[Federal Register Volume 62, Number 187 (Friday, September 26, 1997)]
[Notices]
[Pages 50646-50647]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25519]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39103; File No. SR-MBSCC-97-5]
Self-Regulatory Organizations; MBS Clearing Corporation; Notice
of Filing of a Proposed Rule Change Regarding Participant Liability for
Transactions Submitted on Behalf of Nonparticipants
September 22, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ notice is hereby given that on August 1, 1997, MBS
Clearing Corporation (``MBSCC'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change (File No. SR-
MBSCC-97-5) as described in Items I, II, and III below, which items
have been prepared primarily by MBSCC. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(i).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change will clarify that participants will be
liable as principal for any contracts or other transactions submitted
to MBSCC on behalf of entities that are not participants
(``nonparticipants'') and that nonparticipants will not be deemed to
possess any rights or benefits of participants.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, MBSCC 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. MBSCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such
statements.\2\
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\2\ The Commission has modified the text of the summaries
prepared by MBSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
Currently, MBSCC's rules state that participants that process any
contracts or other transactions through MBSCC for other participants
are liable as principal for such contracts or transactions. However, it
has always been MBSCC's intention that participants be principally
liable whether they submit a contract or transaction on behalf of other
participants or nonparticipants. Thus, the proposed rule change will
clarify that participants will be liable as principal for any contracts
or other transactions processed, compared, settled, or carried out on
behalf of nonparticipants. In addition, the proposed rule change states
that such nonparticipants will not be deemed to possess any of the
rights or benefits of participants.
[[Page 50647]]
MBSCC believes that the proposed rule change will further protect
MBSCC in the event a participant fails to discharge its liabilities. In
this respect, MBSCC will treat all of a participant's accounts \3\ and
obligations as belonging to such participant regardless of the identity
of the original underlying party. In addition, MBSCC believes that the
proposed rule change will remove any doubt that a participant's
participant fund \4\ deposits will be available for all of the
participant's transactions regardless of the source. Furthermore, MBSCC
believes that this proposed rule change will foreclose any attempt by a
nonparticipant to assert a claim against MBSCC with respect to a trade.
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\3\ According to MBSCC's rules, the term account generally means
any account maintained by MBSCC on behalf of a participant for the
comparison, margining, and clearing of trades.
\4\ According to MBSCC's rules, the term ``participant fund''
means the fund for which provision is made in Article IV to which
participants are required to make basic deposits, minimum market
margin differential deposits, and market margin differential
deposits.
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MBSCC believes that the proposed rule change is consistent with
Section 17A of the Act and the rules and regulations promulgated
thereunder in that it will enhance MBSCC's ability to protect itself
and its participants against loss.
(B) Self-Regulatory Organization's Statement on Burden on Competition
MBSCC does not believe that the proposed rule change will impose
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
MBSCC has not solicited or received comments relating to the
proposed rule change. MBSCC will notify the Commission of any written
comments received by MBSCC.
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 MBSCC 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, 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 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
inspections and copying at the principal office of MBSCC. All
submissions should refer to the File No. SR-MBSCC-97-5 and should be
submitted by October 17, 1997.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-25519 Filed 9-25-97; 8:45 am]
BILLING CODE 8010-01-M
