[Federal Register Volume 60, Number 141 (Monday, July 24, 1995)]
[Notices]
[Pages 37911-37912]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18096]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35985; File No. SR-GSCC-95-01
Self-Regulatory Organizations; Government Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Modifying GSCC's Fee Structure to Reduce the Clearance Fee,
to Implement a New Discount Policy, and to Clarify the Fee Structure
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
\1\ (``Act''), notice is hereby given that on May 31, 1995, the
Government Securities Clearing Corporation (``GSCC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II, and III below, which items have
been prepared primarily by GSCC. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
\1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
GSCC proposes to modify its fee structure to reduce the member
clearance fee, to implement a new discount policy, and to clarify the
application of the fee structure.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, GSCC 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. GSCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such
statements.\2\
\2\ The Commission has modified the text of the summaries
prepared by GSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to modify GSCC's fee
structure to reduce the member clearance fee, to implement a new
discount policy, and to clarify the application of the fee structure.
The reduction in the clearance fee and GSCC's new discount policy will
first be reflected in the bills distributed to GSCC's members in June
1995.
GSCC passes through to its netting members, with the exception of
category 1 interdealer broker netting members, whose activity is
designed to net out completely, its cost of obtaining clearance
services from its agent banks. Currently, the fee charged by GSCC to
netting members to recoup its own clearance costs is $3.35 per deliver
and receive obligation. The level of this fee is periodically reviewed
to ensure that it closely equates to GSCC's actual expense. GSCC's
Board of Directors determined at its meeting on May 4, 1995, that the
clearance fee needed to offset GSCC's own clearance costs is roughly
$2.90 per settlement and that it is appropriate to reduce GSCC's unit
fee for clearance for $3.25 to $2.90, effective as of May 1, 1995. The
level of this unit clearance fee will continue to be periodically
monitored for appropriateness.
The Board also decided to implement a discount policy for GSCC's
basic comparison and netting fees because of the continued increase in
GSCC's financial strength \3\ and its projected continued
profitability. The discount policy will be subject to monthly review,
and it is intended to result in a ten percent reduction in the cost of
the services to members.\4\
\3\ GSCC's financial condition is reflected in, among other
things, its elimination of its accumulated deficit in April of 1995.
\4\ Under the discount policy, GSCC will determine whether a
discount will be provided on a monthly basis. Thus, the discount
will not alter the fees established under GSCC's fee structure. The
policy will operate in a manner similar to a rebate except that
members are advised of and take the discount prior to remitting
their fees to GSCC. The discount will be applied across the board to
comparison and netting fees charged rather than to specific fees set
forth under the fee structure. Telephone conversation between
Jeffrey Ingber, General Counsel, GSCC, and Cheryl R. Oler, Staff
Attorney, Division of Market Regulation (``Division''), Commission
(June 13, 1995).
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In addition, GSCC proposes to amend the language of Section I(D) of
its fee structure pertaining to locked-in trade data to clarify that
the trade comparison fee for locked-in trade data is imposed on a
member for trades entered into by a nonmember for whom the GSCC member
is clearing. The amendment does not modify GSCC's application or size
of this fee; it simply clarifies the provision.\5\
\5\ Telephone conversation between Jeffrey Ingber, General
Counsel, GSCC, and Cheryl R. Oler, Staff Attorney, Division,
Commission (June 13, 1995).
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Finally, the proposed rule change adds a new section to GSCC's fee
structure to clarify an issue concerning the designation and dollar
size
[[Page 37912]]
limitation of a ``side'' of a transaction for purposes of the fee
structure.\6\ As defined in new section V of the fee structure, a
``side'' of a trade or transaction is limited to $50 million increments
in size.\7\ Thus, if the aggregate amount of a side of a trade
submitted to GSCC by or on behalf of a member is greater than $50
million, each $50 million portion of that aggregate amount, including
any residual portion that is less than $50 million, shall be considered
as a separate ``side'' for purposes of the fee structure.
\6\ The issue concerning the determination of a ``side'' of a
transaction for purposes of GSCC's fee structure has arisen in
connection with GSCC's implementation of its auction take down
service. For a description of GSCC auction take down procedures,
refer to Securities Exchange Act Release Nos. 33984 (May 2, 1994),
59 FR 24491 [File No. SR-GSCC-94-01] (approving proposed rule change
relating to the comparison and netting of member's treasury auction
purchases) and 34260 (June 27, 1994), 59 FR 33994 [File No. SR-GSCC-
94-05] (notice of filing and immediate effectiveness of proposed
rule change relating to GSCC's fee structure in connection with
GSCC's auction takedown services).
\7\ Frequently, the aggregate amount of GSCC members' Treasury
auction awards that are submitted to GSCC by a Federal Reserve Bank
exceeds $50 million.
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GSCC believes the proposed rule change is consistent with the
requirements of Section 17A of the Act and the rules and regulations
thereunder because the proposal provides for the equitable allocation
of reasonable dues, fees, and other charges among GSCC's participants.
(b) Self-Regulatory Organization's Statement on Burden on Competition
GSCC does not believe that the proposed rule change will have an
impact on or impose a 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.
Members will be notified of the rule filing, and comments will be
solicited by an Important Notice. GSCC will notify the Commission of
any written comments received by GSCC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) \8\ of the Act and pursuant to Rule 19b-4(e)(2)\9\
promulgated thereunder because the proposal establishes or changes are
due, fee or other charge imposed by GSCC. At any time within sixty days
of the filing of such rule change, the Commission may summarily
abrogate such rule change if it appears to the Commission that such
action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Act.
\8\ 15 U.S.C. Sec. 78s(b)(3)(A)(ii) (1988).
\9\ 17 CFR 240.19b-4(e)(2) (1994).
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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, N.W., Washington, D.C. 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, N.W.,
Washington, D.C. 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 No. SR-GSCC-95-01 and should be
submitted by July 31, 1995.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\10\
\10\ 17 CFR 300.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-18096 Filed 7-21-95; 8:45 am]
BILLING CODE 8010-10-M