[Federal Register Volume 60, Number 230 (Thursday, November 30, 1995)]
[Notices]
[Pages 61577-61581]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29258]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36491; File No. SR-GSCC-95-02]
Self-Regulatory Organizations; Government Securities Clearing
Corporation; Order Approving a Proposed Rule Change Relating to Netting
Services for the Non-Same-Day-Settling Aspects of Next-Day and Term
Repurchase and Reverse Repurchase Transactions
November 17, 1995.
On August 1, 1995, the Government Securities Clearing Corporation
(``GSCC'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change (File No. SR-GSCC-95-02)
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'').\1\ On August 29, 1995, and September 19, 1995, GSCC amended
the filing.\2\ Notice of the proposal was published in the Federal
Register on September 26, 1995.\3\ One comment letter was received
regarding the proposed rule change.\4\ For the reasons discussed below,
the Commission is approving the proposed rule change.
\1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
\2\ Letters from Jeffrey F. Ingber, General Counsel and
Secretary, GSCC, to Christine Sibille, Division of Market
Regulation, Commission (August 24, 1995, and September 14, 1995).
\3\ Securities Exchange Act Release No. 36252 (September 19,
1995), 60 FR 49649.
\4\ Letter from Barry E. Silverman, President, Delta Government
Options Corp., to Jonathan G. Katz, Secretary, Commission (October
20, 1995).
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I. Description
On May 12, 1995, GSCC implemented its comparison service for next-
day (also referred to as ``overnight'') and term repurchase and reverse
repurchase transactions involving government securities as the
underlying instrument (``repos'').\5\ As of October 10, 1995, forty-
five members are participating in this service. This rule filing allows
GSCC to implement the next stage of its repo services, which is
providing netting and risk management services for the non-same-day-
settling aspects of next-day and term repo transactions.\6\
\5\ For a complete description of GSCC's repo comparison
service, refer to Securities Exchange Act Release No. 35557 (March
31, 1995), 60 FR 17598 [File No. SR-GSCC-94-10] (order approving
proposed rule change relating to implementing a comparison service
for repos).
\6\ GSCC plans to offer its repo services in three phases. Phase
I involves providing comparison and netting services for next-day
and term repo transactions; Phase II will focus on providing
comparison, netting, and risk management services for open repos;
and Phase III will focus on providing intraday netting and risk
management services for same-day settling aspects of repo
transactions. Future phases will add the following repo services
(not necessarily in this order): (1) tracking and facilitation of
collateral substitutions, (2) enhanced comparison services for
forward-settling repos, and (3) interest rate protection for
forward-settling repos.
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The repo netting process began in test mode on October 12, 1995,
and continues on a daily basis. The test process is conducted using
data submitted during the previous day's production cycle. GSCC
anticipates fully implementing repo netting in mid-November 1995 after
the November refunding of government securities. In order to
accommodate the repo netting process, the proposed rule change
substantially modifies GSCC's procedures and methodologies as described
below.
(1) Eligibility for Netting
GSCC netting members, other than interdealer broker netting
members, may participate in the repo netting system upon being
designated by GSCC's Membership and Standards Committee as eligible for
such services.\7\ The
[[Page 61578]]
Committee will base its determination of eligibility on: (1)
Satisfactory participation in GSCC's repo comparison service, (2)
demonstration by the member of its ability to meet its obligations with
regards to the netting and settlement of repos, and (3) execution by
the member of documents provided by GSCC to ensure that the netting and
settlement of the member's repos will be done in conformity with GSCC's
rules.
\7\ Interdealer broker netting members will not be eligible for
GSCC's repo netting service during this first phase because
brokering in the repo market currently is done on a ``give up''
basis with interdealer brokers giving up the name of each
counterparty to the other counterparty and the no longer having any
involvement in the transaction.
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A start leg or a close leg of a repo is eligible for netting and
settlement through the netting system if: (1) The repo is compared
through GSCC, (2) (i) for the start leg, the number of calendar days
between the business day on which the repo is submitted to GSCC and the
scheduled settlement date for the close leg associated with the
settling start leg must not be greater than the maximum number of
calendar days set by GSCC, which initially is 195 calendar days and
(ii) for the close leg, the number of calendar days between the
business day on which the repo is submitted to GSCC and the scheduled
settlement date for the close leg must not be greater than the maximum
number of calendar days set by GSCC, (3) netting of the start or close
leg must occur on or before its scheduled settlement date (i.e., the
leg cannot be a same-day settling leg), (4) data on each side of the
repo must be submitted to GSCC by members designated as eligible to
participate in the repo netting process, (5) the underlying securities
must be eligible for netting,\8\ and (6) the maturity date of the
underlying securities must be on or later than the scheduled settlement
date of the leg.
