Daily Rules, Proposed Rules, and Notices of the Federal Government
The purpose of this proposed rule change is to amend NSCC's rules regarding an adjustment to the settlement timing of partial transfers of mutual fund assets
In its filing with the Commission, NSCC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. NSCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements.
Since its inception in 1985, NSCC's Automated Account Transfer System ("ACATS")
For non-CNS eligible securities transferred through ACATS (on broker-to-broker transfers only), on ACATS settlement date NSCC automatically debits the Delivering Member with the market value of the assets being transferred through ACATS and credits the Receiving Member with the same amount.
The combined use of ACATS and Fund/SERV for the transfer of customer mutual fund assets between brokers (referred to as the "ACATS-Fund/SERV Interface") is a non-CNS, ACATS process where both the reregistration of mutual fund securities and associated money settlement of ACATS-Fund/SERV transactions are processed through NSCC's systems. Through this process, after both parties to the transfer have agreed to the transaction details ACATS creates a Fund/SERV record containing reregistration instructions and detailed information provided by the Delivering Member regarding how the asset is currently held. This record is sent to the applicable Fund Member or Mutual Fund Processor. On ACATS settlement date, the Delivering Member of the mutual fund asset is debited the market value of the asset and the Receiving Member is credited the market value of the asset. Any acceptance or rejection by the receiving Fund Member/Mutual Fund Processor is delivered through NSCC's Fund/SERV and is relayed to ACATS. In the case of an acceptance, NSCC offsets any incentive debits and credits with reverse entries. However, in the case of a rejection or a failure to respond to the transfer request, the incentive charges are carried into money settlement.
Currently in ACATS, full account transfers and partial account transfers have different settlement dates. A full account transfer has a two-day settlement cycle. A partial account transfer has a one-day settlement cycle; however, Fund/SERV always provides the receiving Fund Member/Mutual Fund Processor with a two-day response period to acknowledge or reject a transfer.
Pursuant to the rule change, NSCC proposes to modify: (A) Section 12 of Rule 50 (Automated Customer Account Transfer Service) to provide one additional business day for the transfer of any member to member partial transfer that contains any Fund/SERV-eligible asset before it reaches settlement date, and (B) Section 13 of Rule 50 to make conforming changes that provide that the settlement date for transfers where Delivering Member submits detailed account asset data and the transfer is not rejected by the Receiving Member would be one business day after the Delivering Member has submitted the asset account data unless the transfer contains options assets or Fund/SERV eligible assets. In such a situation, the settlement date for all assets would be two business days. The text of Rule 52 (Mutual Fund Services) is unaffected by this proposal. The effective date of the proposed rule change will be announced by Important Notice.
The proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to NSCC because it provides enhanced customer protection and greater transparency with respect to the settlement status of transactions processed through the ACATS-Fund/SERV interface and reduces associated risks in the event of a party's default. As such, the proposed rule change would facilitate the prompt and accurate clearance and settlement of securities transactions. Furthermore, the proposed rule change is consistent with the CPSS/IOSCO Recommendations for Central Counterparties.
NSCC does not believe that the proposed rule change would impose any burden on competition.
Written comments relating to the proposed rule change have not been solicited NSCC.
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:
* Use the Commission's Internet comment form (
* Send an e-mail to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission,
For the reasons stated below, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to NSCC.
As described in this filing, NSCC's proposal to move the settlement of partial transfers of mutual fund assets in ACATS from one day to two days should help mitigate the risk that in the event of a member defaulting between the time funds have been exchanged but delivery has not been made and should provide greater transparency with respect to the settlement status of transactions processed through the ACATS-Fund/SERV interface. Accordingly, the Commission finds that the rule change is consistent with Section 17A(b)(3)(F) of the Act because it should allow NSCC to reduce risks associated with the transfer of mutual fund assets in ACATS, which should in turn better enable NSCC to assure the safeguarding of funds and securities in its possession or control or for which it is responsible.
NSCC has requested that the Commission find good cause for approving the proposed rule change prior to the thirtieth day after publication of notice of filing thereof in the