Notice2021-28518
Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Add Fees for NSCC's MF Info Xchange Service, Modify Fees for NSCC's Alternative Investment Product Service and Make Certain Other Clarification Changes to Addendum A of the NSCC Rules
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 5, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 3 (Wednesday, January 5, 2022)</title>
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[Federal Register Volume 87, Number 3 (Wednesday, January 5, 2022)]
[Notices]
[Pages 508-513]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-28518]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93873; File No. SR-NSCC-2021-017]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change To Add Fees for NSCC's MF Info Xchange Service, Modify Fees
for NSCC's Alternative Investment Product Service and Make Certain
Other Clarification Changes to Addendum A of the NSCC Rules
December 29, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 27, 2021, 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 primarily by the clearing
agency. NSCC filed the proposed rule change pursuant to Section
19(b)(3)(A) \3\ of the Act and subparagraphs (f)(2) and (f)(4) \4\ of
Rule 19b-4 thereunder. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2) and (f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
(a) The proposed rule change of National Securities Clearing
Corporation (``NSCC'') is annexed hereto as Exhibit 5 and consists of
modifications to Addendum A (Fee Structure) (``Addendum A'') of NSCC's
Rules & Procedures (``Rules'') in order to (i) add fees for NSCC's MF
Info Xchange service, (ii) make certain adjustments in the fees for
NSCC's Alternative Investment Product service (``AIP'') and (iii) make
certain other clarification changes to Addendum A, as described
below.\5\
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\5\ Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to such terms in the Rules,
available at http://dtcc.com/~/media/Files/Downloads/legal/rules/
nscc_rules.pdf.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the clearing agency included
statements concerning the purpose of and basis for the proposed rule
change and discussed
[[Page 509]]
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.
The clearing agency 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
The purpose of this proposed rule change is to (i) add fees for MF
Info Xchange, (ii) make certain adjustments in the fees for AIP and
(iii) make certain clarifications to Addendum A, as described below.
The fee changes are being made to better align fees with the costs of
services provided by NSCC by adjusting the fees so that the revenue
received by NSCC would be closer to the costs of building and providing
the services consistent with NSCC's cost-based plus markup fee
model.\6\ In general, fee levels for NSCC are set by NSCC after
periodic reviews of a number of factors, including revenues, operating
costs and potential service enhancements. NSCC also continuously
engages in discussions with NSCC Members regarding proposed fee changes
and potential impacts.
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\6\ NSCC has in place procedures to control costs and to
regularly review pricing levels against costs of operation. NSCC's
fees are cost-based plus a markup as approved by its Board of
Directors. This markup is applied to recover development costs and
operating expenses, and to accumulate capital sufficient to meet
regulatory and economic requirements. See NSCC Disclosure Framework
for Covered Clearing Agencies and Financial Market Infrastructures,
available at <a href="https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf">https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf</a>, at 120.
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(i) MF Info Xchange Fees
MF Info Xchange facilitates and centralizes the delivery and
receipt of time-critical notifications, including corporate actions,
service disruptions, large trade notifications and other critical
alerts. The service was launched on November 30, 2018 with 3 event
types.\7\ Given the limited number of event types available for event
notifications upon the launch of MF Info Xchange, NSCC did not charge
fees initially for the use of the service.\8\ NSCC indicated that it
would file with the Commission an appropriate rule change proposal to
implement any fees for MF Info Xchange if NSCC added fees for the
service.\9\ Fund Members are typically funds or asset managers of funds
and use MF Info Xchange to send notifications regarding the funds to
their distribution partners. NSCC Members that are not Fund Members are
typically broker/dealers or other distributors that use MF Info Xchange
to receive and track such notifications sent by the Fund Members as
well as send notifications to Fund Members about their funds.
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\7\ See Securities Exchange Act Release No. 84611 (November 16,
2018), 83 FR 59427 (November 23, 2018) (SR-NSCC-2018-010). The
initial 3 event types were Fund Merger, Fund Closure--Hard Close and
Fund Closure--Soft Close.
\8\ Id.
