[Federal Register Volume 59, Number 158 (Wednesday, August 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20120]


[[Page Unknown]]

[Federal Register: August 17, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34511; File No. SR-GSCC-94-06]

 

Self-Regulatory Organizations; Government Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change Modifying the 
Trade Reporting Requirements for Category 2 Inter-Dealer Broker Netting 
Members

August 10, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 5, 1994, the 
Government Securities Clearing Corporation (``GSCC'') filed with the 
Securities and exchange Commission (``Commission'') the proposed rule 
change (File No. SR-GSCC-94-06) 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 modify GSCC's rules concerning the 
trade reporting requirements for category 2 inter-dealer broker netting 
members (``IDBs'').

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 classification of category 2 IDBs was established by GSCC in 
1993 in order to permit qualifying IDBs to engage in up to ten percent 
of their trading activity in eligible securities with non-netting 
members.\2\ Each category 2 IDB must act exclusively as a broker and at 
least ninety percent of its business, measured based on the overall 
dollar volume of next day and forward settlement activity in eligible 
netting securities over the most recent twenty day period, must be with 
netting members.\3\ In addition, Category 2 IDBs have clearing fund and 
margin requirements essentially the same as those of a category 1 
dealer netting members.
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    \2\The Commission approved category 2 IDBs in Securities 
Exchange Act Release No. 32722 (August 12, 1993), 58 FR 42993.
    \3\For a temporary period established by GSCC's Board of 
Directors, the term netting members is defined to include certain 
specifically designated grandfathered non-netting members firms that 
currently have IDB screen access. This will temporarily allow 
category 2 IDBs to trade with nonmember dealers that historically 
have had access to the IDBs' screens. An IDB's trading activity with 
grandfathered dealers will not be included for purposes of 
determining when an IDB meets the ten percent scope of business 
limitation.
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    In order to monitor compliance with their scope of business 
requirements, each category 2 IDB is obligated to provide GSCC in 
writing with a list of all of the legal entities that it acts on behalf 
of and must promptly inform GSCC of any change to such list. Each IDB 
also is required to submit daily to GSCC all of its next day and 
forward settling trades in eligible netting securities, including 
trades with non-grandfathered non-members and must indicate the buy and 
sell side of each transaction.
    GSCC's rule do not, however, expressly require that a category 2 
IDB provide to GSCC for every trade done involving an eligible netting 
security the identity of each buy side and sell side counterparty. This 
information is significant to GSCC for risk monitoring and surveillance 
purposes. In particular, it is important for GSCC to understand and to 
be able to assess the volume of and degree of concentration of trading 
done by a category 2 IDB with one or more specific non-members.
    The proposed rule change, therefore, will expressly require each 
category 2 IDB to disclose to GSCC for every trade done involving an 
eligible netting security, including trades done with non-members, the 
identity of each buy side and sell side counterparty.
    GSCC believes that because the proposed rule change allows GSCC to 
ensure that it can appropriately monitory its existing netting members, 
it is consistent with Section 17A of the Act\4\ and the rules and 
regulations thereunder applicable to GSCC.
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    \4\15 U.S.C. 78q-1 (1988).
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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 thirty-five 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 ninety 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. Sec. 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-94-06 and should be submitted by 
September 7, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-20120 Filed 8-16-94; 8:45 am]
BILLING CODE 8010-01-M