Notice2025-17341
Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving a Proposed Rule Change Concerning Enhancements to the Automated Customer Account Transfer Service
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Published
September 10, 2025
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 90 Issue 173 (Wednesday, September 10, 2025)</title>
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[Federal Register Volume 90, Number 173 (Wednesday, September 10, 2025)]
[Notices]
[Pages 43709-43712]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-17341]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103890; File No. SR-NSCC-2025-011]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Approving a Proposed Rule Change Concerning
Enhancements to the Automated Customer Account Transfer Service
September 5, 2025.
On July 16, 2025, National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') proposed rule change SR-NSCC-2025-011 (``Proposed Rule
Change'') pursuant to Section 19(b)(1) of the Securities Exchange Act
of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The Proposed Rule
Change was published for comment in the Federal Register on July 29,
2025.\3\ The Commission did not receive any comments on the Proposed
Rule Change. For the reasons discussed below, the Commission is
approving the Proposed Rule Change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 103542 (Jul. 24, 2025),
90 FR 35740 (Jul. 29, 2025) (SR-NSCC-2025-011) (``Notice of
Filing'').
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I. Background
ACATS is a non-guaranteed service provided by NSCC that enables
Members to effect transfers of customer accounts among themselves.
ACATS complements Financial Industry Regulatory Authority (``FINRA'')
Rule 11870 regarding customer account transfers, which requires FINRA
members to use automated clearing agency customer account transfer
services and to effect customer account transfers within specified time
frames.\4\ ACATS automates and standardizes procedures for the transfer
of assets in a customer account, allowing Members to automatically
enter, review, and generate instructions to settle customer account
transfers. The timing and procedures with respect to ACATS customer
account transfers are intended to be consistent with the timing and
processes set forth in FINRA Rule 11870.\5\
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\4\ See FINRA Rule 11870, available at <a href="http://www.finra.org/rules-guidance/rulebooks/finra-rules/11870">www.finra.org/rules-guidance/rulebooks/finra-rules/11870</a>. NSCC also permits Qualified
Securities Depositories (i.e., The Depository Trust Company
(``DTC'')) to utilize ACATS on behalf of their participants (e.g.,
DTC member banks) on a voluntary basis. See Section 1 of Rule 50,
infra note 6.
\5\ See NSCC Notice of Filing, supra note 3, at 35740-41.
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ACATS is primarily described in Rule 50 and Procedure XVIII (ACATS
Settlement Accounting Operation) of the NSCC Rules.\6\ Pursuant to NSCC
Rule 50, an NSCC Member to whom a customer's account will be
transferred (the ``Receiving Member'') initiates the transfer by
submitting a transfer initiation request to NSCC, which contains the
customer detail information that the NSCC Member who currently has the
account (the ``Delivering Member'') requires to transfer the
account.\7\ The Delivering Member must either reject the customer
account transfer request or submit detailed customer account asset data
to NSCC.\8\ NSCC then provides a report detailing the customer account
asset data to the Receiving Member,\9\ who has one business day after
receipt of the report to review the account and (i) accept all assets;
(ii) reject one or more assets, to the extent such a rejection is
permitted by the Receiving Member's Designated Examining Authority
(i.e., FINRA), and allow the transfer of the remaining assets; (iii)
request the Delivering Member to make adjustments to the customer
account asset list; or (iv) reject the account, to extent such a
rejection is permitted by NSCC or FINRA.\10\ Once a customer account
has been accepted by the Receiving Member, ACATS facilitates the
settlements associated with the account transfer at the appropriate
asset settling location (e.g., through NSCC's Continuous Net Settlement
system (``CNS'') for CNS-eligible securities, DTC for securities
otherwise eligible for DTC settlement services, Fund/SERV for eligible
mutual fund products, the
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Insurance Processing Service \11\ for annuities, or The Options
Clearing Corporation \12\ for listed options).
