the
volume of all firms who utilize the service by either dollar or
transaction count measurements; and (3) the member cannot represent a
processing arrangement with the service bureau that is unique to that
member. Members subject to the testing mandate who may be represented
in the SIA test by their service bureau will be notified by NSCC by
January 29, 1999, that they fall within this exception category.
At the conclusion of the SIA test, all members subject to the
testing mandate will be required to provide NSCC with written
confirmation, in a format proscribed by NSCC, that test files have been
received from NSCC and successfully processed in a Year 2000 compliant
manner.\3\
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\3\ NSCC will inform members by Important Notice as to the form
in which they must provide written confirmation to NSCC regarding
test results.
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Members who fail to complete prerequisite testing with NSCC prior
to the March 1999 SIA test as well as members who are required to
participate in the SIA test but fail to do so will be subject to
appropriate disciplinary action in accordance with NSCC's rules. Such
disciplinary action permits NSCC to limit or restrict a member's access
to NSCC. In addition, NSCC could require a member to clear trades
through another entity.
NSCC believes that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder. In
particular, the proposed rule change is consistent with Section
17A(b)(3)(F) of the Act,\4\, which requires that the rules of a
clearing agency be designed to promote the prompt and accurate
clearance and settlement of securities transactions and, in general, to
protect investors and the public interest.
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\4\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change will 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
NSCC advised members of its Year 2000 testing requirements in
presentations and in an Important Notice, dated September 1, 1998. No
written comments 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 \5\ requires that the rules of a
clearing agency be designed to promote the prompt and accurate
clearance and settlement of securities transactions. The Commission
believes that the proposed rule change is consistent with this
obligation because the required prerequisite and SIA Year 2000 testing
should allow NSCC to address potential problems associated with its
critical members' Year 2000 readiness. As a result, NSCC should be able
to continue
[[Page 3329]]
to provide prompt and accurate clearance and settlement of securities
transactions before, on, and after Year 2000 without interruption.
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\5\ 15 U.S.C. 78q-1(b)(3)(F).
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NSCC requested that the Commission find good cause for approving
the proposed rule change prior to the thirtieth day after the
publication of notice of the filing. The Commission finds good cause
for approving the proposed rule change prior to the thirtieth day after
the publication of notice of the filing because such approval will
allow NSCC to implement its mandatory Year 2000 testing program in a
timely manner.
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, N.W., Washington, D.C. 20549.
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. Sec. 552, will be available for inspection and copying in
the Commission's Public Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such filing will also be available
for inspection and copying at the principal office of NSCC. All
submissions should refer to the File No. SR-NSCC-98-15 and should be
submitted by February 11, 1999.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\6\ that the proposed rule change (File No. SR-NSCC-98-15) be and
hereby is approved.
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\6\ 15 U.S.C. 78s(b)(2).
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-1325 Filed 1-20-99; 8:45 am]
BILLING CODE 8010-01-M