\9\ Id.
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Since the launch, MF Info Xchange has been enhanced with an
additional 25 event types and additional user interface capabilities.
NSCC believes that it is appropriate to begin charging fees for the
service given the added capabilities and in order to offset the costs
of building and maintaining the service.
NSCC is proposing to implement a two-tiered billing structure for
MF Info Xchange based on the anticipated amount of use of the service
by NSCC Members.\10\ Based on a review of the usage by NSCC Members,
NSCC believes that NSCC Members that are not Fund Members and larger
Fund Members use the service more than smaller Fund Members. NSCC
believes that the number of Security Issue IDs that a Fund Member
maintains on Fund/SERV[supreg] is a good indication of the size of the
Fund Member and the level of usage of MF Info Xchange by such Fund
Member. Most notifications in MF Info Xchange relate to a specific
security issuance and each Security Issue ID represents a security
issuance. Therefore, Fund Members that maintain more Security Issue
IDs, will have a greater number of security issuances for which
notifications will need to be sent. NSCC Members that are not Fund
Members typically receive notifications from multiple Fund Members and
often benefit from receiving notifications for a large number of
security issuances.
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\10\ For purposes of this filing, NSCC Members refers to Members
and Limited Members.
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Fund/SERV is an NSCC service providing for the processing and
settling of Fund/SERV Eligible Funds.\11\ Each Fund/SERV Eligible Fund
that is processed through Fund/SERV is required to be assigned a
Security Issue ID, such as a CUSIP.\12\ NSCC is proposing to charge
NSCC Members that are not Fund Members that use MF Info Xchange and
Fund Members that maintain more than 25 Security Issue IDs on Fund/SERV
that use MF Info Xchange, $1,500 per month (``Tier 1''). NSCC is
proposing to charge Fund Members that maintain 25 or fewer Security
Issue IDs on Fund/SERV that use MF Info Xchange $250 per month (``Tier
2'').
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\11\ Fund/SERV Eligible Fund means a fund or other pooled
investment entity which are subject of orders processed through
Mutual Fund Services. See definition of ``Fund/SERV Eligible Fund,
Rule 1, supra note 5 and Section 1(c) of Rule 3, supra note 5.
\12\ See Section 1(c) of Rule 3, supra note 5, which requires
that unless otherwise required by NSCC, each Fund/SERV Eligible Fund
be assigned a CUSIP number. CUSIP is a registered trademark of the
American Bankers Association.
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NSCC believes that the tiered structure will align the fees with
the costs of services provided by NSCC by setting the fees so that the
revenue received by NSCC would be sufficient to recover the costs of
building and maintaining the service. The tiered billing structure is
similar to NSCC's billing structure for its Mutual Fund Profile Service
(``MFPS''). Users of MFPS that use Phases I & II \13\ that have greater
than 25 Security Issue IDs in MFPS pay $1,250.00 per month whereas
users that have 25 or fewer Security Issue IDs registered in MFPS that
use Phases I & II pay $250.00 per month.\14\ Based on its experience
with MFPS \15\ and discussions with Fund Members, NSCC believes that
the threshold of greater than 25 Security Issue IDs has been a good
estimation of the size of the Fund Member and the amount of use of the
service by each Fund Member. Also based on pricing levels and usage in
MFPS and discussions with NSCC Members, NSCC believes that the $1,500
and $250 pricing levels are sufficient to recover the costs of building
and maintaining the service without being so excessive as to materially
disincentivize use of MF Info Xchange.
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\13\ Phases I & II are also known as MFPS I (Daily Price and
Rate File) and MFPS II (Security Issue Database and Distribution
Database). The terms Phase I and Phase II are used in the Rules
because MFPS I and MFPS II were implemented in phases with MFPS I
implemented first in 1996 and MFPS II implemented in 1999. See
Securities Exchange Act Release No. 37171 (May 8, 1996), 61 FR 24344
(May 14, 1996) (SR-NSCC-96-04) (order approving MFPS I
implementation) and Securities Exchange Act Release No. 40614
(October 28, 1998), 63 FR 59615 (November 4, 1998) (SR-NSCC-98-09)
(notice of filing of rule change implementing MFPS II).
