[Federal Register Volume 60, Number 131 (Monday, July 10, 1995)]
[Notices]
[Pages 35575-35576]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16784]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35916; File Nos. SR-NSCC-95-04; SR-MCC-95-02; SR-SCCP-
95-03]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Midwest Clearing Corporation; 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 28, 1995.

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that the 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 May 19, 1995, 
May 26, 1995, and June 12, 1995, respectively, the proposed rule 
changes as described in Items I and II below, which items have been 
prepared primarily by the Clearing Corporations. The proposals seek 
approval of rule changes relating to the guarantee of trades in the 
Clearing Corporations' continuous net settlement systems. The 
Commission is publishing this notice and order to solicit comments from 
interested persons and to extend temporary approval of the proposed 
rule changes on an accelerated basis through June 28, 1996.

    \1\ 15 U.S.C. Sec. 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 approval of the Commission's temporary 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\

    \2\ The Commission has approved these proposals on a temporary 
basis on six 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); 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); and 33996 (June 27, 1994), 
59 FR 33996 (approving File Nos. SR-NSCC-94-09, SR-MCC-94-06, and 
SR-SCCP-94-02 through June 30, 1995).
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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.\3\

    \3\ The Commission has modified the language in these sections.
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(A) Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    The proposed rule changes seek approval of the Clearing 
Corporations' procedures whereby the settlement of all pending CNS 
trades are guaranteed as of midnight (11:59 p.m. for MCC) on the day 
after the trade date for locked-in or automatically compared trades and 
as of midnight (11:59 p.m. for MCC) on the day trades are reported to 
members as compared for all other trades. The proposed rule changes 
also seek 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.\4\

    \4\ For a more detailed discussion of the proposals, refer to 
Securities Exchange Act Release Nos. 34261, 32547, 30879, 29388, 
28728, and 27192 and the accompanying rule filings, supra note 3.
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    The Clearing Corporations believe that the proposed rule changes 
are consistent with the Act and particularly with Section 17A of the 
Act because they 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.\5\

    \5\ 15 U.S.C. Sec. 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 not impose a 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 using 
revised formulas for calculating clearing fund contributions are 
consistent with the Act and particularly with Section 17A of the 
Act.\6\ Section 17A(b)(3)(F) of the Act \7\ 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.

    \6\ 15 U.S.C. Sec. 78q-1 (1988).
    \7\ 15 U.S.C. Sec. 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. The Commission finds good cause for so approving 
because accelerated approval will permit the Clearing Corporations to 
continue to provide their participants with earlier trade guarantees 
and to 

[[Page 35576]]
continue to base clearing fund assessments on the revised formulas 
without any needless disruptions to their programs. 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.
    The Clearing Corporations and the Commission will continue to 
monitor the adequacy of the Clearing Corporation's procedures and 
safeguards applicable to earlier guarantees of CNS trades and the 
revised clearing fund formulas is necessary. Each Clearing Corporation 
will 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.\8\

    \8\ The Commission reserves the right to amend the data request 
during the ensuing temporary approval period 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 submission 
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. Sec. 552, will be available for inspection and copying in 
the Commission's Public Reference Room, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filings will also be available for 
inspection and copying at the principal office of each Clearing 
Corporation. All submissions should refer to the file numbers SR-NSCC-
95-04, SR-MCC-95-02, and SR-SCCP-95-03 and should be submitted by July 
31, 1995.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule changes (File Nos. SR-NSCC-95-04, SR-MCC-95-02, 
and SR-SCCP-95-03) be and hereby are approved on a temporary basis 
through June 28, 1996.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\

    \9\ 17 CFR 200.30-3(a)(12) (1994).
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Jonathan G. Katz,
Secretary.
[FR Doc. 95-16784 Filed 7-7-95; 8:45 am]
BILLING CODE 8010-01-M