[Federal Register Volume 60, Number 212 (Thursday, November 2, 1995)]
[Notices]
[Pages 55749-55750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27237]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36431; File No. SR-MBSCC-95-05]
Self-Regulatory Organizations; MBS Clearing Corporation; Order
Approving a Proposed Rule Change Authorizing the Release of Clearing
Data Relating to Participants
October 27, 1995.
On June 28, 1995, the MBS Clearing Corporation (``MBSCC'') filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change (File No. SR-MBSCC-95-05) pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'').\1\ On July 24, 1995,
MBSCC filed an amendment to the proposed rule change.\2\ Notice of the
proposal was published in the Federal Register on August 24, 1995.\3\
No comment letters were received. For the reasons discussed below, the
Commission is approving the proposed rule change.
\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ Letter from Anthony H. Davidson, MBSCC, to Peter R.
Geraghty, Division of Market Regulation, Commission (July 21, 1995).
\3\ Securities Exchange Act Release No. 36107 (August 16, 1995),
60 FR 44092.
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I. Description of the Proposal
The proposed rule change modifies Article V of MBSCC's Rules by
adding a new Rule 14 concerning the release of data relating to
participants' clearance and settlement activity. MBSCC receives
transaction data and other data relating to its participants in the
normal course of its business. The rule change sets forth MBSCC's
obligation to preserve its participants' rights with respect to such
data and the conditions under which MBSCC will disclose such data.
The rule change permits MBSCC to disclose such data to regulatory
organizations, self-regulatory organizations, clearing organizations
affiliated with or designated by contract markets trading specific
futures products under the oversight of the Commodity Futures Trading
Commission, and others under certain conditions. The rule change also
provides that, absent valid legal process or as provided for elsewhere
in Rule 14, MBSCC will only release clearing data relating to a
particular participant to such participant upon its written request.\4\
Furthermore, the rule provides that MBSCC is not prevented from
releasing clearing data to parties other than those discussed above
provided that such data be in format that does not disclose proprietary
and/or confidential financial, operational, or trading data of a
particular participant or groups of participants. Finally, the rule
change also defines ``clearing data'' to mean transaction and other
data which is received by MBSCC in the clearance and/or settlement
process or such reports or summaries which may be produced as a result
of processing such data.
\4\ As a self-regulatory organization, MBSCC currently is
permitted without obtaining a participant's written authorization to
cooperate and share data with other regulatory or self-regulatory
organizations for regulatory purposes.
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The rule change facilitates MBSCC's participation in the National
Securities Clearing Corporation's (``NSCC'') Collateral Management
Service (``CMS'') \5\ because it enables MBSCC to provide information
regarding MBSCC's participants fund, including excess or deficit
amounts, and comprehensive data on the collateral deposited in the
participants fund to NSCC for inclusion in NSCC's CMS. Participants of
MBSCC that desire access to the CMS data are required to execute a CMS
application. The executed CMS application will constitute a
participant's written request required under MBSCC's new Rule 14 to
Article V to authorize MBSCC to release the participant's clearing data
to that participant.\6\
\5\ Generally, NSCC's CMS will provide participating
participants and clearing agencies with access to information
regarding participating participants' clearing fund, margin, and
other similar requirements and deposits at participating clearing
agencies. For a complete description of the CMS, refer to Securities
Exchange Act Release No. 36091 (August 10, 1995), 60 FR 42931 [File
No. SR-NSCC-95-06] (order approving the CMS).
\6\ A separate CMS agreement between MBSCC and NSCC sets forth
MBSCC's and NSCC's authorizations and obligations to collect and
provide information relating to the participants' clearing fund and
margin requirements and deposits.
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II. Discussion
Section 17A(b)(3)(F) of the Act requires that the rules of a
clearing agency be designed 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.\7\ As discussed below, the Commission
believes the proposed rule change is consistent with MBSCC's obligation
under Section 17A(b)(3)(F) because the proposal sets forth MBSCC's
responsibilities and obligations with regard to releasing participants'
clearing data. MBSCC's new rule sets forth specific procedures that
MBSCC and a participant must comply with before that participant's
clearing data will be released for purposes such as participation in
NSCC's CMS. MBSCC's and its participants' participation in NSCC's CMS
should help MBSCC and other clearing agencies to better monitor
clearing fund, margin, and other similar required deposits that protect
a clearing agency against loss should a member default on its
obligations to the clearing agency.\8\
\7\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
\8\ Although MBSCC currently does not have any cross-guarantee
agreements or arrangements with other clearing agencies, NSCC's CMS
will be especially beneficial to those participating clearing
entities that have executed cross-guaranty agreements or have other
cross-guarantee arrangements. The Commission supports the use of
cross-guaranty agreements and other similar arrangements among
clearing agencies as a method of reducing clearing agencies' risk of
loss due to a common participant's default and encourages MBSCC to
explore such agreements or arrangements.
Currently, the Depository Trust Company (``DTC'') and NSCC are
the only clearing agencies registered with the Commission that have
executed a cross-guaranty agreement. The agreement provides that in
the event of a default of a common member, any resources remaining
after the failed common member's obligations to the guaranteeing
clearing agency have been satisfied will be made available to the
other clearing agency. The guaranty is not absolute but rather is
limited to the extent of the resources relative to the failed member
remaining at the guaranteeing clearing agency. The principal
resources will be the failed member's settlement net credit balances
and deposits to the clearing agencies' clearing funds. For a
complete description of DTC's and NSCC's agreement, refer to
Securities Exchange Act Release No. 33548 (January 31, 1994), 59 FR
5638 [File Nos. SR-DTC-93-08 and SR-NSCC-93-07].
The Midwest Securities Trust Company (``MSTC'') and Midwest
Clearing Corporation (``MCC'') and the Philadelphia Depository Trust
Company (``Philadep'') and the Stock Clearing Corporation of
Philadelphia (``SCCP'') each have cross-guarantee arrangements with
their related affiliate. Pursuant to Section 3, Rule 2, Article VI
of MSTC's Rules, a defaulting participant's obligations at MSTC or
MCC will be discharged by application of that participant's deposits
at either clearing agency if that participant is a common member to
both clearing agencies. MCC's Rules contain a similar provision.
Similarly, pursuant to Section 4, Rule 4 of SCCP's Rules, SCCP will
make available any portion of a defaulting participant's
contribution to its participants fund to offset a loss suffered by
Philadep by reason of that participant's default. Philadep's Rules
contain an identical provision.
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III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of Section 17A(b)(3)(F) of
the Act and the rules and regulations thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-MBSCC-95-05) be, and hereby
is, approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\9\
\9\ 17 CFR 200.30-3(a)(12) (1994).
[[Page 55750]]
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27237 Filed 11-1-95; 8:45 am]
BILLING CODE 8010-01-M
