[Federal Register Volume 60, Number 37 (Friday, February 24, 1995)]
[Notices]
[Pages 10415-10416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4516]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35392; International Series Release No. 786; File No.
SR-ISCC-94-6]
Self-Regulatory Organizations; International Securities Clearing
Corporation; Order Granting Approval of Proposed Rule Change Relating
to the Global Clearance Networking System
February 16, 1995.
On December 17, 1994, International Securities Clearing Corporation
(``ISCC'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'').\1\ The Commission
published notice of the proposed rule change in the Federal Register on
January 18, 1995.\2\ No comments have been received on the notice. As
discussed below, the Commission is approving the proposed rule change.
\1\15 U.S.C. 78s(b)(1) (1988).
\2\Securities Exchange Act Release No. 35212, International
Series Release No. 767 (January 10, 1995), 60 FR 3687).
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I. Description
Pursuant to ISCC's Rule 50, ISCC has established a foreign
clearing, settlement, and custody service known as the Global Clearance
Networking (``GCN'') service. Currently, Citibank, N.A. is the sole
provider of GCN services. The proposed rule change adds two additional
GCN service providers: Standard Bank of South Africa (``Standard'') and
Westpac Custodian Nominees Limited of Australia (``Westpac'').\3\
Standard will offer to ISCC members clearance, settlement, and custody
services in South Africa.\4\ Westpac will offer to ISCC members
clearance, settlement, and custody services in Australia.\5\ In order
to obtain access to Standard's services or Westpac's services, ISCC
members will need to enter into individual agreements with Standard or
Westpac.
\3\A steering committee of GCN participants working with ISCC
selected Standard and Westpac to become GCN service providers.
\4\Standard was established in 1862. Standard's Securities
Services Division provides comprehensive services to over three
hundred foreign banks, stockbrokers, and custodian accounts.
Standard also is positioned through their subsidiary, Stanbic Bank,
to provide clearance and settlement services in other southern and
central African countries. ISCC has informed the Commission that
Standard meets the requirements under Rule 17f-5 under the
Investment Company Act of 1940 to be an eligible foreign custodian.
Standard currently manages in excess of 30 billion in U.S. dollars.
\5\Westpac was established in 1944. Westpac currently provides
custodial and securities settlement services to over 500 local and
international clients. ISCC has informed the Commission that Westpac
is qualified as an eligible foreign custodian under Rule 17f-5 under
the Investment Company Act of 1940. Westpac manages over 50.2
billion in Australian dollars in assets under custody.
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Both Standard and Westpac have entered into an agreement with ISCC
pursuant to which they agree to provide access to clearing, settlement,
and custody services to eligible GCN participants at reduced prices.
ISCC has not provided any volume guarantees to either of these banks,
and each of the banks are responsible for collection of fees directly
from the participants. The agreements may be terminated by mutual
agreement of the parties with ninety days prior notice.
The proposed rule change also modifies the procedures for using the
GCN service contained in Addendum E to ISCC's rules. Currently,
participants can submit data to ISCC through their office computer's
central processing unit (``CPU'') or any personal computer (``PC'')
connection using an ISCC universal trade record (``UTR'') format. The
proposal allows ISCC also to accept data submitted via S.W.I.F.T.\6\
and to accept data in ISO 7775 format.\7\ If the data is not received
in ISO 7775 format, ISCC will convert the data into this format for
transmission to the service provider.
\6\The Society for Worldwide Interbank Financial
Telecommunication (``S.W.I.F.T.'') operates a secure data
communication and processing system which enables thousands of
financial institutions in more than 100 countries to communicate
with each other 24 hours a day and facilitates the sending in excess
of 500 million messages annually.
\7\The International Organization for Standardization (``ISO'')
was founded in 1949 to promote standards worldwide. ISO 7775, the
standard for international securities messages, was developed in
close cooperation with S.W.I.F.T. It was first published in 1984.
S.W.I.F.T. has assumed responsibility for maintenance of the
standard.
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Data submitted via PC or CPU is routed through ISCC's Datatrak
system to validate the sender's identity against ISCC`s masterfile
prior to the validation and edit process.\8\ Data submitted via
S.W.I.F.T. will go directly to the validation and edit process.\9\
Information that does not pass the validation or edit process will be
rejected, and the participant will be required to resubmit the data.
\8\Currently, participants receive a confirmation that ISCC has
received the data. The proposal eliminates the sending of the
confirmation.
\9\S.W.I.F.T. automatically verifies the identity of the sending
party.
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Data will be routed to the service provider using the method
required by the service provider. In general, ISCC will receive
confirmation that the data has been received by the service provider.
If the data is sent using S.W.I.F.T., ISCC only will receive
confirmation that the data was transmitted.\10\ If the service provider
is unable to process the data, the service provider will contact the
participant directly. Each day, the service provider will provide
reports on behalf of the participants' accounts to ISCC which ISCC will
retransmit to the participants.
\10\Additionally, S.W.I.F.T., instead of ISCC, will verify the
number of records transmitted.
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II. Discussion
The Commission believes the proposed rule change is consistent with
Section 17A of the Act and, therefore, is [[Page 10416]] approving the
proposal. Specifically, the Commission believes the proposal is
consistent with Section 17A(b)(3)(F)\11\ of the Act in that it promotes
the prompt and accurate clearance and settlement of securities
transactions.
\11\15 U.S.C. 78q-1(b)(3)(F) (1988).
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In the initial order granting ISCC temporary registration as a
clearing agency, the Commission stated that the development of
efficient and comparable automated national and international
clearance, settlement, and payment systems is one of the more important
international goals.\12\ The Commission noted that without established
international systems, broker-dealers and their institutional customers
often are forced to devote substantial resources to each task related
to trade settlement and must deliver securities by physical means.
\12\Securities Exchange Act Release 26812 (May 12, 1989), 54 FR
21691.
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The GCN service offers participating ISCC members advantages in
securities processing including central access for processing trades,
standardized operating procedures, receipt of uniform reports on their
trades, and reduced prices due to economies of scale. The addition of
Westpac and Standard as GCN providers gives ISCC participants access to
settlement services in areas not currently covered by the GCN service
and thus increases the utility of the GCN service. The Commission also
believes that revising the GCN procedures to permit the use of the ISO
format is beneficial as another step in the standardization of the
international clearance of trades. By accepting trade data through
S.W.I.F.T., ISCC may provide enhanced access to the system.
III. Conclusion
For the reasons stated above, the Commission finds that the
proposed rule change is consistent with Section 17A of the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-ISCC-94-06) 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. 95-4516 Filed 2-23-95; 8:45 am]
BILLING CODE 8010-01-M