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\6\ Capitalized terms not defined herein shall have the meaning
assigned to such terms in the NSCC Rules, available at <a href="http://www.dtcc.com/legal/rules-and-procedures">www.dtcc.com/legal/rules-and-procedures</a>.
\7\ See Sections 2 and 3 of Rule 50, supra note 6.
\8\ See Section 5 of Rule 50, supra note 6.
\9\ See Section 7 of Rule 50, supra note 6.
\10\ See Section 8 of Rule 50, supra note 6. Pursuant to FINRA
Rule 11870(d)(8), a Receiving Member may reject a transfer of
account assets in whole if the account is not in compliance with the
Receiving Member's credit policies or minimum asset requirements.
See supra note 4.
\11\ See <a href="http://www.dtcclearning.com/products-and-services/insurance-retirement-services/acats-ips.html">www.dtcclearning.com/products-and-services/insurance-retirement-services/acats-ips.html</a>.
\12\ See <a href="http://www.theocc.com">www.theocc.com</a>.
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NSCC states that it is currently working with the industry to
streamline the ACATS process and shorten the time it takes to complete
a customer account transfer in ACATS.\13\ Specifically, the changes to
ACATS would reflect the removal of (i) the settlement preparation stage
of the ACATS process (``Settle Prep'' or the ``Settle Prep Day'') and
(ii) the second day of the Fund/SERV[supreg] \14\ pending
acknowledgement process from the ACATS transfer process, as further
described below.\15\ NSCC is proposing amendments to its Rules to
conform to and accommodate these changes.\16\
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\13\ See NSCC Notice of Filing, supra note 3, at 35741.
\14\ Fund/SERV is an NSCC service that serves as the U.S.
industry standard for processing and settling mutual fund, bank
collective fund and other pooled investment product transactions
between fund companies and distributors.
\15\ Id.
\16\ Id.
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ACATS Timeline and Settle Prep Day
There are currently four stages of an ACATS transfer, which can
take up to five days to complete. The first stage is the ``Request
Period'' (Day 1), during which the Receiving Member initiates the
transfer. The second stage is the ``Review Period'' (Days 2-3), during
which the Delivering Member confirms the assets currently in the
account so the Receiving Member can review and determine if it will
accept or reject the account.\17\ The third stage is the Settle Prep
period (Day 4) between the review stage and actual settlement,\18\
which provides a full day for the Delivering Member to perform any
possession and control activities to prepare the delivery of the cash
and securities (e.g., submitting instructions for CNS exemptions and
memo segregation).\19\ Finally, the last stage is the settlement close
period (``Settle Close'') (Day 5), which is the day of settlement on
which the securities and/or cash are transferred at the applicable
settling locations (e.g., CNS, DTC, or Fund/SERV).\20\
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\17\ During this period, the account may also be referred to as
being in ``Review Status.'' Id.
\18\ During this period, the account may also be referred to as
being in ``Settle Prep Status.'' Id.
\19\ ACATS restricts any additional activities for the transfer
in Settle Prep Status. Id.
\20\ Id.
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NSCC states that, during this five-day period, an investor's assets
remain invested in the market; however, trading for these assets may be
restricted.\21\ The inability to trade such assets may expose the
investor to additional market risks. NSCC states that, with the move to
the T+1 settlement cycle in May 2024,\22\ there is now an opportunity
to remove the Settle Prep Day from the ACATS transfer cycle, shortening
the time it takes to complete an account transfer.\23\
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\21\ Id.
\22\ See Securities Exchange Act Release No. 96930 (Feb. 15,
2023), 88 FR 13872 (Mar. 6, 2023) (S7-05-22) (Shortening the
Securities Transaction Settlement Cycle). See also Securities
Exchange Act Release No. 100048 (May 2, 2024), 89 FR 38929 (May 8,
2024) (SR-NSCC-2024-002).
\23\ See NSCC Notice of Filing, supra note 3, at 35741.
