[Federal Register Volume 59, Number 79 (Monday, April 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-9847]
[[Page Unknown]]
[Federal Register: April 25, 1994]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33887; File No. SR-GSCC-94-2]
Self-Regulatory Organizations; Government Securities Clearing
Corporation: Filing of a Proposed Rule Change Relating to the
Comparison and Netting of Non-Member Trades
April 8, 1994.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on March 28, 1994, the
Government Securities Clearing Corporation (``GSCC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II, and III below, which items have
been prepared by GSCC. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\15 U.S.C. 78s(b)(1) (1988).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change would allow GSCC to continue to offer
comparison and netting services for non-member trades which have been
submitted to GSCC by netting members on behalf of non-members executing
firms.
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 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
(a) On December 13, 1991, the Commission approved, on a temporary
basis through December 31, 1992, a rule change authorizing GSCC to
implement a non-member, ``executing firm'' information feature as an
enhancement to its comparison service.\2\ On December 23, 1992, the
Commission extended its temporary approval of the executing firm
feature until June 30, 1994.\3\
---------------------------------------------------------------------------
\2\Securities Exchange Act Release No. 30078 (December 12,
1991), 56 FR 66110.
\3\Securities Exchange Act Release No. 31651 (December 23,
1992), 57 FR 62586.
---------------------------------------------------------------------------
On February 14, 1992, GSCC introduced the executing firm feature,
which allows trade data to be submitted to GSCC by a member (the
``submitting member'') on behalf of a non-member firm (the ``executing
firm'') that it clears for by adding two new fields to the comparison
system: (1) The name of the executing party associated with the member;
and (2) the name of the executing party associated with the contra-
party member. If a submitting member that is a netting member so
elects, a netting eligible trade that it has submitted on behalf of an
executing firm may be included in the net, and the submitting member
would be obligated to GSCC as regards such trade to the same degree as
if it itself had executed such trade; therefore, such trade would be
considered for purposes of calculating the submitting member's mark and
margin requirements. However, an eligible trade submitted by a
submitting member on behalf of an executing firm will not be included
in the net if the submitting member has informed GSCC that it does not
wish, because of the type of relationship that it has with the
executing firm (i.e., it does not normally guarantee settlement of such
firm's trades), to have the trades executed by such firm be netted and
novated by GSCC .
Initially, participation in the executing firm feature was modest;
however, participation has grown significantly over the past year.
Currently, twelve GSCC members have agreements in place pursuant to
which, collectively, they may submit data on trades executed by 271
non-members. GSCC expects that the number of submitting members and
executing firms will continue to grow. GSCC has not experienced any
operational or other problems with regard to the executing firm
feature.
GSCC believes that the executing firm feature provides significant
benefit to the government securities industry by improving
reconciliation of unmatched trade data and, thus, providing the
benefits of GSCC's comparison process to a broader range of trades.
This feature allows access by a greater number of firms (who may
otherwise be ineligible for direct membership in GSCC's netting system)
to GSCC's netting and risk management services, including broker-
dealers and institutional customers. The result is that, through the
executing firm feature, a greater number of government securities
trades are being margined, netted, and guaranteed by GSCC than would
otherwise be the case.
In view of the above, GSCC hereby requests that its authorization
to implement the executing firm feature be made permanent. In the
alternative, if the Commission determines that the granting of such
permanent authorization is not appropriate at this time, GSCC requests
that it be granted a renewal of its temporary authorization to
implement the executing firm feature.
GSCC also proposes to amend GSCC Rule 2, Section 10 and GSCC Rule
11, Section 4 to permit GSCC to accept trades of a member after
voluntary termination or insolvency in order to ensure an orderly
settlement of the member's net settlement position.
(b) The proposed rule change would allow GSCC to further improve
its comparison rate and to provide the benefits of its comparison and
netting processes to more transactions and more market participants.
Thus, GSCC believes that the proposed rule change is consistent with
the requirements of Section 17A of the Act and the rules and
regulations thereunder.\4\
---------------------------------------------------------------------------
\4\15 U.S.C. 78q-1 (1988).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
GSCC does not believe that the proposed rule change imposes any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Comments on the proposed rule change have not yet been solicited or
received. Members will be notified of the rule change, and comments
will be solicited, by an Important Notice. 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
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
findings or (ii) as to which the self-regulatory organizations
consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 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 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 Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of GSCC. All submissions
should refer to file number SR-GSCC-94-2 and should be submitted by May
16, 1994.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-9847 Filed 4-22-94; 8:45 am]
BILLING CODE 8010-01-M
