Daily Rules, Proposed Rules, and Notices of the Federal Government
BX is filing this proposed rule change to amend Rule 4618. The text of the proposed rule change is below. Proposed new language is italicized; proposed deletions are in brackets.
(b) No change.
In its filing with the Commission, the Exchange 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 Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
BX proposes to modify Rule 4618 to clarify that the use of a long-standing arrangement between National Securities Clearing Corporation ("NSCC") and CDS Clearing and Depository Services, Inc. ("CDS")
Currently, a Canadian broker-dealer seeking to buy or sell U.S. securities may do so through a U.S. registered broker-dealer with which it establishes a relationship for that purpose. In such a relationship, the U.S. broker-dealer manages the clearance and settlement of the resulting trades, either through direct membership at NSCC or indirectly through a clearing broker with which it has established a relationship. Under the proposed change, a Canadian broker-dealer that is a member of CDS may make use of CDS, and its direct membership in NSCC, to clear and settle the resulting trades. Specifically, the clearing report for the trade will "lock in" CDS, with reference to the CDS membership of the Canadian broker-dealer, as a party to the trade.
The relationship between NSCC and CDS was established more than two decades ago, and various aspects of the
In order to clearly establish that use of the CDS/NSCC relationship is a permissible method of clearing transactions executed on BX, BX is proposing to amend Rule 4618. Currently, the rule provides that trades must be cleared through a registered clearing agency using a continuous net settlement ("CNS") system, and that this requirement may be satisfied by direct participation, use of direct clearing services, or by entry into a correspondent clearing arrangement with another member that clears trades through such an agency. NSCC is currently the only registered clearing agency using a CNS system for trades executed on BX. While it is possible that the term "direct clearing services" could be construed to cover CDS's participation in NSCC on behalf of its members--because CDS is a direct member of NSCC for the purpose of providing clearing services to its members--the term has not previously been construed by BX in that manner. Accordingly, BX believes that the clarity of the rule would be enhanced by directly recognizing the CDS/NSCC relationship in the rule text. BX proposes amending the rule to provide that the rule may be satisfied through "use of the services of CDS Clearing and Depository Services, Inc. in its capacity as a member of such a clearing agency." Whenever a clearing arrangement making use of CDS's membership in NSCC is established, NSCC will require the BX member, the Canadian broker on whose behalf it is acting, CDS, and BX to sign a short agreement, to be addressed to NSCC, in which the parties acknowledge their use of the CDS/NSCC arrangement.
BX believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
BX does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. The proposed change will ensure that Canadian broker-dealers whose trades are executed on BX are able to make use of an additional available option for clearing such transactions, thereby promoting competition with respect to the availability of clearing services.
Written comments were neither solicited nor received.
The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A) of the Act
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 email to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
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-BX-2012-072 and should be submitted on or before December 18, 2012.