\14\ Section IV.J.b. of Addendum A and accompanying footnote 5
in Addendum A, supra note 5. See also Securities Exchange Act
Release No. 61413 (January 25, 2010), 75 FR 4894 (January 29, 2010)
(SR-NSCC-2009-12) (NSCC introduced the credit for MFPS for smaller
fund families that had 25 or fewer funds in their fund family) and
Securities Exchange Act Release No. 84771 (December 10, 2018), 83 FR
64393 (December 14, 2018) (SR-NSCC-2018-012) (NSCC reduced the fees
in MFPS to current levels) (``2018 Filing'').
\15\ After NSCC lowered its fees in 2019 for funds with 25 or
fewer Security IDs on MFPS from $850 to $250, the number of such
funds using MFPS has doubled. See 2018 Filing, Id.
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[[Page 510]]
(ii) AIP Fee Changes
AIP is a standardized, trading and reporting platform that links
the alternative investments industry to securely and efficiently
exchange data and money relating to alternative investment products,
including hedge funds, funds of funds, private equity, non-traded real
estate investment trusts, managed futures and limited partnerships.
NSCC has undertaken a strategic review of its pricing structure for
AIP, and developed a revenue and pricing strategy with the goal of
aligning the pricing of AIP with costs of providing the service. As a
result of the review, NSCC has determined that certain fees in AIP
have, over time, become misaligned with the costs of service as a
result of increased technology run costs relating to the service. NSCC
would also like to lower certain fees relating to capital calls and
lower volume transfers \16\ to incentivize greater use of those
products. In connection with the realignment, NSCC is proposing to
eliminate a cap of $250,000 currently in place for AIP Distributors.
Currently, there are certain products for which a $250,000 fee cap
applies for AIP Distributors.\17\ Once an AIP Distributor has been
charged $250,000 for transactions relating to such products in a
calendar year, it will not pay with respect to transactions in those
products for the remainder of the calendar year.\18\ The fee cap was
put in place to incentivize greater use of AIP with respect to certain
products for AIP Distributors.\19\
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\16\ AIP has a tiered billing system based on whether services
are being used for higher volume products or lower volume products.
See Section L.O.3 of Addendum A, supra note 5, which indicates which
products are considered higher volume and which are considered lower
volume. Fees are lower with respect to higher volume products.
\17\ See Section IV.O.3. of Addendum A and accompanying footnote
12 of Addendum A, supra note 5.
\18\ Id.
\19\ See Securities Exchange Act Release No. 63634 (January 3,
2011), 76 FR 1475 (January 10, 2011) (SR-NSCC-2010-19) (stating that
the fee cap was implemented to ``encourage broker-dealers to use the
service and expand coverage of these products and increase the value
of the overall market'').
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NSCC believes that the fee cap has been successful in incentivizing
AIP Distributors to use AIP and to require more of their fund
counterparties (i.e., AIP Manufacturers) to use AIP.\20\ Given the
growth of AIP and to readjust the overall revenues, NSCC no longer
believes that the fee cap is necessary as an incentive or appropriate
given AIP's operating margin.
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\20\ For instance, since the fee cap was put in place in 2010,
the number of Eligible AIP Products on the AIP platform has grown
from under 500 to over 7000.
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NSCC is also proposing to increase lower volume record transaction
fees for AIP Manufacturers from $1 to $2 (AIP Distributors will
continue to pay $1) in order to better align revenues of AIP with the
costs of providing the services.
