97-13035. Self-Regulatory Organizations; National Securities Clearing Corporation; Order Granting Approval of a Proposed Rule Change to Revise Rules Relating to Clearing Agency Cross-Guaranty Agreements

[Federal Register Volume 62, Number 96 (Monday, May 19, 1997)]
[Notices]
[Pages 27286-27287]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13035]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38624; File No. SR-NSCC-96-20]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Granting Approval of a Proposed Rule Change to 
Revise Rules Relating to Clearing Agency Cross-Guaranty Agreements

May 13, 1997.
    On November 14, 1996, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change (File No. SR-NSCC-96-20) 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'').\1\ Notice of the proposal was published in the Federal 
Register on March 6, 1997.\2\ No comment letters were received. For the 
reasons discussed below, the Commission is granting approval of the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 38350 (February 27, 
1997), 62 FR 10601.
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I. Description

    The purpose of the proposed rule change is to modify the definition 
of ``Clearing Agency Cross-Guaranty Agreement.'' In 1993, the 
Commission approved a proposed rule change filed by NSCC to establish a 
Netting Contract and Limited Cross-Guaranty Agreement between it and 
the Depository Trust

[[Page 27287]]

Company (``DTC'').\3\ In connection with the implementation of the 
NSCC-DTC Agreement, a definition of a ``Clearing Agency Cross-Guaranty 
Agreement'' was added to NSCC's rules. The definition was limited to 
registered clearing agencies because NSCC believed that only registered 
clearing agencies would enter into such arrangements.
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    \3\ Securities Exchange Act Release No. 33145 (November 3, 
1993), 58 FR 59766 [File No. SR-NSCC-93-07] (order approving 
proposed rule change relating to a netting contract and limited 
cross guaranty agreement) (``NSCC-DTC Agreement'').
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    In 1995, the Commission approved a proposed rule change filed by 
NSCC to establish the Collateral Management Service (``CMS'').\4\ In 
order to provide their participants with a more accurate and broader 
picture of the aggregate amount of their clearing fund deposits and 
collateral, NSCC and other participating clearing entities recognized 
that other types of clearing entities should be included in the CMS. 
This broad category of participating entities is reflected in Rule 53 
(CMS Rule) of NSCC's rules which includes clearing organizations 
affiliated with or designated by contract markets trading specific 
futures products under the oversight of the Commodity Futures Trading 
Commission. The proposed rule change modifies the definition of 
clearing agency cross-guaranty agreement to permit NSCC to enter into 
limited cross guaranty agreements with the same broad category of 
clearing entities as provided in the CMS.
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    \4\ Securities Exchange Act Release No. 35809 (June 5, 1995), 60 
FR 30912 [File No. SR-NSCC-95-06] (order approving proposed rule 
change establishing CMS).
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II. Discussion

    Section 17A(b)(3)(F)\5\ provides that the rules of a clearing 
agency must be designed to assure the safeguarding of securities and 
funds in the custody or control of the clearing agency or for which is 
responsible. The Commission believes that cross-guaranty agreements can 
serve as a method for further reducing clearing agencies' risk of loss 
due to common participant's default. Consequently, cross-guaranty 
agreements should assist clearing agencies in assuring the safeguarding 
of securities and funds in the custody or control of the clearing 
agency or for which it is responsible.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A 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-NSCC-96-20) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-13035 Filed 5-16-97; 8:45 am]
BILLING CODE 8010-01-M