[Federal Register Volume 59, Number 126 (Friday, July 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16043]


[[Page Unknown]]

[Federal Register: July 1, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34261; File Nos. SR-NSCC-94-09, SR-MCC-94-06, and SR-
SCCP-94-02]

 

Self-Regulatory Organizations; National Securities Clearing 
Corporation, Midwest Clearing Corporation, and Stock Clearing 
Corporation of Philadelphia; Notice of Filing and Order Granting 
Temporary Approval on an Accelerated Basis of Proposed Rule Changes 
Relating to the Guarantee of Trades in Continuous Net Settlement 
Systems

June 27, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that National Securities Clearing 
Corporation (``NSCC''), Midwest Clearing Corporation (``MCC''), and 
Stock Clearing Corporation of Philadelphia (``SCCP'') (collectively 
referred to as ``Clearing Corporations'') filed with the Securities and 
Exchange Commission (``Commission'') on June 15, 1994, June 12, 1994, 
and June 24, 1994, respectively, the proposed rule changes as described 
in Items I and II below. The Commission is publishing this notice and 
order to solicit comments from interested persons and to grant 
accelerated approval of the proposed rule changes.
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    \1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organizations' Statement of the Terms of Substance 
of the Proposed Rule Changes

    The proposals seek a one year extension, through June 30, 1995, of 
the Commission's order that authorizes the Clearing Corporations: (1) 
To guarantee at an earlier time the settlement of participant trades in 
their Continuous Net Settlement (``CNS'') systems and (2) to use 
revised clearing fund calculations to protect against any increased 
risk caused by such earlier guarantees.\2\
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    \2\The Commission has approved these proposals on a temporary 
basis on five previous occasions in Securities Exchange Act Release 
Nos. 27192 (August 29, 1989), 54 FR 37010 (approving File Nos. SR-
NSCC-87-04, SR-MCC-87-03, and SR-SCCP-87-03 until December 31, 
1990); 28728 (December 31, 1990), 56 FR 717 (approving File Nos. SR-
NSCC-90-25, SR-MCC-90-08, and SR-SCCP-90-03 until June 30, 1991); 
29388 (June 28, 1992), 56 FR 30951 (approving File Nos. SR-NSCC-91-
06, SR-MCC-91-03, and SR-SCCP-91-03 through June 30, 1992); 30879 
(July 1, 1992), 57 FR 30279 (approving File Nos. SR-NSCC-92-04, SR-
MCC-92-07, and SR-SCCP-92-02 through June 30, 1993); and 32547 (June 
29, 1993), 58 FR 36491 (approving File Nos. SR-NSCC-93-04, SR-MCC-
93-02, and SR-SCCP-93-02 through June 30, 1994).
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II. Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    In their filings with the Commission, the Clearing Corporations 
included statements concerning the purpose of and basis for the 
proposed rule changes and discussed any comments they received on the 
proposed rule changes. The text of these statements may be examined at 
the places specified in Item IV below. The Clearing Corporations have 
prepared summaries, set forth in sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    The purpose of the proposed rule changes is to extend through June 
30, 1995, the Commission's approval of NSCC's, MCC's, and SCCP's 
procedures whereby the settlement of all pending CNS trades are 
guaranteed as of midnight on the day after the trade date for locked-in 
or automatically compared trades and as of midnight on the day trades 
are reported to members as compared for all other trades. The proposed 
rule changes also seek extension through June 30, 1995, of the 
Commission's approval of the Clearing Corporations' revisions to the 
CNS portions of their clearing fund formulas. These revisions are 
designed to protect against increased risk associated with earlier 
guarantees.\3\
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    \3\For a more detailed discussion of the proposals, refer to 
Securities Exchange Act Release Nos. 32547, 30379, 29388, 27828, and 
27192 and the accompanying rule filings, supra note 2.
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    The Clearing Corporations represent that the proposed rule changes 
are consistent with the Act and particularly with Section 17A of the 
Act because it will help the Clearing Corporations to assure the 
safeguarding of securities and funds which are in their custody or 
control or for which they are responsible.\4\
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    \4\15 U.S.C. 78q-1 (1988).
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B. Self-Regulatory Organizations' Statement on Burden on Competition

    The Clearing Corporations believe that the proposed rule changes 
will impose no burden on competition.

