Notice2024-27478
Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Add Activity Status Tracking to I&RS and Make Certain Clarification Changes in the 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
November 25, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 227 (Monday, November 25, 2024)</title>
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[Federal Register Volume 89, Number 227 (Monday, November 25, 2024)]
[Notices]
[Pages 92978-92981]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-27478]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101656; File No. SR-NSCC-2024-009]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Add Activity Status Tracking to I&RS and Make Certain
Clarification Changes in the Rules
November 19, 2024.
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 November 14, 2024, 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 the clearing agency.
NSCC filed the proposed rule change pursuant to Section 19(b)(3)(A) of
the Act \3\ and Rule 19b-4(f)(2) \4\ and Rule 19b-4(f)(4)
thereunder.\5\ 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).
\5\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of modifications to NSCC's
Insurance & Retirement Services (``I&RS'') in order to provide for
Activity Status Tracking (``Activity Status''), a new service offering
designed to allow I&RS members to communicate with each other relating
to activity status of I&RS transactions, and to make other
clarification changes to the Rules, as described in greater detail
below.\6\
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\6\ Terms not defined herein are defined in the NSCC Rules &
Procedures (``Rules''), available at <a href="http://www.dtcc.com/legal/rules-and-procedures">www.dtcc.com/legal/rules-and-procedures</a>.
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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 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 proposed rule change consists of modifications to I&RS in order
to provide for Activity Status, a new service offering designed to
allow I&RS members to communicate with each other relating to activity
status of I&RS transactions, and to make other clarification changes to
the Rules, as described in greater detail below.
The objectives and expected impacts of the proposed rule change to
I&RS Members \7\ would be to make available a new optional service
offering that would provide a more efficient method for I&RS Members to
choose to transmit, view and retrieve I&RS Data and to improve the
Member's understanding of the Rules relating to I&RS.
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\7\ I&RS Members include (i) insurance companies that are
Insurance Carrier/Retirement Services Members (``Carriers''); and
(ii) Carriers' intermediaries, such as broker-dealers, banks and
insurance agencies, that are Members, Mutual Fund/Insurance Services
Members and Data Services Only Members that distribute participating
Carriers' insurance products (collectively, ``Distributors,'' and,
together with ``Carriers,'' collectively referred to herein as
``I&RS Members'').
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Activity Status was developed at the request of and in consultation
with industry participants, and the proposed fees for the service
offering were designed to pay for the costs of developing and
maintaining such offering in a manner that would fulfill the
requirements expected from industry participants consistent with NSCC's
cost-based plus markup fee model.\8\ Based on financial projections of
development and maintenance costs and anticipated participation by I&RS
Members, it is anticipated that the costs and revenues would result in
a slight increase in the overall operating margin percentage of I&RS.
NSCC anticipates recouping the costs of building the service offering
within approximately 3.5 years of implementing the fees. In addition to
the building cost of Activity Status, NSCC incurs a run-cost based on
use and maintenance of its staffing and technology resources to operate
I&RS. NSCC would continue to evaluate the costs and revenues of
Activity Status after implementation to determine if its fees for the
service are consistent with NSCC's overall pricing methodology.
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\8\ 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="http://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf">www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf</a>, at 118.
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As with its other services, if NSCC determines that its operating
margin is too high or too low, NSCC could change pricing levels of
Activity Status to be consistent with its overall pricing methodology.
I&RS
I&RS allows I&RS Members to transmit I&RS Data \9\ among each
other, including data relating to annuity and life insurance policy
applications and premiums, licensing and appointments, commission
payments, reporting of client positions and valuations, asset pricing,
financial activity reporting and annuity customer account transfers.
I&RS also allows certain I&RS Members to settle payments relating to
I&RS Eligible Products. NSCC does not act as a central counterparty
with respect to
[[Page 92979]]
I&RS and I&RS are not guaranteed by NSCC.
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\9\ ``I&RS Data'' means data and information relating to I&RS
Eligible Products. See Rule 57, supra note 6. ``I&RS Eligible
Product'' means an insurance product or a retirement or other
benefit plan or program included in the list for which provision is
made in Section 1.(d) of Rule 3 of the Rules. See definition of I&RS
Eligible Product, Rule 1, supra note 6.
