Interpretive Letter to Merrie Faye Witkin, The Depository Trust & Clearing Corporation
NASD Rule 11190(a) requires members that are participants in a registered clearing agency to participate in a fail reconfirmation and pricing service when offered.
June 9, 2010
Merrie Faye Witkin
Managing Director and Deputy General Counsel
The Depository Trust & Clearing Corporation
55 Water Street
New York, New York 10041-0099
Re: Interpretative Request Regarding NSCC's Enhanced Reconfirmation and Pricing Service
Dear Ms. Witkin:
This letter responds to your letter dated June 2, 2010, in which you request interpretive guidance on behalf of National Securities Clearing Corporation ("NSCC"), a registered clearing agency. As described in your letter, NSCC is proposing to enhance its current reconfirmation and pricing service. You are seeking interpretative guidance that use of the proposed enhanced service by FINRA members, that are also NSCC participants, would fall within the scope of NASD Rule 11190(a) (Reconfirmation and Pricing Service Participants), as a "fail reconfirmation and pricing service" offered by a registered clearing agency.1
NASD Rule 11190(a) (Reconfirmation and Pricing Service Participants) requires members that are participants in a registered clearing agency for purposes of clearing over-the-counter securities transactions, to participate in a fail reconfirmation and pricing service when offered. NSCC, as a registered clearing agency, may develop a service for its participants and determine that such service is in accordance with a reconfirmation and pricing service under NASD Rule 11190(a). FINRA members that are participants in NSCC would be required under NASD Rule 11190(a) to participate in such fail reconfirmation and pricing service.2
We trust that this letter is responsive to your request. Please note that the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the FINRA Board of Governors. This letter responds only to the issues you have raised based on the facts as you have described them, and does not address any other rule or interpretation of FINRA, or all the possible regulatory and legal issues involved. In addition, you should be aware that any changes in the facts as you have described them will require further consideration and may cause us to reach a different conclusion.
Very truly yours,
Kosha K. Dalal
Associate Vice President and Associate General Counsel
cc: Krisoula Dailey, FINRA
1 NASD Rule 11190 is expected to be transferred to the Consolidated FINRA Rulebook with no substantive changes.
2 This staff letter does not address the fairness of any fees that NSCC may charge participants in connection with the proposed enhanced service. The staff notes that registered clearing agencies are subject to the requirements of Section 17A of the Securities Exchange Act of 1934 ("Exchange Act") and that under that section, the rules of such registered clearing agencies must provide for the "equitable allocation of reasonable dues, fees and other charges among its participants," and "not impose any burden on competition not necessary or appropriate in furtherance of the purposes of" the Exchange Act. Registered clearing agency rules are subject to filing and, subject to limited exceptions, approval by the SEC under Section 19(b) of the Exchange Act.