[Federal Register Volume 61, Number 25 (Tuesday, February 6, 1996)]
[Notices]
[Page 4508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-2461]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36791; International Series Release No. 925; File No.
Sr-ISCC-95-05]
Self-Regulatory Organizations; International Securities Clearing
Corporation; Order Approving Proposed Rule Change Relating to Global
Clearance Network Service
January 30, 1996.
On November 22, 1995, International Securities Clearing Corporation
(``ISCC'') filed a proposed rule change (File No. SR-ISCC-95-05) with
the Securities and Exchange Commission (''Commission'') pursuant to
Section 19(b) of the Securities Exchange Act of 1934 (``Act'').\1\
Notice of the proposal was published in the Federal Register on
December 27, 1995, to solicit comments from interested persons.\2\ No
comments were received. As discussed below, this order approves the
proposed rule change.
\1\ 15 U.S.C. 78s(b) (1988).
\2\ Securities Exchange Act Release No. 36605 (December 20,
1995), 60 FR 67004.
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I. Description
ISCC has established a foreign clearance, settlement, and custody
service known as a Global Clearance Network (``GCN'') in conjunction
with certain banks, trust companies, and other entities. Presently,
ISCC has established GCN relationships with Citibank, N.A., Standard
Bank of South Africa, Westpac Custodian Nominees Limited of Australia,
and Westpac Nominees-NZ-Limited.\3\ The proposed rule change
accommodates S.D. INDEVAL, S.A. de C.V. (``INDEVAL'') as an additional
GCN service provider.
\3\ Securities Exchange Act Release Nos. 29841 (October 18,
1991), 56 FR 55960; 35392 (February 16, 1995), 60 FR 10415; and
36339 (October 5, 1995), 60 FR 53447.
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INDEVAL provides clearance, settlement, and custodial services for
all transactions executed on the Mexican Stock Exchange and for
transactions in other securities that are publicly traded in Mexico.\4\
INDEVAL accepts any security publicly offered in Mexico for custody and
clearing except for certain Mexican government securities.\5\ As of
December 31, 1994, 415 institutions were registered with INDEVAL, and
the value of assets under INDEVAL's custody was 744.2 billion Mexican
pesos. INDEVAL may act as an eligible foreign custodian under Rule 17f-
5 under the Investment Company Act of 1940.\6\
\4\ INDEVAL was created under Mexican securities law in 1978 and
has been privately owned since 1987. Its shareholders are brokerage
houses, banks, insurance companies, Banco de Mexico (the central
bank of Mexico), and the Mexican Stock Exchange. INDEVAL is
regulated by the Government of Mexico.
\5\ Starting in April 1994, Banco de Mexico authorized INDEVAL
to offer custodial and transfer services for government debt
securities to foreign direct account depositors by means of a link
between Banco de Mexico and INDEVAL.
\6\ Letter from Richard F. Jackson, Division of Investment
Management, Commission to INDEVAL, File No. 132-3 (October 19,
1990). An ``eligible foreign custodian'' includes a securities
depository or clearing agency which is incorporated or organized
under the laws of a country other than the United States and which
operates the central system for handling of securities or equivalent
book-entries in that country. 17 CFR 270.17f-5(c)(2)(iii) (1995).
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INDEVAL has entered into an agreement with ISCC pursuant to which
INDEVAL has agreed to provide access to its clearance, settlement, and
custody services to GCN participants that qualify to be customers of
INDEVAL. \7\ ISCC has developed a cross-broker communication link to
INDEVAL using the telecommunication system provided by the Society for
Worldwide Interbank Financial Telecommunications S.C. (``SWIFT''). The
link permits ISCC members that also are members of INDEVAL to send
instructions through ISCC to INDEVAL regarding such participants'
INDEVAL accounts. The link does not provide a mechanism for
transferring securities or funds into or out of the United States.
INDEVAL is providing the services at its scheduled rates and is
responsible for collecting fees directly from the participants.
\7\ The agreement is terminable on ninety days prior notice.
However, if ISCC notifies INDEVAL within such ninety day period that
it has not been able to make arrangements with an alternative
service provider, the agreement terminates thirty days after the
expiration of such ninety day period.
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II. Discussion
The Commission believes the proposal is consistent with the
requirements of Section 17A of the Act and therefore is approving the
proposal.\8\ In the initial order granting ISCC temporary registration
as a clearing agency, the Commission stated that the development of
efficient and comparable automated national and international
clearance, settlement, and payment systems is one of the more important
international goals.\9\ The Commission noted that without established
international systems, broker-dealers and their institutional customers
often are forced to devote substantial resources to each task related
to trade settlement and must deliver securities by physical means. The
Commission also found that clearing linkages facilitate cross-border
settlements without compromising the essential soundness and integrity
of each national clearing and settlement system.
\8\ 15 U.S.C. 78q-1 (1988).
\9\ Securities Exchange Act Release 26812 (May 12, 1989), 54 FR
21691.
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The GCN service offers participating ISCC members advantages in
securities processing including central access for processing trades,
standardized operating procedures, receipt of uniform reports on their
trades, and reduced costs. The addition of INDEVAL as a GCN provider
gives ISCC participants access to settlement services in areas not
currently covered by the GCN service and thus increases the utility of
the GCN service. Therefore, the Commission believes the proposal is
consistent with Section 17A(b)(3)(F) of the Act in that it promotes the
prompt and accurate clearance and settlement of securities
transactions.\10\
\10\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
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III. Conclusion
For the reasons stated above, the Commission finds that ISCC's
proposal is consistent with Section 17A of the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change (File No. SR-ISCC-95-05) be and
hereby is approved.
\11\ 15 U.S.C. 78s(b)(2) (1988).
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For the Commission by the Division of Market Regulation, pursuant
to delegated authority.\12\
\12\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
FR Doc. 96-2461 Filed 2-5-96; 8:45 am]
BILLING CODE 8010-01-M