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Activity Status Tracking (ACT)
NSCC is proposing to establish Activity Status which is intended to
allow I&RS Members to communicate the status of business transactions
involving I&RS Eligible Products. Currently, there is not a
standardized method for I&RS Members to communicate with each other
relating to the status of transactions involving I&RS Eligible Products
from the beginning of the application process until the applicable
contracts are in force. Applications that are submitted to Carriers may
take weeks to process before a position is sent back to a Distributor.
During the processing time, there is currently no standardized way to
communicate the status of the order. Overseeing the statuses of new
business across different Carriers can be difficult and inefficient,
with many communications existing across multiple mediums, like paper
applications, Carrier websites and phone calls. For instance, some
Carriers offer activity status of new business via their public website
which requires Distributors to go to multiple Carrier websites to get a
complete view of their outstanding business.
Clients have requested a feature that would allow I&RS Members to
update each other on the status of transactions in I&RS Eligible
Products beginning at the application stage including such information
as the applicable Carrier, product type, product CUSIP (if applicable),
the producer involved in the transaction and similar information.
Activity Status would provide the ability of I&RS Members to
communicate with each other using standardized messages relating to the
status of transactions in I&RS Eligible Products from the start of such
transactions beginning at the application stage. Activity Status is
designed to standardize messages relating to providing real-time
activity across platforms and planning tools. I&RS Members would be
able to track electronic applications through the underwriting process,
participating in standardized communication.
As with other I&RS service offerings, Activity Status was built to
be accessible by an Application Programming Interface (``API'')
specifically for use for users of Activity Status. Using the Activity
Status API, I&RS Members will be able to send messages in a standard
file format containing information relating to the activity status of
each transaction.
NSCC would add the following description of Activity Status in a
new Section 3 in Rule 57:
Activity Status Tracking (ACT)
SEC. 3. The Corporation may provide a service to enable I&RS
Members to transmit status information to other I&RS Members relating
to transactions involving I&RS Eligible Products.
NSCC would also renumber the sections following Activity Status to
reflect the addition of Activity Status as a new Section 3.
NSCC would also amend Addendum A to provide for fees for Activity
Status. The fees would be $0.35 per transaction, per side. NSCC would
add a fee description for Activity Status in a Section IV.H.3. in
Addendum A.
Additional Clarification Changes
NSCC would also modify the names of two services in Addendum A for
clarity. In Section IV.H.2.c. of Addendum A, NSCC would change the
description of ``Commissions (COM)'' to ``Commissions and Compensation
(COM)'' and in Section IV.H.2.d. of Addendum A, NSCC would change the
description of ``Initial Application Information (APP)'' to
``Applications and Premiums (APP)''. In each case, NSCC would be
changing the descriptions to match the formal name of those services
and to match the description of those services in Rule 57 for
consistency and to make the Rules easier to understand for I&RS
Members.
Implementation Timeframe
NSCC would implement the proposed changes on November 21, 2024.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act, requires, that the Rules be
designed to, among other things, promote the prompt and accurate
clearance and settlement of securities transactions.\10\
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\10\ 15 U.S.C. 78q-1(b)(3)(F).
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The proposed addition of the Activity Status service offering would
provide a standardized method to communicate I&RS Data among I&RS
Members relating to the activity status of transactions in I&RS
Eligible Products beginning at the application stage, as discussed
above. The addition of Activity Status would enhance I&RS Members'
ability to communicate with each other relating to ongoing transactions
starting at the application stage and bring greater efficiency and
expediency to the buying, selling and settlement of such I&RS Eligible
Products among I&RS Members. Providing a more efficient and streamlined
process with respect to transmitting and receiving such I&RS Data would
promote the prompt and accurate clearance and settlement of securities
transactions, consistent with the requirements of Section 17A(b)(3)(F)
of the Act.\11\
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\11\ Id.
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The renumbering of the Sections in Rule 57 and the renaming of two
services in Addendum A discussed above is consistent with this
provision because the proposed change would enhance clarity and
transparency for participants with respect to services offered by NSCC
allowing I&RS Members to have a better understanding of the Rules
relating to I&RS. Having clear and accurate Rules would help I&RS
Members to better understand their rights and obligations regarding
NSCC's services. NSCC believes that when I&RS Members better understand
their rights and obligations regarding NSCC's services, they can act in
accordance with the Rules. NSCC believes that better enabling I&RS
Members to comply with the Rules would promote the prompt and accurate
clearance and settlement of securities transactions by NSCC consistent
with the requirements of the Act, in particular Section 17A(b)(3)(F) of
the Act.\12\
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\12\ Id.