NSCC is proposing to lower fees relating to capital calls to
incentivize use of AIP with respect to capital calls. Capital calls are
considered ``Trades'' in the Rules and higher volume Trades are
currently priced at a range from $5 per trade to $4 per trade depending
on the number of trades in each calendar year \21\ and lower volume
Trades are $10 per trade.\22\ In addition to capital calls, Trades
include initial purchases, subsequent purchases, partial redemption
requests, full redemption requests and commitments. NSCC has received
feedback from AIP Members indicating that capital calls are performed
more frequently than other types of Trades and as a result, AIP Members
have not been using AIP for capital calls because the AIP Members
believe the price is currently too high for both higher volume products
and lower volume products with respect to capital calls. As a result,
NSCC is proposing to reduce the price for all capital calls to $2 to
incentivize use of AIP for capital calls. This reduction would apply to
capital calls with respect to higher volume products and lower volume
products.
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\21\ Section IV.O.1.ii of Addendum A, supra note 5.
\22\ Section IV.O.2.ii of Addendum A, supra note 5.
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NSCC is also proposing to lower fees relating to lower volume
transfers to incentivize use of AIP with respect to lower volume
transfers. NSCC has received feedback from AIP Members that lower
volume transfers are also priced too high and as a result AIP Members
have not been using AIP for lower volume transfers. NSCC is proposing
to reduce lower volume transfers from $5 to $2 in order to incentivize
use of AIP for lower volume transfers.
(iii) Clarification Changes
NSCC is also proposing to add a heading for Mutual Fund Services in
Addendum A and renumber the headings in Addendum A to reflect that a
number of services listed in Addendum A fall within Mutual Fund
Services. NSCC would also renumber other sections of Addendum A to
reflect the renumbering for Mutual Fund Services.
(iv) Proposed Rule Changes
A. MF Info Xchange Fees
NSCC is proposing to add the fees to MF Info Xchange in new
proposed section IV.G.5 of Addendum A.
B. AIP Fee Changes
NSCC is proposing to state that all capital calls are $2 per trade
in new proposed Section IV.L.1.c (for higher volume capital calls) and
new proposed Section IV.L.2.c (for lower volume capital calls) of
Addendum A. NSCC would add ``(other than capital calls)'' in proposed
sections IV.L.1.b. and IV.L.2.b. of Addendum A to reflect that capital
calls would be separately covered in other sections. NSCC is proposing
to increase the lower volume record transactions fees for AIP
Manufacturers in new proposed section IV.L.2.a. of Addendum A from $1
dollar per trade to $2 dollar per trade. NSCC is also proposing to
reduce lower volume transfers from $5 to $2 in new proposed Section
IV.L.2.d. of Addendum A. NSCC is proposing to remove the $250,000 fee
cap for AIP Distributors in new proposed Section IV.L.3. and to remove
the accompanying footnote 12 of Addendum A.
Based on feedback from NSCC Members and a review of other pricing
levels, NSCC believes that:
<bullet> Reducing fees to $2 for all capital calls and reducing lower
volume transfers to $2 would incentivize NSCC Members to begin using
AIP with respect to capital calls and with respect to lower volume
transfers
<bullet> increasing the lower volume record transaction fees from $1 to
$2 and removing the fee cap for AIP Distributors would raise revenue to
an appropriate level to help ensure that AIP operates with a positive
operating margin without being so excessive as to materially
disincentivize the use of AIP for lower volume record transactions or
the use of AIP by AIP Distributors
C. Clarification Changes
NSCC is proposing to add a heading ``Mutual Fund Services'' in
Section IV.G. of Addendum A and proposing to renumber Mutual Fund
Services under that heading to reflect the services that fall within
Mutual Fund Services. NSCC is also proposing to renumber sections
following Section IV.G. to reflect the renumbering within Section IV.G.
of Addendum A.
(iii) Expected Member/NSCC Impact
A. MF Info Xchange Fees
The fee changes for MF Info Xchange would impact all users of the
service.
[[Page 511]]
Based on a review of users in the first quarter of 2021, it is
anticipated that initially approximately 67% of the users will fall
within Tier 1 and be charged $1,500 per month and approximately 33% of
the users will fall within Tier 2 and be charged $250 per month. Of the
users in Tier 1, approximately 67% are expected to be Fund Members that
maintain more than 25 Security Issue IDs and approximately 33% are
expected to be NSCC Members that are not Fund Members.
