90 FR 143 pgs. 35740-35744 - Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change Concerning Enhancements to the Automated Customer Account Transfer Service
Type: NOTICEVolume: 90Number: 143Pages: 35740 - 35744
Pages: 35740, 35741, 35742, 35743, 35744Docket number: [Release No. 34-103542; File No. SR-NSCC-2025-011]
FR document: [FR Doc. 2025-14236 Filed 7-28-25; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103542; File No. SR-NSCC-2025-011]
Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change Concerning Enhancements to the Automated Customer Account Transfer Service
July 24, 2025.
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 July 16, 2025, 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. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
Footnotes:
1 ?15 U.S.C. 78s(b)(1).
2 ?17 CFR 240.19b-4.
I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change
The proposed rule change consists of amendments to the NSCC Rules & Procedures ("Rules") to enhance the Automated Customer Account Transfer Service ("ACATS") account transfer process. 3
Footnotes:
3 ?Capitalized terms not defined herein shall have the meaning assigned to such terms in the NSCC Rules, available at www.dtcc.com/legal/rules-and-procedures.
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 purpose of this proposed rule change is to amend the NSCC Rules to accommodate proposed enhancements to ACATS to improve the efficiency of the account transfer process. Specifically, the proposed rule change would modify NSCC Rule 50 (Automated Customer Account Transfer Service) to 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®? 4 pending acknowledgement process from the ACATS transfer process. The proposed rule change is discussed in detail below.
Footnotes:
4 ?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.
Background
ACATS Overview
[top] 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. 5 ACATS automates and standardizes procedures for the transfer of assets in a customer account, allowing Members to efficiently and automatically enter, review, and generate instructions to settle customer account transfers. The
Footnotes:
5 ? See FINRA Rule 11870, available at www.finra.org/rules-guidance/rulebooks/finra-rules/11870. 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, supra note 3.
ACATS is primarily described in Rule 50 and Procedure XVIII (ACATS Settlement Accounting Operation) of the NSCC Rules. 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. 6 The Delivering Member must either reject the customer account transfer request or submit detailed customer account asset data to NSCC. 7 NSCC then provides a report detailing the customer account asset data to the Receiving Member, 8 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. 9 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 Insurance Processing Service? 10 for annuities, or The Options Clearing Corporation? 11 for listed options).
Footnotes:
6 ? See Sections 2 and 3 of Rule 50, supra note 3.
7 ? See Section 5 of Rule 50, supra note 3.
8 ? See Section 7 of Rule 50, supra note 3.
9 ? See Section 8 of Rule 50, supra note 3. 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 5.
10 ? See www.dtcclearning.com/products-and-services/insurance-retirement-services/acats-ips.html.
11 ? See www.theocc.com.
NSCC 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. Specifically, ACATS is being enhanced by removing the Settle Prep Day and the second day of the Fund/SERV pending acknowledgement process from the ACATS transfer process, as further described below. As a result, NSCC is proposing changes to the NSCC Rules to conform to and accommodate these enhancements.
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. 12 The third stage is the settlement preparation period (or "Settle Prep") (Day 4) between the review stage and actual settlement, 13 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). 14 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, Fund/SERV).
Footnotes:
12 ?During this period, the account may also be referred to as being in "Review Status."
13 ?During this period, the account may also be referred to as being in "Settle Prep Status."
14 ?ACATS restricts any additional activities for the transfer in Settle Prep Status.
During this five-day period, an investor's assets remain invested in the market; however, trading for these assets may be restricted. The inability to trade such assets may expose the investor to additional market risks. With the move to the T+1 settlement cycle in May 2024, 15 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.
Footnotes:
15 ? 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).
Previously, under the T+2 settlement cycle, daily ACATS transfer processing completed at approximately 4:30 p.m. Eastern Time? 16 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. 17 In the absence of an additional processing day, 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. 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. However, as noted above, 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.
Footnotes:
16 ?All times discussed herein are Eastern Time.
17 ?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.
Under the T+1 settlement cycle, Members now have until 10:45 p.m. to submit CNS exemptions and priority instructions. 18 DTC's night cycle start time has also changed from 8:15 p.m. on T+1 to 11:30 p.m. on T. 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. For example, 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. Accordingly, 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.
