[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