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Previously, under the T+2 settlement cycle, daily ACATS transfer
processing completed at approximately 4:30 p.m.\24\ each day, and the
cutoff time for Members to submit CNS exemptions and priority
instructions to control their CNS deliveries was 6:00 p.m.\25\ In the
absence of an additional processing day, NSCC states that this would
have left Members with only 1.5 hours to submit CNS exemptions and
priority instructions, which would not allow for sufficient time to
perform those tasks.\26\ As a result, the ACATS processing timeline
included a Settle Prep Day to allow Members sufficient time to submit
their exemptions and priority instructions in preparation for
settlement.\27\ However, NSCC states that the Settle Prep Day also
extended the time period during which customers continue to have market
exposure but restricted access to trading for these assets.\28\
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\24\ All times discussed herein are Eastern Time.
\25\ See NSCC Notice of Filing, supra note 3, at 35741. The CNS
automatic delivery process occurs in two cycles: the ``night
cycle,'' which typically begins the night before settlement date,
and the ``day cycle,'' which occurs on settlement date. NSCC employs
an algorithm for each cycle to determine the order in which Members
with long allocations receive positions from CNS. Members can submit
exemptions and priority requests that override NSCC's algorithm to
control the automatic delivery of securities from their DTC accounts
or if they have special needs to receive securities owed to them
(e.g., the Member has an urgent customer delivery). These priority
requests can be submitted for the night cycle, the day cycle, or
both. Id.
\26\ Id.
\27\ Id.
\28\ Id.
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Under the T+1 settlement cycle, Members now have until 10:45 p.m.
to submit CNS exemptions and priority instructions.\29\ DTC's night
cycle start time has also changed from 8:15 p.m. on T+1 to 11:30 p.m.
on T.\30\ NSCC states that, as a result of the changes to the exemption
processing timelines in T+1, Members now have sufficient time to submit
exemption instructions for settling positions for both two-day settling
ACATS and one-day settling ACATS with the same settlement date.\31\ For
example, NSCC states that a one-day settling CNS ACATS position from a
transfer that has aged to Settle Close can now have a CNS exemption
override instruction processed against that position for settlement in
the night cycle.\32\ Accordingly, NSCC states that Members have
sufficient time under the new T+1 processing timelines to submit their
exemption and priority instructions prior to settlement date,
eliminating the need for the Settle Prep Day in the ACATS process.\33\
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\29\ Id. Absent submission of an override instruction, Members'
regular standing instruction would be applied to both two-day and
one-day settling ACATS that create a short position. Id.
\30\ Id.
\31\ Id.
\32\ Id.
\33\ Id.
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Mutual Fund Pending Acknowledgement Process
ACATS facilitates account transfers that may include Fund/SERV
Eligible Fund \34\ assets to be transferred through NSCC's Mutual Fund
Services.\35\ NSCC states that its Mutual Fund Services are the
industry standard for processing fund transactions, communicating
account-related information, and linking fund companies with their
network of distribution firms.\36\ The Fund/SERV service automates
purchases, registrations, redemptions and settlement of fund
transactions.\37\ The Fund/SERV side of the ACATS-Fund/SERV process
comprises the second half of the ACATS transfer process for mutual
funds, transferring mutual fund assets from one owner to another
through the ACATS-Fund/SERV system.\38\
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\34\ Id. A Fund/SERV Eligible Fund is a fund or other pooled
investment entity which may be the subject of orders processed
through NSCC's Mutual Fund Service. See definition of Fund/SERV
Eligible Fund in NSCC Rule 1 (Definitions and Descriptions) and NSCC
Rule 3 (Lists to be Maintained), Section 1(c), supra note 6.
\35\ NSCC's Mutual Fund Services are described in NSCC Rule 52
(Mutual Fund Services), supra note 6.
\36\ See NSCC Notice of Filing, supra note 3, at 35742.
\37\ Id.
\38\ Id.