\8\ Pursuant to GSCC's rules, an eligible security is a security
issued or guaranteed by the U.S., a U.S. government agency or
instrumentality, or a U.S. government-sponsored corporation (except
a mortgage-backed security) that GSCC has listed on its eligible
securities master file.
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A forward-settling start leg \9\ is not netted with other trades
and is not guaranteed until the scheduled settlement date for that
start leg. A forward-settling close leg is not netted with other trades
and is not guaranteed until the scheduled settlement date for the
associated start leg.
\9\ A forward-settling transaction is submitted one or more
business days prior to its scheduled settlement date.
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(2) Netting Process
Each night a participating repo netting member's eligible repo
transactions will be netted with its regular buy/sell cash activity and
Treasury auction purchases in the same CUSIP to establish a single net
position in each security. For netting purposes, the settlements
associated with repo start legs and reverse repo close legs will be
treated as short positions. The settlements associated with repo close
legs and reverse repo start legs will be treated as long positions. The
difference between a member's total short activity and its total long
activity within a CUSIP is its net position in the CUSIP.
GSCC will provide each participant with a daily netting system
output that will breakdown its net positions by reporting for each
security: (1) The net cash position, (2) the net repo position, and (3)
the total net position.\10\ Each participant's forward-settling net
position for each of its securities is recalculated on a daily basis.
Forward-settling net positions automatically convert into deliver or
receive obligations on their scheduled settlement dates.
\10\ The daily netting system output separately lists forward-
settling start legs and close legs until such transactions are
eligible for netting (i.e., the settlement date of the start leg).
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(3) Settlement
Each processing day, GSCC conducts two settlement processes. These
are a securities settlement and a funds-only settlement.\11\ For
securities settlement, each netting member is obliged to deliver to or
to receive from GSCC its net deliver or receive obligation in each
CUSIP that is generated as a result of the netting process. Securities
settlement for repo legs will not differ from securities settlement for
regular cash activity. For funds-only settlement, GSCC will add amounts
pertaining to repos to amounts pertaining to regular cash activity and
Treasury auction purchases and will report such amounts within the
existing categories (e.g., forward margin or fail mark
obligations).\12\
\11\ At 2:00 a.m., GSCC issues to each participant its netting
output reports which establish the participant's deliver, receive,
and payment obligations for the day. By 10:00 a.m., a participant
must satisfy its funds only settlement obligations, and GSCC will
pay funds credits owed to participants by 11:00 a.m. A participant
may satisfy its securities deliver obligations at any time during
the day.
\12\ The daily net funds-only settlement amount for each netting
member will be adjusted to reflect certain changes to GSCC's
margining processes as discussed below in Section (7).
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(4) Coupon Protection
When the start leg of a repo is initiated, securities are moved
from the account of the funds borrower (i.e., the long side for the
close leg) to the account of the funds lender (i.e., the short side for
the close leg) until the settlement date of the close leg. However,
because the funds lender is not entitled to any coupon payments which
are made by the issuer directly to the funds lender's clearing bank
while the securities are in its possession, the coupon payments will be
passed through from the funds lender (short side) to the funds borrower
(long side) when the coupon date is after the repo start date and on or
before the repo close date. GSCC's current procedures for paying coupon
on all fail obligations will not change and will apply to fail
obligations arising from repos as well.\13\
\13\ Under these procedures, on the coupon payment date GSCC
will collect the coupon payment from a member with a fail net short
position and pass the coupon payment to the member with the fail net
long position.
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(5) Collateral Substitution
In this initial phase of repo netting, GSCC will not perform
collateral substitutions on an automated basis. However, participants
may make collateral substitutions by designating new underlying
collateral for a repo transaction through use of the ``cancel and
correct'' feature of GSCC's comparison system. GSCC's operations staff
manually will process the collateral substitution as it does now for
clearing fund securities margin.