C. Self-Regulatory Organizations' Statement on Comments on the Proposed 
Rule Changes Received from Members, Participants or Others

    The Clearing Corporations have neither solicited nor received any 
comments.

III. Date of Effectiveness of the Proposed Rule Changes and Timing for 
Commission Action

    The Commission believes the Clearing Corporations' proposals to 
continue providing earlier guarantees for CNS trades along with revised 
formulas for calculating clearing fund contributions are consistent 
with the Act and particularly with Section 17A of the Act.\5\ Section 
17A(b)(3)(F) of the Act\6\ requires that the rules of clearing agencies 
be designed to assure the safeguarding of securities and funds that are 
in the custody or control of the clearing agencies or for which the 
clearing agencies are responsible and be designed to remove impediments 
to and perfect the national system for the clearance and settlement of 
securities transactions.
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    \5\15 U.S.C. 78q-1 (1988).
    \6\15 U.S.C. 78q-1(b)(3)(F) (1988).
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    The Commission believes that these proposals promote the perfection 
of the national system by providing increased certainty as to 
settlement of securities transactions by reducing the time that 
clearing members are exposed to the risk of counterparty default. The 
Commission further believes that these proposals achieve that goal 
without compromising the safeguarding of securities and funds in the 
Clearing Corporations' custody or control or for which they are 
responsible.
    The Clearing Corporations have requested that the Commission find 
good cause for approving the proposed rule changes prior to the 
thirtieth day after the date of publication of notice of the filings in 
the Federal Register. Accelerated approval will permit NSCC, MCC, and 
SCCP to continue to provide their participants with earlier trade 
guarantees and to continue to base clearing fund assessments on the 
revised formulas without any needless disruptions to the program. 
During the proposals' temporary approval periods, the Commission and 
the Clearing Corporations have continued to examine the Clearing 
Corporations' procedures and safeguards applicable to earlier 
guarantees of CNS trades and the revised formulas for calculating CNS 
clearing fund contributions. To date, the earlier guarantee procedures 
and revised clearing fund formulas have functioned adequately. 
Therefore, the Commission believes there is good cause for approving 
the proposed rule changes prior to the thirtieth day after the date of 
publication of notice of the filing.
    The Commission will continue to monitor the adequacy of NSCC's, 
MCC's, and SCCP's procedures and safeguards applicable to earlier 
guarantees of CNS trades and the revised clearing fund formulas. The 
Clearing Corporations remain under a continuing obligation to provide 
data to the Commission pertaining to earlier trade guarantees and the 
ability of the revised CNS clearing formulas to guard against any 
increased risks posed by earlier guarantees.\7\
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    \7\The Commission reserves the right to amend the data request 
during the ensuing temporary approval for any of the Clearing 
Corporations in order to obtain the most useful and accurate 
information available.
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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 submissions, 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 at the 
principal office of the Clearing Corporations. All submissions should 
refer to File Nos. SR-NSCC-94-09, SR-MCC-94-06, and SR-SCCP-94-02 and 
should be submitted by July 22, 1994.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act\8\ 
that the above-mentioned proposed rule changes (File Nos. SR-NSCC-94-
09, SR-MCC-94-06, and SR-SCCP-94-02) be, and hereby are, approved 
through June 30, 1995.

    \8\15 U.S.C. 78s(b) (1988).
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    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\17 CFR 200.30-3(a)(12) (1993).
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Jonathan G. Katz,
Secretary.
[FR Doc. 94-16043 Filed 6-30-94; 8:45 am]
BILLING CODE 8010-01-M