[Federal Register Volume 60, Number 212 (Thursday, November 2, 1995)]
[Notices]
[Pages 55749-55750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27237]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36431; File No. SR-MBSCC-95-05]


Self-Regulatory Organizations; MBS Clearing Corporation; Order 
Approving a Proposed Rule Change Authorizing the Release of Clearing 
Data Relating to Participants

October 27, 1995.
    On June 28, 1995, the MBS Clearing Corporation (``MBSCC'') filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change (File No. SR-MBSCC-95-05) pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'').\1\ On July 24, 1995, 
MBSCC filed an amendment to the proposed rule change.\2\ Notice of the 
proposal was published in the Federal Register on August 24, 1995.\3\ 
No comment letters were received. For the reasons discussed below, the 
Commission is approving the proposed rule change.

    \1\ 15 U.S.C. 78s(b)(1) (1988).
    \2\ Letter from Anthony H. Davidson, MBSCC, to Peter R. 
Geraghty, Division of Market Regulation, Commission (July 21, 1995).
    \3\ Securities Exchange Act Release No. 36107 (August 16, 1995), 
60 FR 44092.
---------------------------------------------------------------------------

I. Description of the Proposal

    The proposed rule change modifies Article V of MBSCC's Rules by 
adding a new Rule 14 concerning the release of data relating to 
participants' clearance and settlement activity. MBSCC receives 
transaction data and other data relating to its participants in the 
normal course of its business. The rule change sets forth MBSCC's 
obligation to preserve its participants' rights with respect to such 
data and the conditions under which MBSCC will disclose such data.
    The rule change permits MBSCC to disclose such data to regulatory 
organizations, self-regulatory organizations, clearing organizations 
affiliated with or designated by contract markets trading specific 
futures products under the oversight of the Commodity Futures Trading 
Commission, and others under certain conditions. The rule change also 
provides that, absent valid legal process or as provided for elsewhere 
in Rule 14, MBSCC will only release clearing data relating to a 
particular participant to such participant upon its written request.\4\ 
Furthermore, the rule provides that MBSCC is not prevented from 
releasing clearing data to parties other than those discussed above 
provided that such data be in format that does not disclose proprietary 
and/or confidential financial, operational, or trading data of a 
particular participant or groups of participants. Finally, the rule 
change also defines ``clearing data'' to mean transaction and other 
data which is received by MBSCC in the clearance and/or settlement 
process or such reports or summaries which may be produced as a result 
of processing such data.

    \4\ As a self-regulatory organization, MBSCC currently is 
permitted without obtaining a participant's written authorization to 
cooperate and share data with other regulatory or self-regulatory 
organizations for regulatory purposes.
---------------------------------------------------------------------------

    The rule change facilitates MBSCC's participation in the National 
Securities Clearing Corporation's (``NSCC'') Collateral Management 
Service (``CMS'') \5\ because it enables MBSCC to provide information 
regarding MBSCC's participants fund, including excess or deficit 
amounts, and comprehensive data on the collateral deposited in the 
participants fund to NSCC for inclusion in NSCC's CMS. Participants of 
MBSCC that desire access to the CMS data are required to execute a CMS 
application. The executed CMS application will constitute a 
participant's written request required under MBSCC's new Rule 14 to 
Article V to authorize MBSCC to release the participant's clearing data 
to that participant.\6\

    \5\ Generally, NSCC's CMS will provide participating 
participants and clearing agencies with access to information 
regarding participating participants' clearing fund, margin, and 
other similar requirements and deposits at participating clearing 
agencies. For a complete description of the CMS, refer to Securities 
Exchange Act Release No. 36091 (August 10, 1995), 60 FR 42931 [File 
No. SR-NSCC-95-06] (order approving the CMS).
    \6\ A separate CMS agreement between MBSCC and NSCC sets forth 
MBSCC's and NSCC's authorizations and obligations to collect and 
provide information relating to the participants' clearing fund and 
margin requirements and deposits.
---------------------------------------------------------------------------

II. Discussion

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in the custody or control of the clearing agency or 
for which it is responsible.\7\ As discussed below, the Commission 
believes the proposed rule change is consistent with MBSCC's obligation 
under Section 17A(b)(3)(F) because the proposal sets forth MBSCC's 
responsibilities and obligations with regard to releasing participants' 
clearing data. MBSCC's new rule sets forth specific procedures that 
MBSCC and a participant must comply with before that participant's 
clearing data will be released for purposes such as participation in 
NSCC's CMS. MBSCC's and its participants' participation in NSCC's CMS 
should help MBSCC and other clearing agencies to better monitor 
clearing fund, margin, and other similar required deposits that protect 
a clearing agency against loss should a member default on its 
obligations to the clearing agency.\8\

    \7\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
    \8\ Although MBSCC currently does not have any cross-guarantee 
agreements or arrangements with other clearing agencies, NSCC's CMS 
will be especially beneficial to those participating clearing 
entities that have executed cross-guaranty agreements or have other 
cross-guarantee arrangements. The Commission supports the use of 
cross-guaranty agreements and other similar arrangements among 
clearing agencies as a method of reducing clearing agencies' risk of 
loss due to a common participant's default and encourages MBSCC to 
explore such agreements or arrangements.
    Currently, the Depository Trust Company (``DTC'') and NSCC are 
the only clearing agencies registered with the Commission that have 
executed a cross-guaranty agreement. The agreement provides that in 
the event of a default of a common member, any resources remaining 
after the failed common member's obligations to the guaranteeing 
clearing agency have been satisfied will be made available to the 
other clearing agency. The guaranty is not absolute but rather is 
limited to the extent of the resources relative to the failed member 
remaining at the guaranteeing clearing agency. The principal 
resources will be the failed member's settlement net credit balances 
and deposits to the clearing agencies' clearing funds. For a 
complete description of DTC's and NSCC's agreement, refer to 
Securities Exchange Act Release No. 33548 (January 31, 1994), 59 FR 
5638 [File Nos. SR-DTC-93-08 and SR-NSCC-93-07].
    The Midwest Securities Trust Company (``MSTC'') and Midwest 
Clearing Corporation (``MCC'') and the Philadelphia Depository Trust 
Company (``Philadep'') and the Stock Clearing Corporation of 
Philadelphia (``SCCP'') each have cross-guarantee arrangements with 
their related affiliate. Pursuant to Section 3, Rule 2, Article VI 
of MSTC's Rules, a defaulting participant's obligations at MSTC or 
MCC will be discharged by application of that participant's deposits 
at either clearing agency if that participant is a common member to 
both clearing agencies. MCC's Rules contain a similar provision. 
Similarly, pursuant to Section 4, Rule 4 of SCCP's Rules, SCCP will 
make available any portion of a defaulting participant's 
contribution to its participants fund to offset a loss suffered by 
Philadep by reason of that participant's default. Philadep's Rules 
contain an identical provision.
---------------------------------------------------------------------------

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of Section 17A(b)(3)(F) of 
the Act and the rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-MBSCC-95-05) be, and hereby 
is, approved.

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

    \9\ 17 CFR 200.30-3(a)(12) (1994).

[[Page 55750]]

---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27237 Filed 11-1-95; 8:45 am]
BILLING CODE 8010-01-M