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NSCC states that, during the Review Period of an ACATS transfer,
the Delivering Member confirms the assets in the account to be
transferred so that the Receiving Member can review and determine if it
will accept or reject the account.\39\ If the Receiving Member accepts
the mutual fund transfer, it submits a mutual fund registration
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record (``FR Record'') to ACATS before the end of the Review
Period.\40\ The FR Record is then processed by ACATS and passed to
Fund/SERV, which then passes it to the mutual fund. Once the FR Record
is submitted, the account transfer has passed from Review Status to
Settle Prep Status.\41\
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\39\ Id.
\40\ Id.
\41\ Id. If, by the end of the review period, the Receiving
Member fails to submit an FR Record for all eligible mutual fund
assets due to be re-registered through the ACATS-Fund/SERV automatic
link, ACATS generates a default account registration on behalf of
the Receiving Member and passes it to the ACATS-Fund/SERV link. Id.
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NSCC states that the mutual fund company currently has until 11:00
a.m. on the second day after receipt of the fund re-registration
request through Fund/SERV to acknowledge/accept or reject the mutual
fund re-registration requests associated with an ACATS transaction. The
acknowledgement also offsets the original incentive charge applied to
the asset during the ACATS transaction.\42\ Due to the current two-day
acknowledgement process, mutual fund transfers require a Settle Prep
Day for both full and partial transfers to align with a two-day
settling process.\43\ NSCC states that, to facilitate the inclusion of
mutual funds in the shortened ACATS cycle (i.e., the removal of the
Settle Prep Day), NSCC is eliminating the second day of the Fund/SERV
pending acknowledgement process.\44\ NSCC states that, under the new
ACATS timeline, mutual fund companies/transfers agents will be required
to send acknowledgements on day 1 or the next business day after
receipt of the mutual fund registration request.\45\ NSCC states that
maintaining a two-day acknowledgement process with the removal of
Settle Prep would create a settlement misalignment for ACATS Fund/SERV
transfers (e.g., a day 2 acknowledgement without Settle Prep would be
sent the day after settlement is complete, which would be too late to
apply the incentive charge credit that offsets the original incentive
charge when a Fund/SERV acknowledgement occurs).\46\
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\42\ Id. ACATS applies incentive charges to all Fund/SERV
eligible assets. NSCC states that these charges incentivize the
deliverer to deliver the asset and allow the receiver to record the
customer on its books on the ACATS settlement date, insulating the
firm from the settlement process. As the items are acknowledged by
the fund companies through the ACATS-Fund/SERV interface, ACATS
offsets the incentive charges to reflect the acknowledgments. Id.
\43\ Id.
\44\ Id.
\45\ Id.
\46\ Id.
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II. Description of the Proposed Rule Change
NSCC proposes to amend Rule 50 to reflect the upcoming elimination
of the Settle Prep Day and the second day of the Fund/SERV pending
acknowledgement process from the ACATS transfer process.\47\ NSCC Rule
50 and Procedure XVIII do not contain information describing the
specific number of days in the transfer process, the Settle Prep Day,
or the specific number of days in the Fund/SERV pending acknowledgement
process. However, Rule 50 does contain descriptions of the settlement
dates for certain types of transfers, and some of these descriptions
will be impacted by the removal of the Settle Prep Day and the second
day of the Fund/SERV pending acknowledgement process. NSCC states that
the amendments to Rule 50 would conform with forthcoming changes to the
ACATS process.\48\
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\47\ Id.
\48\ Id.
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NSCC proposes to amend Section 12.3.(ii) of Rule 50 to remove
language related to the two-day settlement timeline for certain options
and Fund/SERV assets. Section 12 of Rule 50 describes the transfer of
(i) residual credit positions; (ii) partial accounts; (iii) cash in
respect of fail positions for which delivery is unable to be completed;
and (iv) cash or securities mistakenly delivered as part of ACATS
(``Reclaims''), other than Fund/SERV Eligible Fund assets and positions
eligible for processing at another registered clearing agency (``ACAT
RCA''). Specifically, the rule states that the settlement date for all
such transfers is one business day following the day NSCC receives the
transfer request unless the request includes, among other things,
options assets which are eligible for processing at an ACAT RCA or
Fund/SERV Eligible Fund assets, whereby the settlement date for all
assets included in the transfer shall be two business days following
the day NSCC receives the transfer request. NSCC proposes to remove
this sub-paragraph from Section 12.3 of Rule 50 to reflect the
elimination of the Settle Prep Day and the second day of the Fund/SERV
pending acknowledgement process and that such transfers would now be
settled on the first business day after NSCC receives the transfer
request. NSCC would also make conforming changes to the Rule to reflect
the removal of this sub-paragraph and make a typographical correction
to the Rule.
