[Federal Register: September 7, 1999 (Volume 64, Number 172)] [Notices] [Page 48693-48694] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr07se99-113] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-41801; File No. SR-NSCC-99-05] Self-Regulatory Organizations; National Securities Clearing Corporation; Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Acceptance of Letters of Credit August 27, 1999. On April 20, 1999, the National Securities Clearing Corporation (``NSCC'') filed with the Securities and Exchange Commission (``Commission'') a proposed rule change (File No. SR-NSCC-99-05) pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ to permit NSCC 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ The members of the UCG include the Boston Stock Exchange Clearing Corporation, The Depository Trust Company, Government Securities Clearing Corporation, MBS Clearing Corporation, NSCC, The 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. 41716 (August 6, 1999), 64 FR 44252. --------------------------------------------------------------------------- I. Description Rule 4, Section 1 of NSCC's Rules and Procedures permits NSCC to accept letters of credit in addition to cash and government securities as collateral for its clearing fund.\4\ The proposed rule change will require that letters of credit delivered to NSCC on or after September 1, 1999, be in the form of the uniform letter of credit (``ULC'') developed by the UCG. --------------------------------------------------------------------------- \4\ Securities Exchange Act Release No. 18052 (August 21, 1981), 46 FR 43341. --------------------------------------------------------------------------- The ULC consists of a cover page plus the uniform terms. All variable terms of the ULC, such as the name of the clearing member, the beneficiary clearing corporation, the issuing bank, the amount of the credit, and the expiration date, are set forth on the cover page. To assist members in completing the ULC, the UCG drafted general instructions. In addition, NSCC has provided supplemental instructions [[Page 48694]] relating specifically to letters of credit furnished to NSCC. NSCC expects that modifications may be made to the ULC in the future. If and when that occurs, NSCC will require its members to use the revised form.\5\ --------------------------------------------------------------------------- \5\ NSCC will file a proposed rule change with the Commission prior to requiring members to comply with any substantive changes made to the ULC. --------------------------------------------------------------------------- II. Discussion Section 17A(b)(3)(F) \6\ 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. NSCC 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 NSCC and other UCG members as collateral will be enforceable. Accordingly, the Commission finds that the rule change is consistent with NSCC's obligations under the Act. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- NSCC 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 NSCC 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-NSCC-99-05) be and hereby is approved. For the Commission by the Division of Market Regulation, pursuant to delegated authority.\7\ --------------------------------------------------------------------------- \7\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 99-23111 Filed 9-3-99; 8:45 am] BILLING CODE 8010-01-M