[Federal Register Volume 59, Number 43 (Friday, March 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4929]
[[Page Unknown]]
[Federal Register: March 4, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33663; File No. SR-GSCC-93-05]
Self-Regulatory Organizations; Government Securities Clearing
Corporation; Order Approving Proposed Rule Change Relating to
Conditions for the Release of Confidential Data
February 23, 1994.
I. Introduction
On June 18, 1993, pursuant to Section 19(b) of the Securities
Exchange Act of 1934 (``Act''),\1\ the Government Securities Clearing
Corporation (``GSCC'') filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change relating to the
release of confidential data. Notice of the proposed rule change was
published in the Federal Register on August 10, 1993.\2\ On December
30, 1993, GSCC filed with the Commission an amendment (``Amendment No.
1'') to the proposed rule change. Notice of Amendment No. 1 was
published in the Federal Register on January 20, 1994.\3\ No comments
were received. This order approves the proposed rule change.
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\1\15 U.S.C. 78s(b) (1990).
\2\Securities Exchange Act Release No. 32710 (August 2, 1993),
58 FR 42584.
\3\Securities Exchange Act Release No. 33464 (January 12, 1994),
59 FR 3142.
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II. Description
Currently, GSCC Rule 29 provides that, absent valid legal process,
GSCC will release clearing data\4\ that is identifiable as to a member
only to (1) that member, (2) the Commission upon request, (3) another
self-regulatory organization, and (4) an ``appropriate regulatory
agency'' as defined in Section 3(a)(34) (C) of the Act with regard to a
member that is primarily regulated by such agency. The proposed rule
change amends GSCC Rule 29 to permit GSCC to release clearing data to
the Federal Reserve Bank of New York (``FRBNY'') and to other third
parties that perform a regulatory or oversight function related to the
government securities marketplace.
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\4\Clearing data is defined essentially to include any data
relating to a member's trading activity that is held or produced by
GSCC.
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An agreement between GSCC and the FRBNY controls the release of
data to the FRBNY. The FRBNY has agreed to maintain member specific
information in confidence, subject to certain exceptions. The FRBNY may
share GSCC data with the members of the Interagency Working Group on
Market Surveillance\5\ and may release GSCC data as required by law.
The FRBNY also has agreed to follow certain procedures should third
parties attempt to obtain release of GSCC data through the FRBNY.\6\
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\5\The Interagency Working Group on Market Surveillance is
composed of representatives from the FRBNY, the Board of Governors
of the Federal Reserve System (``Federal Reserve Board''), the
United States Department of the Treasury (``Treasury''), the
Commission, and the Commodity Futures Trading Commission (``CFTC'').
The FRBNY will provide each member of the working group with a copy
of the agreement with GSCC and request confirmation that the other
members will follow the procedures contained in that agreement.
\6\If the FRBNY is presented with a request under the Freedom of
Information Act (``FOIA'') (5 U.S.C. 552 (Supp. I 1993)), the FRBNY
will decline requests for member specific information to the extent
that the information is exempt from FOIA. If a FRBNY determination
under FOIA is appealed, the FRBNY will notify GSCC to permit GSCC to
raise an objection. If the information is requested under a subpoena
or other form of legal process, the FRBNY will notify GSCC, if not
prohibited by law. The FRBNY, however, will make its own
determination whether it is required to comply with the disclosure
request under the subpoena.
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Before releasing data to third parties that perform a regulatory or
oversight function related to the government securities market, GSCC
must determine, and the Membership and Standards committee of the Board
of Directors of GSCC must concur, that the following five conditions
have been met. The requesting party must show a legitimate need for
such data related to its market regulatory or oversight function. The
data released by GSCC will be used solely for market regulatory or
oversight purposes. The requesting party must make the request in
writing and with sufficient specificity. With respect to member
specific data, the member must be notified of the request and be given
the opportunity to present GSCC with any objections to the release of
data.\7\ Finally, with respect to member specific data, the requesting
party must show that it unsuccessfully attempted to obtain the data
directly from the member.\8\
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\7\This prerequisite does not apply if valid legal process
prohibits GSCC from informing the member of the request for data.
\8\This prerequisite does not apply if valid legal process
prohibits GSCC from informing the member of the request for data.
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III. Discussion
Section 17A(b)(3)(F) of the Act\9\ requires that the rules of a
clearing agency be designed to protect investors and the public
interest. The proposed rule change serves this goal by enhancing the
surveillance of the government securities market.
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\9\15 U.S.C. 78q-1(b)(3)(F) (1988).
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As discussed in the Joint Report on Government Securities (``Joint
Report''),\10\ adequate surveillance of the government securities
market is necessary to detect manipulation and address disorderly
market conditions. In order to provide coordinated surveillance, the
FRBNY was selected to collect and analyze a range of market data, which
is transmitted promptly to the Federal Reserve Board, the Treasury, and
the Commission. The FRBNY collects information from a variety of
sources, including automated systems operated by vendors, daily
telephone surveys of primary dealer operations, and weekly and daily
reports of dealers. Their efforts provide additional safeguards to the
government securities market. In addition, other government
organizations have had the need to study the government securities
market in order to evaluate suspicious activity in the market. GSCC, by
providing data necessary to evaluate market activity, assists these
organizations in the performance of their functions. Thus, the
amendment furthers the protection of investors and the public interest.
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\10\U.S. Department of the Treasury, Board of Governors of the
Federal Reserve System, and Securities and Exchange Commission,
Joint Report on the Government Securities Market (January 1992).
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IV. Conclusion
For the reasons discussed above, the Commission finds that the
proposal is consistent with the requirements of the Act, and
particularly with 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 above-mentioned proposed rule change (File No. SR-GSCC-93-05)
be, and hereby is, approved.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-4929 Filed 3-3-94; 8:45 am]
BILLING CODE 8010-01-M