[Federal Register Volume 59, Number 158 (Wednesday, August 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20120]
[[Page Unknown]]
[Federal Register: August 17, 1994]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34511; File No. SR-GSCC-94-06]
Self-Regulatory Organizations; Government Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change Modifying the
Trade Reporting Requirements for Category 2 Inter-Dealer Broker Netting
Members
August 10, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on July 5, 1994, the
Government Securities Clearing Corporation (``GSCC'') filed with the
Securities and exchange Commission (``Commission'') the proposed rule
change (File No. SR-GSCC-94-06) as described in Items I, II, and III
below, which Items have been prepared primarily by the self-regulatory
organization. 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 will modify GSCC's rules concerning the
trade reporting requirements for category 2 inter-dealer broker netting
members (``IDBs'').
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
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. The self-regulatory organization
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 the
Statutory Basis for, the Proposed Rule Change
The classification of category 2 IDBs was established by GSCC in
1993 in order to permit qualifying IDBs to engage in up to ten percent
of their trading activity in eligible securities with non-netting
members.\2\ Each category 2 IDB must act exclusively as a broker and at
least ninety percent of its business, measured based on the overall
dollar volume of next day and forward settlement activity in eligible
netting securities over the most recent twenty day period, must be with
netting members.\3\ In addition, Category 2 IDBs have clearing fund and
margin requirements essentially the same as those of a category 1
dealer netting members.
---------------------------------------------------------------------------
\2\The Commission approved category 2 IDBs in Securities
Exchange Act Release No. 32722 (August 12, 1993), 58 FR 42993.
\3\For a temporary period established by GSCC's Board of
Directors, the term netting members is defined to include certain
specifically designated grandfathered non-netting members firms that
currently have IDB screen access. This will temporarily allow
category 2 IDBs to trade with nonmember dealers that historically
have had access to the IDBs' screens. An IDB's trading activity with
grandfathered dealers will not be included for purposes of
determining when an IDB meets the ten percent scope of business
limitation.
---------------------------------------------------------------------------
In order to monitor compliance with their scope of business
requirements, each category 2 IDB is obligated to provide GSCC in
writing with a list of all of the legal entities that it acts on behalf
of and must promptly inform GSCC of any change to such list. Each IDB
also is required to submit daily to GSCC all of its next day and
forward settling trades in eligible netting securities, including
trades with non-grandfathered non-members and must indicate the buy and
sell side of each transaction.
GSCC's rule do not, however, expressly require that a category 2
IDB provide to GSCC for every trade done involving an eligible netting
security the identity of each buy side and sell side counterparty. This
information is significant to GSCC for risk monitoring and surveillance
purposes. In particular, it is important for GSCC to understand and to
be able to assess the volume of and degree of concentration of trading
done by a category 2 IDB with one or more specific non-members.
The proposed rule change, therefore, will expressly require each
category 2 IDB to disclose to GSCC for every trade done involving an
eligible netting security, including trades done with non-members, the
identity of each buy side and sell side counterparty.
GSCC believes that because the proposed rule change allows GSCC to
ensure that it can appropriately monitory its existing netting members,
it is consistent with Section 17A of the Act\4\ and the rules and
regulations thereunder applicable to GSCC.
---------------------------------------------------------------------------
\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 will impose any
burden on competition.
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. GSCC members will be notified of the rule filing and comments
will be solicited by a GSCC Important Notice. GSCC will then notify the
Commission of any written comments received by GSCC regarding the
proposed rule change.
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
finding or (ii) as to which the self-regulatory organization 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 and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. Sec. 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-94-06 and should be submitted by
September 7, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-20120 Filed 8-16-94; 8:45 am]
BILLING CODE 8010-01-M