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Section 17A(b)(3)(D) of the Act \13\ requires that the Rules
provide for the equitable allocation of reasonable dues, fees, and
other charges among its participants. NSCC believes the proposed fees
for Activity Status would align with the cost of building and
delivering the proposed service offering, consistent with the provision
of the Act. NSCC believes the proposed changes to the fees are
equitable because they would apply uniformly to all I&RS Members that
utilize the service offering. NSCC believes the proposed changes are
reasonable because they would be commensurate with the costs of
resources allocated by NSCC in developing and maintaining the service
offering. Based on financial projections of development and maintenance
costs and anticipated participation by I&RS Members, it is anticipated
that the costs and revenues would result in a slight increase in the
overall operating margin percentage of I&RS. Therefore, by establishing
fees that align with the cost of delivery of these service offerings
and allocating those fees equitably among the subscribing users, the
proposed rule change would provide for the equitable allocation of
reasonable dues, fees and other charges among its participants
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consistent with the requirements of Section 17A(b)(3)(D) of the
Act.\14\
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\13\ 15 U.S.C. 78q-1(b)(3)(D).
\14\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
NSCC does not believe that the proposed rule change would have any
adverse impact, or impose any burden, on competition.
The proposed changes to adopt Activity Status would add optional
functions to NSCC's services to provide more efficient methods by which
subscribing Carriers and Distributors may transmit, view and retrieve
I&RS Data. Such changes would not affect services for I&RS Members that
do not subscribe to such service offering and non-subscribing I&RS
Members would transmit, view and retrieve I&RS Data in the same manner
as they currently transmit, view and retrieve I&RS Data. The fees for
Activity Status were designed to be reasonable and align with the
projected cost of building and operating such service offering and
would be charged ratably based on each I&RS Members' use of such
service offering. Therefore, the proposed changes to implement such
optional service offerings would not disproportionally impact any I&RS
Members, have any effect on existing NSCC services other than to add a
new method of transmitting, viewing and retrieving I&RS Data, nor have
any adverse impact on competition.
Moreover, because the proposed rule changes would improve the
efficiency by which subscribing I&RS Members may view, transmit and
retrieve I&RS Data, the proposed rule change may have a positive effect
on competition among Carriers and Distributors. The proposed features
would provide these firms with a faster, more streamlined method of
transmitting and receiving I&RS Data, and therefore could enable I&RS
Eligible Products to be marketed more quickly. Specifically, I&RS
Members could have the ability to distribute I&RS Eligible Products
into the market to consumers more quickly because I&RS Members would
have the ability to obtain information with respect to these products
in a quicker, more efficient manner.
NSCC does not believe the renumbering of the section numbers in
Rule 57 in connection with the addition of Activity Status or the
renaming of two services in Addendum A discussed above would impact
competition. Such changes would help to ensure that the Rules remain
clear and facilitate I&RS Members' understanding of the Rules and their
obligations thereunder. The proposed changes would not affect NSCC's
operations or the rights and obligations of the membership. As such,
NSCC believes the proposed rule change would not have any impact on
competition.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
NSCC has not received or solicited any written comments relating to
this proposal. If any written comments are received, 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="http://www.sec.gov/regulatory-actions/how-to-submit-comments">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#7f0b0d1e1b1611181e111b121e0d141a0b0c3f0c1a1c51181009"><span class="__cf_email__" data-cfemail="285c5a494c41464f49464c45495a434d5c5b685b4d4b064f475e">[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) \15\ of the Act and paragraph (f) \16\ 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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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2153544d440c424e4c4c444f5552615244420f464e57"><span class="__cf_email__" data-cfemail="5022253c357d333f3d3d353e2423102335337e373f26">[email protected]</span></a>. Please include
File Number SR-NSCC-2024-009 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-NSCC-2024-009. 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="https://www.sec.gov/rules/sro.shtml">https://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>). Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to File Number SR-NSCC-2024-009 and should be
submitted on or before December 16, 2024.
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-27478 Filed 11-22-24; 8:45 am]
BILLING CODE 8011-01-P
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