The fees are intended to cover the costs of developing and
maintaining MF Info Xchange in accordance with NSCC's cost-based plus
markup fee model.\23\ Following the implementation of fees, assuming
revenues and expenses remain constant,\24\ NSCC anticipates recouping
the costs of building MF Info Xchange within approximately three years
of implementing the fees and expects to have a positive operating
margin thereafter.
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\23\ See note 6, supra.
\24\ It is not certain that revenues and expenses will remain
constant. Costs of providing the service may change, for instance,
if NSCC Members request service enhancements or NSCC's technology
costs change. In addition, revenues may change depending on the
number of users of the service. NSCC regularly reviews pricing
levels against costs of operation. As with its other services, if
NSCC determines that its operating margin is too high or too low,
NSCC would change pricing levels accordingly. See 2018 Filing, supra
note 14.
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B. AIP Fee Changes
In general, NSCC anticipates that, as result of the proposed
changes to remove the $250,000 fee cap, four AIP Distributors will see
a fee increase for use of the affected products. Based on a review of
client invoices in June 2021, which NSCC believes is representative of
typical AIP usage, NSCC anticipates that as a result of all of the fee
changes approximately 59% of AIP users comprised of mainly AIP
Manufacturers engaging in lower volume activity will see a fee
increase, approximately 40% of AIP users comprised of mainly AIP users
engaging in higher volume activity will see no fee impact and less than
1% of AIP users will see a fee decrease.
The fee changes are intended to realign AIPs revenue with its
costs. AIP had a negative operating margin in 2020 and it is
anticipated to have a negative operating margin in 2021. Following the
fee changes, AIP anticipates that it will have a positive operating
margin in 2022 and going forward, consistent with NSCC's cost-based
plus markup fee model.\25\
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\25\ Id.
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(iv) Implementation Timeline
NSCC expects to implement the proposed rule changes on January 1,
2022. As proposed, a legend would be added to Addendum A stating there
are changes that became effective upon filing with the Commission but
have not yet been implemented. The proposed legend also would include
January 1, 2022, as the date on which such changes would be implemented
and the file number of this proposal, and state that, once this
proposal is implemented, the legend would automatically be removed from
Addendum A.
2. Statutory Basis
NSCC believes this proposal is consistent with the requirements of
the Act and the rules and regulations thereunder applicable to a
registered clearing agency. Specifically, NSCC believes this proposal
is consistent with Sections 17A(b)(3)(D) \26\ and 17A(b)(3)(F) \27\ of
the Act and Rule 17Ad-22(e)(23)(ii),\28\ as promulgated under the Act,
for the reasons described below.
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\26\ 15 U.S.C. 78q-1(b)(3)(D).
\27\ 15 U.S.C. 78q-1(b)(3)(F).
\28\ 17 CFR 240.17Ad-22(e)(23)(ii).
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Section 17A(b)(3)(D) of the Act \29\ requires, in part, that the
Rules provide for the equitable allocation of reasonable dues, fees,
and other charges among its participants. The proposed fee changes set
forth above are consistent with 17A(b)(3)(D) of the Act \30\ because
the proposed fees would be allocated equitably among the NSCC Members
that subscribe for those services based on each NSCC Member's use of
such services. In addition, NSCC believes that the proposed fee changes
are reasonable because they would enable NSCC to better align its
revenue with the costs and expenses required for NSCC to provide the
services to NSCC Members consistent with NSCC's cost-based plus markup
fee model.\31\ Specifically, NSCC has determined that assuming revenue
and expenses remain constant,\32\ adding the fee for MF Info Xchange
would allow NSCC to recoup the investments it has made in building the
service within approximately three years and allow it to operate with a
positive operating margin going forward. Based on the current usage and
projected revenue for AIP, the realignment of fees would result in
overall revenue that would be closer to the costs of providing the
service and at the same time provide incentives for users to use AIP
for capital calls and lower volume transfers. Therefore, by
establishing fees that align with the costs of delivery of these
products and services and allocating those fees equitably among the
subscribing NSCC Members, the proposed fee changes are consistent with
the requirements of Section 17A(b)(3)(D) of the Act.\33\
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\29\ 15 U.S.C. 78q-1(b)(3)(D).