NSCC also proposes to amend Section 13 of Rule 50 to remove a
statement concerning a two-day settlement timeline for certain
transfers containing options assets or Fund/SERV Eligible Fund assets.
Pursuant to Section 13 of Rule 50, a Receiving Member may submit a
request to a Delivering Member to initiate the transfer of a partial
customer account. For partial settlements, if the Delivering Member
submits detailed account asset data, and the transfer is not rejected
by the Receiving Member, the settlement date for the transfer request
is generally one business day after the Delivering Member has submitted
the asset account data, unless the transfer contains options assets or
Fund/SERV Eligible Fund assets, in which case the settlement date for
all assets will be two business days after the Delivering Member has
submitted the asset account data. As a result of the proposed
elimination of Settle Prep Day and the second day of the Fund/SERV
pending acknowledgement process, future transfers containing options
assets or Fund/SERV Eligible Fund assets would now settle one business
day after the Delivering Member has submitted the asset account data.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Exchange Act \49\ directs the Commission
to approve a proposed rule change of a self-regulatory organization if
it finds that such proposed rule change is consistent with the
requirements of the Exchange Act and rules and regulations thereunder
applicable to such organization. After carefully considering the
Proposed Rule Change, the Commission finds that the Proposed Rule
Change is consistent with the requirements of the Exchange Act and the
rules and regulations thereunder applicable to the Clearing Agencies.
In particular, the Commission finds that the Proposed Rule Change is
consistent with Section 17A(b)(3)(F) of the Exchange Act.\50\
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\49\ 15 U.S.C. 78s(b)(2)(C).
\50\ 15 U.S.C. 78q-1(b)(3)(F).
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Section 17A(b)(3)(F) of the Exchange Act \51\ requires the rules of
a clearing agency to, among other things, promote the prompt and
accurate clearance and settlement of securities transactions and assure
the safeguarding of securities and funds which are in the custody or
control of the clearing agency or for which it is responsible.
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\51\ Id.
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As described above, NSCC is working with the industry to remove the
Settle
[[Page 43712]]
Prep Day and the second day of the Fund/SERV pending acknowledgement
process from the ACATS transfer process. The Proposed Rule Change will
amend the NSCC Rules to conform to and accommodate the upcoming removal
of the Settle Prep Day and the second day of the Fund/SERV pending
acknowledgement process. As a result, the Proposed Rule Change should
expedite the time it takes to complete a customer account transfer in
ACATS, reducing the amount of time that an investor's assets would
remain invested in the market without the ability for the investor to
trade such assets. By reducing the amount of time that an investor's
assets would remain invested in the market without the ability for the
investor to trade such assets, the Proposed Rule Change should promote
the prompt and accurate settlement of ACATS account transfers and
assure the safeguarding of securities and funds associated with such
transfers, consistent with Section 17A(b)(3)(F) of the Exchange
Act.\52\
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\52\ Id.
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
Proposed Rule Change is consistent with the requirements of the
Exchange Act, and in particular, the requirements of Section 17A of the
Exchange Act \53\ and the rules and regulations thereunder.
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\53\ In approving this proposed rule change, the Commission has
considered the proposed rules' impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\54\ that the Proposed Rule Change (SR-NSCC-2025-011) be,
and hereby is, approved.
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\54\ 15 U.S.C. 78s(b)(2).
\55\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\55\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-17341 Filed 9-9-25; 8:45 am]
BILLING CODE 8011-01-P
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