[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