[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Notices]
[Pages 66570-66571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31179]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36597; File No. SR-GSCC-95-03]
Self-Regulatory Organizations; Government Securities Clearing
Corporation; Order Approving a Proposed Rule Change Authorizing the
Release of Clearing Data Relating to Participants
December 15, 1995.
On August 28, 1995, the Government Securities Clearing Corporation
(``GSCC'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change (File No. SR-GSCC-95-03)
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'').\1\ On September 13, 1995, GSCC filed an amendment to the
proposed rule change.\2\ Notice of the proposal as amended was
published in the Federal Register on November 2, 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 Jeffrey F. Ingber, General Counsel and
Secretary, GSCC, to Peter R. Geraghty, Division of Market
Regulation, Commission (September 13, 1995).
\3\ Securities Exchange Act Release No. 36430 (October 27,
1995), 60 FR 55748.
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I. Description of the Proposal
The purpose of the proposed rule change is to modify GSCC's rules
to authorize the release of clearing data relating to GSCC's
participants to the National Securities Clearing Corporation's
(``NSCC'') Collateral Management Service (``CMS'') \4\ and to other
parties. GSCC Rule 1 (``Definitions'') is amended to include the term
``CFTC-Recognized Clearing Organization'' and to define it as ``a
clearing organization that is affiliated with, or designed by, a
contracts market or markets trading specific futures products, and is
under the oversight of the Commodity Futures Trading
[[Page 66571]]
Commission.'' The term ``Collateral Management Service'' also is added
to Rule 1 and defined as ``the collateral management information-
sharing service operated by the National Securities Clearing
Corporation.''
\4\ 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 CMS, refer to Securities
Exchange Act Release No. 36091 (August 10, 1995), 60 FR 42931 [File
No. SR-NSCC-95-06] (order approving NSCC's CMS).
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Section 2 of Rule 29 (``Release of Clearing Data'') is amended to
permit GSCC to release clearing data to CFTC-Recognized Clearing
Organizations and to NSCC solely in connection with NSCC providing
CMS.\5\ Section 4 of Rule 29 is amended to clarify that the term
``Clearing Data'' includes, in addition to transaction data, other data
that is received by GSCC in the clearance and/or settlement process.
\5\ Section 2(a) of Rule 29 already permits GSCC to release
clearing data to other self-regulatory organizations such as NSCC
that have regulatory authority over a GSCC member. The purpose of
new Section 2(b) is to make explicit GSCC's authority to release
clearing data to NSCC for its CMS.
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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.\6\ As discussed below, the Commission
believes the proposed rule change is consistent with GSCC's obligation
under Section 17A(b)(3)(F) because the proposal sets forth GSCC's
responsibilities and obligations with regard to releasing participants'
clearing data and facilitates GSCC's participation in NSCC's CMS by
enabling GSCC to provide information regarding GSCC's participants to
NSCC for its CMS. GSCC's and its participants' participation in NSCC's
CMS should help GSCC 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.\7\
\6\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
\7\ Although GSCC 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 GSCC 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 members'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-GSCC-95-03) be, and hereby
is, approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
\8\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-31179 Filed 12-21-95; 8:45 am]
BILLING CODE 8010-01-M
