[Federal Register Volume 63, Number 39 (Friday, February 27, 1998)]
[Notices]
[Pages 10055-10056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4986]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39685; File No. SR-GSCC-97-09]
Self-Regulatory Organizations; Government Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change Relating to Changes to the Fee Structure
February 19, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1935
(``Act''),\1\ notice is hereby given that on January 5, 1998, the
Government Securities Clearing Corporation (``GSCC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change (File No. SR-GSCC-97-09) as described in Items I, II, and III
below, which items have been prepared primarily by GSCC. The Commission
is publishing this notice to
[[Page 10056]]
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The prupose of the proposed rule change is to amend GSCC's fees for
processing of term repurchase agreements (``repos'').\2\
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\2\ A term repo is a repo for which the settlement date for the
close leg is more than one business day after the settlement date
for the start leg.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, GSCC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments that it received on the proposed rule change.
The text of these statements may be examined at the places specified in
Item IV below. GSCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such
statements.\3\
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\3\ The Commission has modified the text of the summaries
submitted by GSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
GSCC currently provides a settlement service for repos with
treasury securities as collateral.\4\ When CSCC clears and settles
repos, it guarantees settlement of the repo from the date the repo is
compared by GSCC. This proposed rule change amends GSCC's fees for
clearance of term repos.
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\4\ Securities Exchange Act Release No. 36491 (November 17,
1995), 60 FR 61577.
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As it currently exists and as it will be enhanced in the future,
GSCC's repo netting service requires significant risk management
resources and represents a large ongoing expense particularly from an
operational and technological perspective. In light of this, the board
of directors of GSCC now believes it is appropriate to revise the
pricing structure for the netting and guaranteed settlement of term
repos to cover the true cost of the service and to more closely reflect
the benefits derived by members from the service. The board also
believes it is appropriate to revise the pricing structure to cover the
costs of other repo netting services and enhancements (such as the
development effort to net same-day start legs) that are important from
a settlement and risk management perspective and that provide
operational and cost benefits to members but are not a significant
source of revenue for GSCC.
GSCC believes that these goals are best accomplished by shifting
from a transactional charge to a basis point charge. A transactional
charge is an inadequate pricing method because it does not reflect the
size of the repo in dollar terms. Thus, a member carrying a $50 million
repo incurs the same charge as a member carrying only a million dollar
repo. GSCC believes this is inequitable because the former member
brings more risk to GSCC and derives more benefit than the latter
member.
The proposed rule change will eliminate a two cents per calendar
day fee on outstanding start and close term repo legs. Instead, there
will be new fees for the processing of an outstanding term repo that
has been compared and netted but has not yet settled. These basis point
fees will be applied each calendar day but calculated on an annualized
basis.
A fee of a .015 basis point charge will be applied to the gross
dollar amount of a member's term repos that have been entered into
GSCC's netting system. This fee reflects the potential balance sheet
offset benefit derived by the member from its repo activity. In
addition, a fee of a .060 basis point charge will be applied to the net
dollar amount of a member's term repo activity within a CUSIP. This fee
reflects the guarantee of settlement and other risk management benefits
provided by GSCC once a member's activity has been netted by CUSIP.
GSCC believes that the proposed rule change is consistent with the
requirements of section 17A(b)(3)(A) of the Act \5\ and the rules and
regulations thereunder because it will promote the prompt and accurate
clearance and settlement of securities transactions.
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\5\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
GSCC does not believe that the proposed rule change will have an
impact or impose a burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments relating to the proposed rule change have not yet
been solicited or received. GSCC will notify the Commission of any
written comments received by GSCC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) (ii) \6\ of the Act and Rule 19b-4(e) (2) \7\ promulgated
thereunder because the proposal establishes or changes a due, fee, or
other charge imposed by the self-regulatory agency. At any time within
sixty days of the filing of such proposed rule change the Commission
may summarily abrogate such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise win furtherance of the
purposes of the Act.
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\6\ 15 U.S.C. 78s(b)(3)(A)(ii).
\7\ 17 CFR 240.19b-4(e)(2).
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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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference room, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such filing will also be available for inspection
and copying at the principal office GSCC. All submissions should refer
to the file number SR-GSCC 97-09 and should be submitted by March 20,
1998.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-4986 Filed 2-26-98; 8:45 am]
BILLING CODE 8010-01-M
