99-23110. Self-Regulatory Organizations; MBS Clearing Corporation; Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Acceptance of Letters of Credit  

  • [Federal Register Volume 64, Number 172 (Tuesday, September 7, 1999)]
    [Notices]
    [Page 48692]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 99-23110]
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    
    [Release No. 34-41803; File No. SR-MBSCC-99-05)]
    
    
    Self-Regulatory Organizations; MBS Clearing Corporation; Order 
    Granting Accelerated Approval of a Proposed Rule Change Relating to the 
    Acceptance of Letters of Credit
    
    August 27, 1999.
        On June 25, 1999, the MBS Clearing Corporation (``MBSCC'') filed 
    with the Securities and Exchange Commission (``Commission'') a proposed 
    rule change (File No. SR-MBSCC-99-05) pursuant to Section 19(b)(1) of 
    the Securities Exchange Act of 1934 (``Act'') \1\ to permit MBSCC to 
    replace its current letter of credit form with a letter of credit form 
    developed by the Uniform Clearing Group (``UCG'').\2\ Notice of the 
    proposal was published in the Federal Register on August 13, 1999.\3\ 
    No comment letters were received. For the reasons discussed below, the 
    Commission is granting accelerated approval of the proposed rule 
    change.
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        \1\ 15 U.S.C. 78s(b)(1).
        \2\ The UCG is an organization comprised of all of the major 
    securities and futures clearing organizations and depositories in 
    the U.S. The members of the UCG include the Boston Stock Exchange 
    Clearing Corporation, The Depository Trust Company, Government 
    Securities Clearing Corporation, MBSCC, National Securities Clearing 
    Corporation, Options Clearing Corporation, Board of Trade Clearing 
    Corporation, Chicago Mercantile Exchange, Clearing Corporation of 
    New York, Kansas City Board of Trade, Minneapolis Grain Exchange, 
    New York Mercantile Exchange, Emerging Markets Clearing Corporation, 
    and Clearing Corporation for Options and Securities.
        \3\ Securities Exchange Act Release No. 41717 (August 6, 1999), 
    64 FR 44250.
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    I. Description
    
        Article IV, Rule 2, Section 9 of MBSCC's rules governs deposits of 
    letters of credit by participants to the participants' fund for margin 
    purposes. Currently, the rule requires participants to amend letters of 
    credit expiring on September 1 by extending the expiration date to 
    March 1 of the following year and to deposit new letters of credit on 
    March 1 of the following year. The proposed rule change will reserve 
    these dates and require participants to annually provide new letters of 
    credit by September 1 and to amend letters of credit by March 1. The 
    proposed rule change will also require that letters of credit delivered 
    to MBSCC on or after September 1, 1999, be in the form of the uniform 
    letter of credit (``ULC'') developed by the UCG.
        The ULC consists of a cover page with variable terms plus 
    preprinted uniform terms. Variable terms include the name of the 
    participant, the beneficiary clearing organization, the issuing bank, 
    the amount of the credit, and the expiration date. To assist letter of 
    credit issues and participants in completing the ULC, the UCG has 
    drafted general instructions. In addition, MBSCC has provided 
    supplemental instructions relating specifically to letters of credit 
    furnished to MBSCC.
        MBSCC expects that in the future modifications may be made to the 
    ULC. If and when that occurs, MBSCC will require its members to use the 
    revised form.\4\
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        \4\ MBSCC will file a proposed rule change with the Commission 
    prior to requiring members to comply with any substantive change 
    made to the ULC by the UCG.
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    II. Discussion
    
        Section 17A(b)(3)(F) \5\ of the Act requires that the rules of a 
    clearing agency be designed to foster cooperation and coordination with 
    persons engaged in the clearance and settlement of securities 
    transactions. MBSCC and the other members of the UCG developed the ULC 
    to foster uniformity among the various U.S. securities and futures 
    clearing organizations with respect to letters of credit that are 
    deposited as collateral. This uniformity will help reduce operational 
    burdens for securities and futures industry participants and their 
    letter of credit issuers. It should also enhance the legal certainty 
    that the letters of credit received by MBSCC and other UCG members as 
    collateral will be enforceable. Accordingly, the Commission finds that 
    the rule change is consistent with MBSCC's obligations under the Act.
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        \5\ U.S.C. 78q-1(b)(3)(F).
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        MBSCC has requested that the Commission find good cause for 
    approving the proposed rule change prior to the thirtieth day after the 
    date of publication of notice of the filing. The Commission finds good 
    cause for so approving the proposed rule change because accelerated 
    approval will permit MBSCC to implement the ULC by September 1, 1999, 
    at which time its previous letters of credit expire. Since September 1, 
    1999, is the scheduled implementation date of the ULC by certain UCG 
    members, accelerated approval will also provide for a more coordinated 
    implementation of the ULC. Furthermore, the Commission has not received 
    any comment letters and does not expect to receive any comment letters 
    on the proposal.
    
    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-MBSCC-99-05) 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. 99-23110 Filed 9-3-99; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
09/07/1999
Department:
Securities and Exchange Commission
Entry Type:
Notice
Document Number:
99-23110
Pages:
48692-48692 (1 pages)
Docket Numbers:
Release No. 34-41803, File No. SR-MBSCC-99-05)
PDF File:
99-23110.pdf