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1 not include (i) Federal Reserve Banks, Federal Home Loan 2 Banks, Federal Land Banks, and (ii) banks, brokers, life 3 insurance companies or their registered separate accounts, 4 registered open end investment companies or unit investment 5 trusts, building and loan, savings and loan, and homestead 6 associations, and cooperative banks by reason of lending, 7 fiduciary, correspondent, or safekeeping functions commonly 8 performed by them on the date of enactment of this 9 paragraph.

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"(23) The term 'participant', when used with respect

to a clearing agency means any person who uses a clearing 12 agency or securities depository for the purpose of settling

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or comparing transactions in securities or making or receiv14 ing payment for or delivering, lending, or hypothecating 15 of securities. Such term does not include a person whose 16 only use of a clearing agency or securities depository is 17 through another person.

18 "(24) The term 'transfer agent' means any person who 19 engages on behalf of an issuer of securities, or on behalf of 20 itself as an issuer, of securities in (A) countersigning such 21 securities upon issuance; (B) monitoring the issuance of 22 such securities with a view to preventing unauthorized is23 suance, a function commonly performed by a person called

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a registrar; (C) registering the transfer of such securities;

25 or (D) exchanging or converting such securities. The term

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1 'transfer agent' does not include any person who performs 2 such functions solely with respect to variable annuity con3 tracts issued by insurance companies.

4 "(25) The term 'appropriate regulatory agency', when 5 used with respect to a clearing agency or transfer agent 6 required to be registered under this title, means:

"(A) the Comptroller of the Currency, in the case of a national bank or a bank operating under the Code of Law for the District of Columbia, or a subsidiary of any such bank;

"(B) the Board of Governors of the Federal Reserve System, in the case of a State member bank of the Federal Reserve System, a subsidiary thereof, a bank holding company, or a nonbank subsidiary of a bank holding company;

"(C) the Federal Deposit Insurance Corporation in the case of a bank insured by the Federal Deposit Insurance Corporation (other than a member of the Federal Reserve System) or a subsidiary thereof; and

"(D) the Commission in the case of all other trans

fer agents and clearing agencies.

22 As used in this paragraph, the terms 'bank holding company' 23 and 'subsidiary' have the meaning given them in section 2

24 of the Bank Holding Company Act of 1956, as amended.

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"(26) The term 'rules of a clearing agency' means the

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1 clearing agency's constitution, articles of incorporation, by2 laws, or rules or instruments corresponding to the foregoing, 3 and its stated policies and practices relating to its organiza4 tion, participation, rules of procedures, financial condition, 5 methods of safekeeping, settling, hypothecating, lending and 6 accounting for funds and securities, and similar matters.". 7 SEC. 4. Section 15 (c) of the Securities Exchange Act 8 of 1934 (15 U.S.C. 780 (c)) is amended by adding at the 9 end thereto the following new paragraph:

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"(6) No broker or dealer shall make use of the mails

or of any means or instrumentality of interstate commerce to 12 effect any transaction in, or to induce or attempt to induce 13 the purchase or sale of, any security (other than an exempted 14 security or commercial paper, bankers' acceptances, or com15 mercial bills) in contravention of such rules and regulations as the Commission shall prescribe as necessary or appropri17 ate in the public interest, for the protection of investors or 18 for the development of an integrated national system for the 19 prompt and accurate processing and settlement of securities 20 transactions to regulate the time and method of making set21 tlements, payments, and deliveries and of opening, maintain22 ing, and closing accounts. Nothing in this paragraph shall 23 be construed (A) to affect the authority of the Board of 24 Governors of the Federal Reserve System, pursuant to sec25 tion 7 of this title, to prescribe rules and regulations for the

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purpose of preventing the excessive use of credit for the 2 purchase or carrying of securities, or (B) to authorize the 3 Commission to prescribe such rules or regulations for such 4 purpose."

5 SEC. 5. The Securities Exchange Act of 1934 is amended 6 by inserting after section 17 (15 U.S.C. 78q) the following new section:

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"PROCESSING OF SECURITIES TRANSACTIONS

"SEC. 17A. (a) (1) Except as otherwise provided in

10 this subsection, it shall be unlawful for any person, directly

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or indirectly, to make use of the mails or any means or in12 strumentality of interstate commerce to perform the function 13 of a clearing agency with respect to any security (other 14 than an exempted security) unless such person is registered 15 under this section. The Commission, by rules and regula16 tions or by order, upon its own motion, or upon application, 17 may conditionally or unconditionally exempt any person, 18 security, transaction, or clearing agency, or any class or 19 classes of persons, securities, transactions, or clearing agen20 cies from any provision or provisions of this section or of 21 any rule or regulation prescribed under this section if the 22 Commission finds that the application of such provision or 23 provisions to such person, security, transaction, or clearing 24 agency or class or classes of persons, securities, transactions, 25 or clearing agencies is not practical or not necessary or ap

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1 propriate in the public interest or for the prompt and ac2 curate processing and settlement of securities transactions. 3 "(2) The Commission shall include in its annual reports 4 to Congress required by section 23 (b) of this title informa5 tion concerning the number of requests for exemptions from 6 this section received, the number granted, and the basis or 7 bases upon which any exemptions were granted. 8 "(b) Any clearing agency may be registered for the 9 purposes of this section by filing with the Commission a reg10 istration statement in such form as the Commission may pre11 scribe containing the rules of the clearing agency and setting 12 forth such other information and accompanied by such other 13 documents as the Commission may, by rule, require. 14 "(c) An applicant shall not be registered as a clearing 15 agency unless the Commission finds that

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"(1) such clearing agency is organized and operated so as to facilitate the prompt and accurate settlement of securities transactions, to safeguard funds and securities held for the accounts of participants, to comply

with the provisions of this title and the rules and regu21 lations thereunder, and to carry out the purposes of this

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section;

(2) the rules of the clearing agency provide that

all (A) registered brokers or dealers or members of a

25 national securities exchange, (B) other registered clear