\30\ Id.
\31\ See note 6, supra.
\32\ See note 24, supra.
\33\ 15 U.S.C. 78q-1(b)(3)(D).
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Section 17A(b)(3)(F) of the Act \34\ requires, in part, that the
Rules promote the prompt and accurate clearance and settlement of
securities transactions. NSCC believes that the proposed clarifications
adding the Mutual Fund Services heading in Addendum A and renumbering
Addendum A as forth above would enhance NSCC Members' ability to
understand the fees associated with Mutual Fund Services. Specifically,
the proposed clarifications would clarify which services fall within
Mutual Fund Services, similar to the structure for Insurance &
Retirement Services and AIP in Addendum A. As such, the proposed
clarifications would allow NSCC Members to have a better understanding
of the Rules in relation to their activities and thereby assist in
promoting the requirements of Section 17A(b)(3)(F) of the Act.\35\
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\34\ 15 U.S.C. 78q-1(b)(3)(F).
\35\ Id.
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Rule 17Ad-22(e)(23)(ii) under the Act \36\ requires NSCC to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide sufficient information to
enable participants to identify and evaluate the risks, fees, and other
material costs they incur by participating in the covered clearing
agency. The proposed clarifications adding the Mutual Fund Services
heading in Addendum A and renumbering Addendum A as set forth above
would help ensure that the fees set forth in Addendum A are clear and
transparent to NSCC Members. Having a clear and transparent Addendum A
would help NSCC Members to better understand NSCC's fees and help
provide NSCC Members with increased predictability and certainty
regarding the fees they incur in participating in NSCC. As such, by
improving the clarity and transparency of the Rules, NSCC believes the
proposed clarifications are consistent with Rule 17Ad-22(e)(23)(ii)
under the Act.\37\
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\36\ 17 CFR 240.17Ad-22(e)(23)(ii).
\37\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
NSCC believes the proposed rule changes to add fees for MF Info
Xchange
[[Page 512]]
and increase certain fees for AIP, may have an impact on competition.
NSCC believes these proposed rule changes could burden competition by
negatively affecting such NSCC Members' operating costs. While these
NSCC Members may experience increases in their fees when compared to
their fees under the current fee structure, NSCC does not believe such
change in fees would in and of itself mean that the burden on
competition is significant. This is because even though the amount of
the fee increase may seem significant in some instances to certain NSCC
Members (e.g., charging $1,500/mo for MF Info Xchange when it is free
now and removing the AIP $250,000 fee cap), NSCC believes the increase
in fees would similarly affect all NSCC Members that utilize the
services, and therefore the burden on competition would not be
significant.
Regardless of whether the burden on competition is deemed
significant, NSCC believes any burden on competition that is created by
these proposed rule changes would be necessary and appropriate in
furtherance of the purposes of the Act, as permitted by Section
17A(b)(3)(I) of the Act.\38\
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\38\ 15 U.S.C. 78q-1(b)(3)(I).
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The proposed rule changes to add fees for MF Info Xchange and
increase certain fees for AIP would be necessary in furtherance of the
purposes of the Act because the Rules must provide for the equitable
allocation of reasonable dues, fees, and other charges among its
participants.\39\ As described above, NSCC believes that the proposed
rule changes would result in fees that are equitably allocated (by
applying uniformly to all NSCC Members that use the applicable
services) and would result in reasonable fees (by allowing NSCC to
recoup its expenses in building MF Info Xchange and allow both MF Info
Xchange and AIP to operate with a positive operating margin). As such,
NSCC believes these proposed rule changes would be necessary in
furtherance of the purposes of the Act, as permitted by Section
17A(b)(3)(I) of the Act.\40\
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\39\ 15 U.S.C. 78q-1(b)(3)(D).
\40\ 15 U.S.C. 78q-1(b)(3)(I).