Footnotes:
18 ?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.
Mutual Fund Pending Acknowledgement Process
[top] As described above, ACATS facilitates account transfers that may include Fund/SERV Eligible Fund? 19 assets to be
Footnotes:
19 ?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 3.
20 ?NSCC's Mutual Fund Services are described in NSCC Rule 52 (Mutual Fund Services), supra note 3.
As described above, 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. If the Receiving Member accepts the mutual fund transfer, it submits a mutual fund registration record ("FR Record") to ACATS before the end of the Review Period. 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. 21
Footnotes:
21 ?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.
Currently, the mutual fund company 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. 22 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. 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. 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. 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).
Footnotes:
22 ?ACATS applies incentive charges to all Fund/SERV eligible assets. 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.
Proposed Changes
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. 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 therefore proposes to amend Rule 50 so that those Rules conform with forthcoming changes to the ACATS process.
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.
Implementation Timeframe
[top] Subject to approval by the Commission, NSCC would implement
Footnotes:
23 ?NSCC has issued Important Notices to Members regarding the removal of Settle Prep and the Fund/SERV Day 2 acknowledgement day available at www.dtcc.com/-/media/Files/pdf/2024/7/31/a9463-24.pdf, www.dtcc.com/-/media/Files/pdf/2025/3/25/a9574-25.pdf, and www.dtcc.com/-/media/Files/pdf/2025/4/9/a9579.pdf.
2. Statutory Basis
NSCC believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. Section 17A(b)(3)(F) of the Act? 24 requires that the rules of a clearing agency be designed to, among other things, promote the prompt and accurate clearance and settlement of securities transactions and to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible. NSCC believes the proposed rule change is consistent with the requirements of Section 17A(b)(3)(F) of the Act for the reasons stated below.
Footnotes:
24 ?15 U.S.C. 78q-1(b)(3)(F).
As described above, NSCC is working with the industry to remove the Settle Prep Day and the second day of the Fund/SERV pending acknowledgement process from the ACATS transfer process. The changes would 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. While 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, 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. The proposed rule change would 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, NSCC believes the proposed changes would promote the prompt and accurate settlement of ACATS account transfers and assure the safeguarding of securities and funds associated with such transfers. For these reasons, NSCC believes the proposed rule change would 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 NSCC or for which it is responsible in accordance with Section 17A(b)(3)(F) of the Act. 25
Footnotes:
25 ? Id.
(B) Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act? 26 requires that the rules of the clearing agency do not impose any burden on competition not necessary or appropriate in furtherance of the Act. The proposed rule change is designed to accommodate industry requests to streamline and shorten the time it takes to complete a customer account transfer in ACATS. Specifically, the proposed rule change would 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, specifically as the Rules pertain to settlement dates for certain types of transfers. The proposed ACATS enhancements would leverage recent changes made to exemption and night cycle processing times in the T+1 settlement cycle, which now provide Members with sufficient time to submit exemption instructions for settling positions for both two-day settling ACATS and one-day settling ACATS with same settlement date settlement cycle, more closely aligning the settlement of ACATS asset transfers with the T+1 settlement cycle for traded assets. NSCC therefore believes the proposed rule change would not impose any burden on competition.
Footnotes:
26 ?15 U.S.C. 78q-1(b)(3)(I).
(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 www.sec.gov/regulatory-actions/how-to-submit-comments. 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 tradingandmarkets@sec.gov 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
Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
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
• Use the Commission's internet comment form ( https://www.sec.gov/rules/sro.shtml ); or
• Send an email to rule-comments@sec.gov. Please include file number SR-NSCC-2025-011 on the subject line.
Paper Comments
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.
[top] All submissions should refer to file number SR-NSCC-2025-011. 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 ( https://www.sec.gov/rules/sro.shtml ). Copies of the filing will be available for inspection and copying at the principal office of NSCC and on DTCC's website ( https://dtcc.com/legal/sec-rule-filings.aspx ). Do not include personal identifiable information in
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 27
Footnotes:
27 ?17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-14236 Filed 7-28-25; 8:45 am]
BILLING CODE 8011-01-P