(6) Guarantee of Settlement
As in cash transactions, GSCC novates the repo transaction at the
time the start or close leg is netted. At that time, GSCC assumes
contraparty responsibility and guarantees settlement of the repo.
GSCC's guarantee includes the return of the underlying collateral to
the funds borrower and both the return of principal (repo start amount)
and the payment of interest to the term of the repo transaction to the
funds lender. As discussed above, forward-settling repo start legs and
close legs are not netted or guaranteed until the scheduled settlement
date of the start leg.
(7) Forward Margin
Because GSCC guarantees the settlement of all transactions once
they are compared and netted, each day GSCC will mark-to-market each
participant's forward-settling net positions and will recalculate each
participant's forward margin obligation. Participating members will
then be assessed forward margin accordingly in their daily funds
settlement.\14\
\14\ Because forward-settling start legs are not guaranteed
until the scheduled settlement date, such transactions are not
margined.
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Margin for cash trades will continue to be calculated by marking
each transaction to the market using the following formula:
Market value=GSCC Price x Par Amount+Accrued Coupon Interest
[[Page 61579]]
Calculated to Scheduled Settlement Date
The resulting value is then subtracted from the contract value to
calculate the appropriate margin amount.
To take into account differences between the repo market and the
when-issued cash market, including the fact that the liquidation
process for repos involves a cost-of-carry element, forward margin
calculations for repos will differ from those of cash market trades. To
margin a forward-settling repo close leg, GSCC begins by calculating
market value, using the following formula:
Market Value=GSCC Price x Par Amount+Accrued Coupon Interest Calculated
to Current Date
The market value calculated is subtracted from the repo's contract
value\15\ to establish a debit or credit collateral mark.
\15\ The contract value of the repo is the dollar value at which
the close leg is to be settled.
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Next, the repo financing mark for the transaction is calculated. If
a member in a net short position (reverse side) fails, GSCC will
replace the position by buying securities and putting them out on repo
in the market and thus will incur a financing cost. Conversely, if a
member in a net long position (repo side) fails, GSCC will replace the
position by selling securities obtained by doing a reverse repo in the
market and thus will create interest income potential. To account for
its possible financing costs and interest income potential, GSCC
computes the financing mark and includes it in the clearing margin
calculation. The formula used to calculate the financing mark is:
Financing Mark=Market Value of Repo x GSCC Repo Rate x Number of Days
to Scheduled Settlement Date360
GSCC tailors its repo rate to each individual repo transaction. To
establish the repo rate, GSCC first determines if the collateral
underlying the repo is general or specific.\16\ For general collateral
repos, GSCC uses the remaining term of the repo to determine the
appropriate market repo rate. For specific collateral repos, GSCC uses
both the CUSIP and the remaining term of the repo to determine the
specific repo rate. GSCC uses multiple market sources to obtain repo
rates which are monitored on a daily basis. After calculating, GSCC
debits from the reverse (short) side the financing mark and credits the
financing mark to the repo (long) side.
\16\ General collateral repos refer to repo transactions that do
not specify the underlying collateral by a CUSIP number while
specific collateral repos indicate by CUSIP number what the
underlying security must be.
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The total forward margin for repos is calculated using the
following formula:
Total Forward Margin=Collateral Mark+Financing Mark
The debit and credit margins calculated for the individual
transactions comprising the participant's net settlement position are
then added together. A participant's total forward margin is the
mathematical sum of the individual debit and credit margins calculated
across all securities and across all settlement dates.
Any credit margin amounts resulting from both cash and repo trades
remaining after being used to fully offset debit margin amounts across
CUSIPs will be paid out to participants in funds settlements. There are
the following exceptions to this pay-through policy: (1) only bank and
category one dealer netting members that have been active in the
netting system for at least sixty days may collect credit forward
margin amounts, (2) if a member has been awarded Treasury securities at
auction, GSCC's obligation to pay to such member a credit forward
margin payment will be limited by the amount of debit forward margin
payment(s) that under GSCC's rules the Federal Reserve Banks are not
obligated to pay to GSCC, and (3) GSCC may suspend a member's right to
collect credit forward margin if the member is placed on surveillance.
