[Federal Register Volume 59, Number 115 (Thursday, June 16, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14663]


[[Page Unknown]]

[Federal Register: June 16, 1994]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34179; File No. SR-GSCC-94-03]

 

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

June 8, 1994.
    On April 18, 1994, the Government Securities Clearing Corporation 
(``GSCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-GSCC-94-03) 
pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'').\1\ The proposed rule change lowers the minimum shareholders' 
equity standard for GSCC bank netting system members. The Commission 
published notice of the proposed rule change in the Federal Register on 
May 9, 1994.\2\ No comments were received. For the reasons discussed 
below, the Commission is approving the proposed rule change.
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    \1\15 U.S.C. section 78s(b)(1) (1988).
    \2\Securities Exchange Act Release No. 33981 (April 28, 1994), 
59 FR 23906.
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I. Description

    The proposed rule change allows 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.\3\ This level was 
chosen because, at the time, it encompassed roughly the one hundred 
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.
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    \3\See Securities Exchange Act Release No. 27006 (July 14, 
1989), 54 FR 29798.
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    The proposed rule change, however, lowers the minimum shareholders' 
equity standard for bank netting members to $100 million. This standard 
will help ensure that each bank netting member, while not necessarily 
among the largest banks in the country, is still a sizable one.

II. Discussion

    The Commission believes that GSCC's proposed rule change is 
consistent with section 17A of the Act,\4\ and in particular, sections 
17A(b)(3) (A) and (F) of the Act. Sections 17A(b)(3) (A) and (F) 
require that a clearing agency be so organized and that its rules be 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions for which it is responsible and to safeguard 
securities and funds in its custody or control or for which it is 
responsible. The Commission believes that GSCC's proposal is consistent 
with these goals.
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    \4\15 U.S.C. section 78q-1 (1988).
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    The Commission believes that the proposal will facilitate broader 
access to the government securities market. Specifically, it will allow 
a greater number of banks that are active participants in the 
government securities market to receive the benefits of GSCC's 
services.
    The Commission also believes that GSCC has established reasonable 
financial and operational requirements for the admission of bank 
applicants. In addition to the minimum shareholders' equity standard, 
GSCC will explicitly impose in its rules an additional standard on all 
bank netting system applicants and members. The capital ratios (i.e., 
total risk-based ratio, tier 1 risk based ratio, and tier 1 leverage 
ratio) of all bank netting system applicants and members must meet the 
minimum levels specified by the applicable bank regulatory agency. In 
conjunction with this change, each bank netting member would be 
required to report periodically 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).

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the Act, and in particular with 
section 17A of the Act, and with the rules and regulations thereunder.
    It Is Therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\5\ that the proposed rule change (File No. SR-GSCC-94-03) be, and 
hereby is, approved.
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    \5\15 U.S.C. section 78s(b)(2) (1988).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\17 CFR Sec. 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-14663 Filed 6-15-94; 8:45 am]
BILLING CODE 8010-01-M