[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