Because credit margins now will be paid to participants, only cash
may be used as margin. Members will no longer be able to post
collateral in advance in lieu of their cash forward margin obligations.
GSCC will pay interest on all margin amounts collected and will charge
interest on all margin amounts paid on a daily basis using the
effective Fed Funds rate.
(8) Clearing Fund
GSCC's method of calculating a member's clearing fund contribution
now is based on the net settlement positions of all of the cash and
repo activities of the participant. The funds settlement risk component
and the securities settlement risk component of the clearing fund
calculation has been changed to take into account the average of a
member's most active ten days over the most recent seventy-five
business days instead of the average of the most recent twenty business
days.\17\
\17\ This change has been made to both the general rules on
clearing fund deposits and the specific rules for Category 2 dealer
netting members and Category 2 futures commission merchants.
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The clearing fund formula also has been modified to anticipate any
exposure resulting from the clearance of the present day's settlement
transactions. Specifically, a member's outstanding net settlement
position for clearing fund purposes is calculated alternately by
disregarding an by including the amount of securities underlying the
positions that are scheduled to settle that day. The portion of the
clearing fund formula that reflects securities settlement exposure is
calculated by taking the average offset margin amount \18\ or, if
greater, the greatest of the following three calculations; (1) fifty
percent of that day's gross margin amount, (2) one hundred percent of
that day's offset margin amount calculated by excluding positions that
are schedule to settle that day or (3) one hundred percent of that
day's offset margin amount including positions that are scheduled to
settle that day.\19\
\18\ The offset margin amount is the gross margin (the dollar
value of a member's net settlement positions multiplied by the
appropriate margin factors) as reduced by offsetting short and long
positions based on maturity date and par amount. The average offset
margin, which is part of the securities settlement risk component
discussed above, takes the average of offset margins from the ten
most active days over the previous seventy-five business days.
\19\ Prior to this filing, securities settlement exposure was
calculated as the greater of the average offset margin amount or 50%
of the gross margin amount.
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The calculation of the securities settlement exposure for a
Category 2 dealer netting member or a Category 2 futures commission
merchant netting member also is revised to require such member to
deposit the greatest (1) such member's average gross margin amount
based on the average of the ten most active days over the most recent
seventy-five business days, (2) such member's gross margin amount
calculated by including positions settle that day, or (3) such member's
gross margin amount calculated by excluding positions settling that
day.
The proposed rule change adds a new component, the repovolatility
factor, to the clearing fund formula. Repo volatility factors are a set
of percentages which are applied to the net settlement repo positions
to cover the securities' settlement exposure posed by such repo
activity.\20\ Initially, the repo volatility factor for general
collateral repos will be set at fifty basis points. The repo volatility
factor for specific repos that
[[Page 61580]]
are expected to convert to general collateral repos on a certain date
will be the same as the factor for general collateral repos. The repo
volatility factor for all other specific repos will be the spread
between the system rate for the repo and the system rate for general
collateral repos with a minimum factor of fifty basis points.
\20\ These percentages are derived based on GSCC's research,
which has been conducted with the assistance of tits members, on
historical repo rate volatility including repo market participants'
analytics and raw data itself. GSCC is building and will maintain
its own date base on the historical daily volatility of repo rates.
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Each member is required to add to its clearing fund requirement the
greater of (1) the product of the repo volatility factors and the
market value of the member's repo transactions reduced by offsetting
short and long positions based on maturity date and par amount \21\
(``offset repo volatility amount'') or (2) the average of a member's
ten highest offset repo volatility amounts over the most recent seventy
five business days. Participants may submit requests for the return of
excess collateral on a monthly basis instead of on a quarterly basis.
\21\ A twenty-five percent disallowance will be imposed an all
offsets.
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(9) Obligation To Submit Trades
GSCC Rule 11, Section 3, which requires a netting member to submit
all eligible trades to GSCC for comparison and netting, is not
applicable to a netting member's repo transactions. Rule 18, Section 4
requires a repo netting member to submit for comparison and netting all
repo trades eligible for netting to either GSCC, to another Commission
registered clearing agency, or a clearing agency exempted by the
Commission from Clearing agency registration.
