[Federal Register: December 16, 2002 (Volume 67, Number 241)]
[Notices]
[Page 77123-77124]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16de02-92]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-46958; File No. SR-NSCC-2002-08]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change Relating to New
Clearing Fund Valuation of Deposited Securities
December 6, 2002.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on October 3, 2002, the
National Securities Clearing Corporation (``NSCC'') 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 by NSCC. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change would modify NSCC's clearing fund rules to
permit NSCC to apply haircuts to securities pledged by NSCC
participants as clearing fund collateral.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NSCC 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. NSCC has prepared summaries, set forth in sections A, B,
and C below, of the most significant aspects of such statements.\2\
---------------------------------------------------------------------------
\2\ The Commission has modified the text of the summaries
prepared by NSCC.
---------------------------------------------------------------------------
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to modify Rule 4
(Clearing Fund) and Procedure XV (Clearing Fund Formula and Other
Matters) of NSCC's Rules and Procedures to establish haircuts for
securities posted by NSCC members as clearing fund collateral.
Under Rule 4, NSCC members are required to make deposits to NSCC's
clearing fund.\3\ Rule 4 also states that NSCC, at its discretion, may
permit part of a member's (with the exception of ``mutual fund/
insurance services members'') clearing fund deposit to be evidenced by
an open account indebtedness secured by (a) unmatured bearer bonds that
are either direct obligations of or obligations guaranteed as to
principal and interest by the United States or its agencies
(``qualifying bonds'') and/or (b) one or more irrevocable letters of
credit under certain guidelines established within NSCC's rules.\4\
---------------------------------------------------------------------------
\3\ The amount of each member's required deposit is determined
by NSCC in accordance with one or more formulas.
\4\ The Commission recently approved a NSCC proposed rule change
(File No. SR-NSCC-2002-05) that increased the minimum amount of cash
that must be deposited by members (with the exception of ``mutual
fund/insurance services members'') to satisfy clearing fund
requirements and that limited the amount of a deposit that may be
collateralized with letters of credit. Securities Exchange Act
Release Nos. 46931 (Nov. 27, 2002) and 46389 (Aug. 21, 2002), 67 FR
55053 (Aug 27, 2002).
---------------------------------------------------------------------------
In its efforts to ensure that it has adequate collateral to cover
its members' obligations, NSCC has decided to haircut the value of
securities deposited to meet clearing fund requirements. The proposed
haircut percentages will range from 2% to 5% and will be based on the
type of security deposited, its market risk, and years to maturity.\5\
The proposed haircuts are similar to those currently applied by The
Depository Trust Company as a part of its risk management controls.
These percentages may change from time to time and NSCC will
communicate any changes to participants should this occur.
---------------------------------------------------------------------------
\5\ NSCC's proposed haircut schedule for U.S. Treasury and
agency securities is: Interest bearing with remaining terms to
maturity of up to 10 years--2%; Interest bearing with remaining
terms to maturity in excess of 10 years--5%; Zero coupon with
remaining terms to maturity of up to 5 years--2%; Zero coupon with
remaining terms to maturity in excess of 5 years--5%.
---------------------------------------------------------------------------
NSCC intends to implement this change no sooner than thirty days
after the Commission's approval of this proposed rule filing provided,
however, that NSCC would like to make this change effective concurrent
with the changes covered by proposed rule change File No. SR-NSCC-2002-
05.\6\
---------------------------------------------------------------------------
\6\ Supra note 4.
---------------------------------------------------------------------------
NSCC believes that this proposed rule change is consistent with the
provisions of the Act and the rules and regulations there under because
it will ensure that NSCC is able to better safeguard securities and
funds in its possession.
B. Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change will have an
impact on or impose a burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments relating to the proposed rule change have been
solicited or received. NSCC will notify the Commission of any written
comments it receives.
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
finding or (ii) as to which the self-regulatory
[[Page 77124]]
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
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. Copies of
the submission, all subsequent amendments, all written statements with
respect to the rule filing that are filed with the Commission, and all
written communications relating to the rule filing 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 in Washington, DC. Copies of such filing will also be
available for inspection and copying at NSCC's principal office. All
submissions should refer to File No. SR-NSCC-2002-08 and should be
submitted by December 31, 2002.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\7\
---------------------------------------------------------------------------
\7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-31555 Filed 12-13-02; 8:45 am]
BILLING CODE 8010-01-P