[Federal Register Volume 61, Number 7 (Wednesday, January 10, 1996)]
[Notices]
[Pages 742-743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-365]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36674; File No. SR-GSCC-95-06]
Self-Regulatory Organizations; Government Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change Relating to Fees Charged for Various Services
January 3, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange act of 1934
(``Act''),\1\ notice is hereby given that on November 29, 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. On December 12, 1995, GSCC amended its
filing to clarify certain references in the rule change.\2\ 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).
\2\ Letter from Jeffrey F. Ingber, General Counsel and
Secretary, GSCC, to Christine Sibille, Division of Market
Regulation, Commission (December 7, 1995).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of the proposed rule change is modify GSCC's fee
schedule to enable GSCC to begin charging members for GSCC services
related to repurchase agreement (``repo'') transactions.\3\
\3\ The fee schedule is attached as Exhibit A to File No. SR-
GSCC-95-06 and is available for review in the Public Reference
Section of the Commission.
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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 that 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.\4\
\4\ 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 impose fees for repo
services provided on and after December 1, 1995. On May 12, 1995, GSCC
implemented its repo comparison service.\5\ At that time, GSCC decided
not to charge for the comparison of repo transactions until a
sufficient number of
[[Page 743]]
GSCC members were participating in the repo comparison process so as to
provide an economic benefit to those members. At this time, forty-six
members are participating in the repo comparison process. Currently,
each day GSCC compares an average of 2,317 repo transactions with a
value of approximately $79.3 billion and has achieved an overall
comparison rate of 93.07 percent.
\5\ For a complete description of the repo comparison service,
refer to Securities Exchange Act Release No. 35557 (March 31, 1995),
60 FR 17598 [File No. SR-GSCC-94-10] (order approving proposed rule
change relating to implementing a comparison service for repo
transactions involving government securities as the underlying
instrument).
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In view of this, GSCC's Board of Directors has determined that it
is appropriate to begin to charge for the repo comparison service. GSCC
proposes to establish a 50 cents per side transaction fee for the
comparison of a repo transaction.\6\ The fee is for the comparison of
the entire repo transaction (i.e., both the start and close legs).
Similarly to buy/sell transactions, GSCC will impose a 25 cents fee to
process a request to modify or cancel a comparison input relating to a
repo transaction.
\6\ The 50 cents fee is for computer-to-computer input and
output. If a member uses input or output other than computer-to-
computer (i.e., magnetic tape input or output or paper output) the
fee rises to $1.00 to $1.50, which is comparable to the fees for
buy/sell transactions.
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On November 17, 1995, GSCC implemented the first phase of its
planned repo netting services, which provides netting, settlement, and
guarantee of settlement services for the non-same-day settling aspects
of overnight and term repos.\7\ Therefore, another purpose of this
filing is to establish a $1.00 per side fee for the netting of a start
of close leg of a repo transaction by GSCC. This fee is the same as the
fee for the netting of a side of a buy/sell transaction.
\7\ For a complete description of these netting services, refer
to Securities Exchange Act Release No. 36491 (November 17, 1995), 60
FR 61577 [File No. SR-GSCC-95-02] (order approving a proposed rule
change relating to netting services for the non-same-day-settling
aspects of next-day and term repos).
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GSCC will incur administrative and operational expenses in the
course of maintaining forward settling repos on its records and in
providing risk management services for such repos, including daily
mark-to-market. Therefore, this proposed rule change establishes a fee
of 2 cents per calendar day for each start leg and close leg that has
been compared and netted but has not yet settled.\8\
\8\ Because GSCC does not currently net start legs until the
scheduled settlement date for such leg, this fee currently is not
applicable to start legs. The fee also does not apply to close legs
that settle one business day after the settlement date for the
related start leg.
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In order to ensure that coupon payments related to the collateral
underlying the repo are collected by the appropriate party, GSCC will
automatically pass the coupon payment from the holder of the securities
to the funds borrower when a coupon payment date falls between the
settlement date of the start leg and the settlement date of the close
leg. To cover the administrative and operational expenses incurred in
the course of providing this coupon pass-through service, GSCC is
imposing a 25 cents fee per coupon movement on both the securities
holder and the funds borrower.\9\
\9\ This fee also will apply to coupon movements made for fail
settlement positions.
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Finally, it should be noted that the Board of Directors of GSCC has
determined that because GSCC's repo comparison and netting services are
new, they will not at this time be subject to GSCC's discount
policy.\10\ Therefore, GSCC is amending Section VI of its fee structure
to provide that its discount pricing policy is not intended to apply to
a newly provided service until GSCC's Board of Directors determines it
to be sufficiently established.
\10\ Under GSCC's discount policy, GSCC may discount its fees
during a given month if the revenue received is in excess of the
amount GSCC needs to maintain a sufficient capital base and sound
financial structure.
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Section 17A(b)(3)(D) of the Act 11 requires that the rules of
a clearing agency provide for the equitable allocation of reasonable
dues, fees, and other charges among its participants. GSCC believes
that the proposed rule change is consistent with the requirements of
Section 17A(b)(3)(D) of the Act because its new fee schedule allocates
its fees equitably among its participants.
\11\ 15 U.S.C. Sec. 78q-1(b)(3)(D) (1988).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
GSCC does not believe that the proposed rule change will impose any
burden on completion that is not necessary or appropriate in
furtherance of the purposes of the Act.
(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 in an important notice and
comments will be solicited. 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) 12 of the Act and Rule 19b-4(e)(2) 13
thereunder because the rule change establishes or changes a due, fee,
or other charge. At any time within sixty days of the filing of such
proposed 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.
\12\ 15 U.S.C. Sec. 78s(b)(3)(A)(ii) (1988).
\13\ 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, NW., Washington, DC 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. 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 filing will also be available for inspection
and copying at the principal office of GSCC. All submissions should
refer to the File No. SR-GSCC-95-06 and should be submitted by January
31, 1996.
For the Commission by the Division of Market Regulation, pursuant
to delegated authority.14
\14\ 17 CFR 200.30-3(a)(12) 1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-365 Filed 1-9-96; 8:45 am]
BILLING CODE 8010-01-M