[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Pages 66570-66571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31179]



[Release No. 34-36597; File No. SR-GSCC-95-03]

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

December 15, 1995.
    On August 28, 1995, the Government Securities Clearing Corporation 
(``GSCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-GSCC-95-03) 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'').\1\ On September 13, 1995, GSCC filed an amendment to the 
proposed rule change.\2\ Notice of the proposal as amended was 
published in the Federal Register on November 2, 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 Jeffrey F. Ingber, General Counsel and 
Secretary, GSCC, to Peter R. Geraghty, Division of Market 
Regulation, Commission (September 13, 1995).
    \3\ Securities Exchange Act Release No. 36430 (October 27, 
1995), 60 FR 55748.

I. Description of the Proposal

    The purpose of the proposed rule change is to modify GSCC's rules 
to authorize the release of clearing data relating to GSCC's 
participants to the National Securities Clearing Corporation's 
(``NSCC'') Collateral Management Service (``CMS'') \4\ and to other 
parties. GSCC Rule 1 (``Definitions'') is amended to include the term 
``CFTC-Recognized Clearing Organization'' and to define it as ``a 
clearing organization that is affiliated with, or designed by, a 
contracts market or markets trading specific futures products, and is 
under the oversight of the Commodity Futures Trading 

[[Page 66571]]
Commission.'' The term ``Collateral Management Service'' also is added 
to Rule 1 and defined as ``the collateral management information-
sharing service operated by the National Securities Clearing 

    \4\ 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 CMS, refer to Securities 
Exchange Act Release No. 36091 (August 10, 1995), 60 FR 42931 [File 
No. SR-NSCC-95-06] (order approving NSCC's CMS).

    Section 2 of Rule 29 (``Release of Clearing Data'') is amended to 
permit GSCC to release clearing data to CFTC-Recognized Clearing 
Organizations and to NSCC solely in connection with NSCC providing 
CMS.\5\ Section 4 of Rule 29 is amended to clarify that the term 
``Clearing Data'' includes, in addition to transaction data, other data 
that is received by GSCC in the clearance and/or settlement process.

    \5\ Section 2(a) of Rule 29 already permits GSCC to release 
clearing data to other self-regulatory organizations such as NSCC 
that have regulatory authority over a GSCC member. The purpose of 
new Section 2(b) is to make explicit GSCC's authority to release 
clearing data to NSCC for its CMS.

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.\6\ As discussed below, the Commission 
believes the proposed rule change is consistent with GSCC's obligation 
under Section 17A(b)(3)(F) because the proposal sets forth GSCC's 
responsibilities and obligations with regard to releasing participants' 
clearing data and facilitates GSCC's participation in NSCC's CMS by 
enabling GSCC to provide information regarding GSCC's participants to 
NSCC for its CMS. GSCC's and its participants' participation in NSCC's 
CMS should help GSCC 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.\7\

    \6\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
    \7\ Although GSCC 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 GSCC 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 members'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-GSCC-95-03) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\

    \8\ 17 CFR 200.30-3(a)(12) (1994).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-31179 Filed 12-21-95; 8:45 am]