[Federal Register: June 20, 2003 (Volume 68, Number 119)]
[Notices]
[Page 37035-37036]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20jn03-129]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48010; File No. SR-GSCC-2002-07]
Self-Regulatory Organizations; Government Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change Relating to the
Elimination of the Comparison-Only Requirement for New GSCC Netting
Members
June 10, 2003.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on September 5, 2002,
Government Securities Clearing Corporation (``GSCC'')\2\ filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in items I, II, and III below, which items have
been prepared primarily by GSCC. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
parties.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ On January 1, 2003, MBS Clearing Corporation (``MBSCC'') was
merged into the Government Securities Clearing Corporation
(``GSCC'') under New York law and GSCC was renamed the Fixed Income
Clearing Corporation (``FICC''). Securities Exchange Act Release No.
47015 (December 17, 2002), 67 FR 78531 (December 24, 2002) File Nos.
(SR-GSCC-2002-07 and SR-MBSCC-2002-01).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change would eliminate the requirement that
before a new member can become a netting member, it must be a
comparison-only member for six months.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, GSCC 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. GSCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.\3\
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\3\ The Commission has modified the text of the summaries
prepared by GSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
GSCC's rules currently provide that an entity is eligible to become
a netting member if, among other things, it has been a comparison-only
member for at least six months unless this requirement is waived by
GSCC's Membership and Risk Management Committee (``Committee''). The
comparison-only membership requirement was included in GSCC's rules
when GSCC first began operations. The purpose of this provision was to
give GSCC staff the opportunity to ensure that a member firm was
operationally sound and had the ability to properly communicate with
GSCC before being permitted to participate in the netting system. Over
the years, GSCC netting membership has become more critical for active
market participants, and it has become increasingly common for
management to seek and receive approval to waive the comparison-only
membership requirement. Unlike other netting membership requirements,
including minimum financial standards and regulation by an established
regulatory body, the comparison-only membership requirement has not
been necessary to ensure the integrity of the admission and membership
processes. GSCC staff has gained significant experience in making
determinations about a firm's an operational capability without any
comparison-only membership history prior to a firm's commencing netting
activity with GSCC. Such a review process has not presented GSCC with
any operationally-deficient members.
For these reasons, GSCC is proposing to amend its rules to (1)
eliminate the imposition of the six-month comparison-only membership
requirement as a routine matter and (2) permit the imposition of a
comparison-only membership requirement for a time period deemed
necessary if management is concerned about the operational capability
of the applicant based on the presence of one or more of the following
conditions: (a) It is a newly-formed entity with little or no
functional history, (b) its operational staff lacks significant
experience, (c) if one of the above conditions is present, it has not
engaged a service bureau or correspondent clearing member with which
GSCC has had a relationship, or (d) any other factor(s) that management
believes might suggest insufficient operational ability.
The proposed rule change is consistent with the requirements of
section 17A of the Act, and the rules and regulations thereunder
because it would allow new members to achieve netting member status in
a more efficient and timely manner.
(B) Self-Regulatory Organization's Statement on Burden on Competition
GSCC does not believe that the proposed rule change will have any
impact or impose any burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
Written comments relating to the proposed rule change have not yet
been solicited or received. GSCC will notify the Commission of any
written comments received by GSCC.
[[Page 37036]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 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 90 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, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
Comments may also be submitted electronically at the following e-mail
address: rule-comments@sec.gov. All comment letters should refer to
File No. SR-GSCC-2002-07. This file number should be included on the
subject line if e-mail is used. To help us process and review comments
more efficiently, comments should be sent in hardcopy or by e-mail but
not by both methods. 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. 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 also will be available for inspection and copying at the
principal office of GSCC. All submissions should refer to File No. SR-
GSCC-2002-07 and should be submitted by July 11, 2003.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\4\
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\4\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-15646 Filed 6-19-03; 8:45 am]
BILLING CODE 8010-01-P