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NSCC also believes that the fees are appropriate in furtherance of
the purposes of the Act because the fees are set so that the revenue
received by NSCC would be closer to the costs of building and providing
the services consistent with NSCC's cost-based plus markup fee model
and are being equitably allocated among NSCC Members.\41\ Moreover,
NSCC believes that the fees will enable NSCC to pay for building and
continue to operate MF Info Xchange. NSCC believes MF Info Xchange has
a positive effect on competition among users because the service allows
data providers to more effectively communicate event notifications
relating to funds and other pooled investment entities (``Funds''). The
service provides data providers with a more efficient method of
distributing event notifications to parties that need to see such
information in order to facilitate the trading and processing of Fund
securities. NSCC believes this enhances competition among Funds and
Fund participants by allowing parties to distribute such information
more quickly and in a more streamlined manner. Based on experiences
with the similar billing structure used in MFPS and discussions with
NSCC Members, NSCC does not believe that that the addition of the
proposed fees for MF Info Xchange would materially disincentivize use
of MF Info Xchange. As such, NSCC believes these proposed rule changes
would be appropriate in furtherance of the purposes of the Act, as
permitted by Section 17A(b)(3)(I) of the Act.\42\
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\41\ See note 6, supra.
\42\ 15 U.S.C. 78q-1(b)(3)(I).
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NSCC does not believe that any proposed fee reductions would have a
burden on competition and may promote competition because the proposed
fee reductions would allow NSCC Members to engage in a greater number
of transactions with lower costs than the prices they would incur today
for the same transactions.
NSCC does not believe that the proposed clarifications to add the
Mutual Fund Services heading to Addendum A and to renumber Addendum A
would have any impact on competition because such changes are
clarifications of the Rules that would not affect the rights or
obligations of NSCC Members.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
NSCC has conducted ongoing outreach to NSCC Members in order to
provide them with notice of the proposed changes to the affected fees.
NSCC has not received or solicited any written comments relating to
this proposal. If any written comments are received by NSCC, they will
be publicly filed as an Exhibit 2 to this filing, as required by Form
19b-4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to
Section IV (Solicitation of Comments) of the Exhibit 1A in the General
Instructions to Form 19b-4, the Commission does not edit personal
identifying information from comment submissions. Commenters should
submit only information that they wish to make available publicly,
including their name, email address, and any other identifying
information.
All prospective commenters should follow the Commission's
instructions on how to submit comments, available at <a href="https://www.sec.gov/regulatory-actions/how-to-submit-comments">https://www.sec.gov/regulatory-actions/how-to-submit-comments</a>. General
questions regarding the rule filing process or logistical questions
regarding this filing should be directed to the Main Office of the
Commission's Division of Trading and Markets at
<a href="/cdn-cgi/l/email-protection#394d4b585d50575e58575d54584b525c4d4a794a5c5a175e564f"><span class="__cf_email__" data-cfemail="fc888e9d9895929b9d9298919d8e9799888fbc8f999fd29b938a">[email protected]</span></a> or 202-551-5777.
NSCC reserves the right not to respond to any comments received.
III. Date of Effectiveness of the Proposed Rule Change, and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) \43\ of the Act and paragraph (f) \44\ of Rule 19b-4
thereunder. 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.
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\43\ 15 U.S.C 78s(b)(3)(A).
\44\ 17 CFR 240.19b-4(f).
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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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#c3b1b6afa6eea0acaeaea6adb7b083b0a6a0eda4acb5"><span class="__cf_email__" data-cfemail="e99b9c858cc48a8684848c879d9aa99a8c8ac78e869f">[email protected]</span></a>. Please include
File Number SR-NSCC-2021-017 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 513]]
Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-NSCC-2021-017. 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 website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 website 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 the filing also will be available for inspection
and copying at the principal office of NSCC and on DTCC's website
(<a href="https://dtcc.com/legal/sec-rule-filings.aspx">https://dtcc.com/legal/sec-rule-filings.aspx</a>). 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-2021-017 and should be submitted on
or before January 26, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\45\
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\45\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2021-28518 Filed 1-4-22; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on January 5, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.