II. Comments
The Commission received one comment letter opposing the
proposal.\22\ This commenter argues that: (1) GSCC's system does not
novate trades, and therefore, its members may not offset repo trades on
their books in reliance on Interpretation 41 of the Financial
Accounting Standards Board (``FASB''); \23\ (2) GSCC's repo volatility
factor provides inadequate protection in a volatile market; \24\ (3)
GSCC does not have a third party credit line to pay for customer
defaults; and (4) GSCC has not imposed trading limits on its members.
In its response to the commenter, GSCC states that the commenter's
arguments are based on misrepresentations and misstatements regarding
GSCC and its processes.\25\
\22\ Supra note 4.
\23\ The commenter asserts that nothing in GSCC's rules or
procedures prevents it from assigning a guaranteed obligation to a
system participant having an equal obligation and stepping out as a
counterparty.
\24\ Specifically, the commenter asserts that GSCC's repo
volatility factor is based upon two standard deviations from the
mean rate over the historical period instead of the three standard
deviations used by the commenter.
\25\ In its letter, GSCC addressed each of the commenter's
points. (1) Regarding novation of trades, GSCC asserts that its
rules clearly set forth the novation process whereby GSCC stands in
the middle of all net settlement positions as a counterparty to each
member for settlement purposes, and with regard to repos, as
counterparty it ensures the return of the underlying collateral to
the funds borrower and both the return of principal and the payment
of interest to the term of the repo to the funds lender. (2)
Regarding the protection given by GSCC's repo volatility factor in a
volatile market, GSCC asserts that it does not plan to use a two
standard deviation measure for the repo volatility component of its
clearing fund calculation as asserted by the commenter and states
that the factor will reflect the interest rate exposure incurred by
GSCC in guaranteeing payment to the funds lender in a repo
transaction. (3) Regarding third-party credit support, GSCC asserts
that it uses a dynamic margining process whereby margin is
recalculated and collected daily and increases or decreases daily
based on the level of members' net activity. GSCC states that the
dynamic nature of the margining process provides a high level of
assurance that GSCC's overall settlement process for the Government
securities industry never fails. (4) Regarding system limits and
risk assessment, GSCC asserts that it has a comprehensive and highly
automated management reporting system that allows it to assess the
risks presented by members' activities and changing market
conditions. GSCC asserts that the clearing fund and forward margin
requirements imposed on members act as limits on system-wide
exposure because a member can only increase its trading activity to
the extent that it can meet its daily margin obligations. Letter
from Jeffrey F. Ingber, General Counsel and Secretary, GSCC, to
Jerry W. Carpenter, Assistant Director, Division of Market
Regulation, Commission (October 27, 1995).
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III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder and particularly with the requirements of Section
17A(b)(3)(F).\26\ Section 17A(b)(3)(F) requires that the rules of a
clearing agency be designed to 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. The
Commission believes GSCC's rule change meets these goals because the
implementation of a netting system for repos continues the process
whereby GSCC provides the benefits of centralized automated settlement
to a broader segment of government securities transactions and because
the netting system is being implemented with safeguards adequately
designed to limit the risks to GSCC and its participants associated
with the netting of repo transactions.
\26\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
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In addition to centralizing and automating the settlement process,
repo netting provides several benefits to participants. Among others,
these include: (1) guaranteed settlement, (2) reduction in FedWire
transfer activity through the netting of a member's repo transactions
with its cash transactions and auction purchases, (3) automated coupon
tracking, and (4) automated output.
The proposed rule change also is consistent with the
recommendations of the Joint Report on the Government Securities
Market.\27\ The Joint Report recommended, among other things, that GSCC
include more trades in its netting system. The Joint Report noted that
the benefits of netting are greater as more trades are included in the
net and that as more trades are included in GSCC's net a larger
percentage of market trades become guaranteed trades.
\27\ Joint Report on the Government Securities Market (January
1992) at 31 (``Joint Report''), prepared by the Department of the
Treasury, the Securities and Exchange Commission, and the Board of
Governors of the Federal Reserve System.
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The Commission also believes that GSCC has put in place adequate
safeguards to limit the settlement risk associated with repo
transactions. For example, GSCC does not novate or guarantee the start
leg of a repo until the scheduled settlement date. In addition, GSCC's
guarantee is limited to repos that are schedule to settle within 195
days of submission to GSCC. The Commission believes that these measures
provide additional risk protection. As GSCC becomes more experienced in
the netting of repos, it may decide that it can eliminate or modify
these limitations consistent with its responsibility to safeguard
securities and funds.\28\
\28\ Should GSCC decide that it can modify or eliminate the
limitations in a manner consistent with its statutory safeguarding
obligations, it will file for Commission approval a proposed rule
change.
