[Federal Register Volume 59, Number 88 (Monday, May 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11032]


[[Page Unknown]]

[Federal Register: May 9, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33981; File No. SR-GSCC-94-03]

 

Self-Regulatory Organizations; Government Securities Clearing 
Corporation; Filing of Proposed Rule Change Relating to Minimum 
Financial Standards for Bank Netting System Members

April 28, 1994.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 18, 1994, the 
Government Securities Clearing Corporation (``GSCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change (File No. SR-GSCC-94-03) as described in Items I, II, and III 
below, which Items have been prepared primarily by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule change will lower the minimum shareholders' 
equity standard for GSCC bank netting system members.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
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. The self-regulatory organization 
has prepared summaries, set forth in sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to allow GSCC to change 
the minimum shareholders' equity standard for bank netting system 
members. In 1989, prior to the commencement of GSCC's netting system, a 
minimum admission and continuance standard of $250 million in 
shareholders' equity was established for banks or trust companies 
(``banks'') that are, or are applying to become, members of GSCC's 
netting system. This level was chosen because, at the time, it 
encompassed roughly the 100 largest banks in the United States and, 
thus, reflected GSCC's initial focus on providing its netting and 
attendant risk protection services to only the largest market 
participants.
    As part of its ongoing process of consideration of how best to 
broaden access to its netting and risk management services in a prudent 
manner, GSCC has determined it appropriate to lower the minimum 
shareholders' equity standard for bank netting system members, so as to 
allow a greater number of banks that are active participants in the 
government securities market to receive the benefits of GSCC's 
services.
    Specifically, the proposed rule change would lower the minimum 
shareholders' equity standard for bank netting members to $100 million. 
This standard would ensure that each bank netting member, while not 
necessarily among the largest banks in the country, is still a sizeable 
one.
    In addition, GSCC would explicitly impose in its rules an 
additional standard on all bank netting system applicants and members; 
in particular, that their capital ratios (i.e., total risk-based ratio, 
tier 1 risk based ratio, and tier 1 leverage ratio) meet the minimum 
levels specified by the applicable bank regulatory agency. In 
conjunction with this change, each bank netting member would be 
required to periodically report to GSCC each of its capital ratios for 
which its appropriate regulatory authority has established standards 
(or the capital ratios that it would be required to report to the Board 
of Governors of the Federal Reserve System (``Fed'') if it were a Fed 
member bank). GSCC will routinely use such information on a bank 
netting member's capital ratios as a part of its ongoing surveillance 
of those members.
    GSCC believes that since the proposed rule change allows GSCC to 
broaden access to its netting and risk management services so as to 
allow a greater number of banks and trust companies to receive the 
benefits of its services, it is consistent with Section 17A of the Act 
and the rules and regulations thereunder applicable to GSCC.

B. Self-Regulatory Organization's Statement on Burden on Competition

    GSCC does not believe that the proposed rule change will impose any 
burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Comments on the proposed rule change have not yet been solicited or 
received. GSCC members will be notified of the rule filing, and 
comments will be solicited, by a GSCC Important Notice. GSCC will then 
notify the Commission of any written comments received by GSCC 
regarding the proposed rule change.

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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
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 will also be available for 
inspection and copying at the principal office of GSCC. All submissions 
should refer to file number SR-GSCC-94-03 and should be submitted by 
May 31, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-11032 Filed 5-6-94; 8:45 am]
BILLING CODE 8010-01-M