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The Commission further believes that GSCC's forward margin and
clearing fund calculations provide adequate risk management. GSCC's
margining system takes into account changes in the price of the
underlying collateral and the risk that GSCC may need to replace the
underlying collateral if a participant defaults. The clearing fund
calculation is based on both a member's funds settlement amount and
securities settlement amount. With respect to repos, GSCC also will
collect clearing fund contributions based on changes in the financing
rate which will reflect possible changes in repo rates. The Commission
believes that the margin and clearing fund contributions appropriately
take into account the risks posed to GSCC by the settlement of repos.
The Commission also notes that GSCC's rules require that netting
[[Page 61581]]
members submit a repo transaction to either GSCC or another registered
or exempted clearing agency. The Commission believes that such a
requirement is consistent with the Act's goal of establishing a
national system for the clearance and settlement of securities by
including more trades within the system.\29\
\29\ 15 U.S.C. 78q-1(a)(2)(A) (1988).
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Currently, GSCC will not accept same-day settling repo legs or open
repos. The Commission understands that GSCC needs to study further the
risk involved with such repos and to modify its systems in order to
process these trades in a safe and efficient manner. The Commission
believes that the current limitations on eligible transactions are
appropriate.
The one adverse commenter argued that GSCC's system does not comply
with FASB's Interpretation No. 41 because GSCC does not novate the
trades.\30\ The Commission believes that the commenter mischaracterizes
GSCC's netting process. Pursuant to Section 6 of GSCC's Rule 11, all
obligations between netting members are terminated at the time a report
of such positions and obligations are made available to members and are
replaced by obligations to deliver to and/or to receive from GSCC
securities and payments.
\30\ The commenter noted that although Price Waterhouse LLP
issued an opinion stating that GSCC members would be allowed to
offset for financial statement purposes positions in repos, this
opinion is based on GSCC's description of the novation process by
which GSCC becomes the counterparty. Letter from Barry E. Silverman,
supra note 4, referring to a letter from Price Waterhouse LLP to
GSCC (May 30, 1995).
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The adverse commenter also argues that GSCC's repo volatility
factor should take into account a three standard deviation move instead
of a two standard deviation move.
Contrary to the commenter's statement, GSCC does not rely upon a
two standard deviation movement. Instead, the current minimum repo
volatility factor of fifty basis points exceeds the largest one day
movement (forty-one basis points) in all general collateral repos.\31\
\31\ In contrast, a two standard deviation movement is equal to
ten basis points.
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The commenter also argues that GSCC does not have sufficient
liquidity through a third party credit line and does not limit the
positions of members. In its release announcing standards for the
registration of clearing agencies, the Commission stated that a
clearing agency should establish an appropriate level of clearing fund
contributions based on the risks to which it is subject.\32\ The
purpose of the clearing fund is to enable a clearing agency to meet its
obligations to its participants. The Commission believes that by
revising its clearing fund formula to take into account repo activity,
GSCC will have sufficient liquidity to provide for the safeguarding of
securities and funds. Further, GSCC's clearing fund is based upon each
member's level of trading activity.\33\ Thus, GSCC will collect
payments from members in proportion to their trading activity.
\32\ Securities Exchange Act Release No. 16900 (June 17, 1980),
45 FR 41920.
\33\ While the commenter suggests that in its repo clearing
system it establishes trading limits for all participants, such
limits only prohibit additional trading activity that is not
margined (i.e., the commenter requires that a participant submit
additional margin in order to submit additional trades).
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Nonetheless, the Commission believes it is appropriate for GSCC to
review its liquidity needs and resources after it has experience
operating the repo netting system. Accordingly, GSCC has agreed to
conduct a study of its liquidity resources within a year after
implementing this service, and to provide a copy of such study to the
Commission.
IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with Section 17A(b)(3)(F) of the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-GSCC-95-02) be, and hereby
is approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\34\
\34\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-29258 Filed 11-29-95; 8:45 am]
BILLING CODE 8010-01-M
