[Federal Register Volume 61, Number 154 (Thursday, August 8, 1996)]
[Notices]
[Pages 41437-41438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20184]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37512; File No. SR-MBSCC-96-01]


Self-Regulatory Organizations; MBS Clearing Corporation; Order 
Approving a Proposed Rule Change To Modify Participants Fund Deposit 
Requirements

August 1, 1996.
    On March 8, 1996, MBS Clearing Corporation (``MBSCC'') filed with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change (File No. SR-MBSCC-96-01) pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') to modify its participants 
fund deposit requirements.\1\ On March 25, and May 30, 1996, MBSCC 
filed amendments to the proposed rule change.\2\ Notice of the proposal 
was published in the Federal Register on June 14, 1996.\3\ No comment 
letters were received. For the reasons discussed below, the Commission 
is approving the proposed rule change.
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    \1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\ Letters from Anthony H. Davidson, MBSCC, to Christine 
Sibille, Division of Market Regulation (``Division''), Commission 
(March 18, 1996) and to Mark Steffensen, Division, Commission (May 
24, 1996).
    \3\ Securities Exchange Act Release No. 37294 (June 10, 1996), 
61 FR 30268.
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I. Description

    The rule change revises the basic deposit component of the MBSCC 
participants fund requirements to correlate more closely with 
participants' actual usage of MBSCC services.\4\ The basic deposit 
component is intended to ensure that participants' obligations to MBSCC 
for fees will be satisfied if participants are unable to meet such 
obligations.\5\ The rule change reduces the basic deposit requirement 
for participants from $10,000 per account maintained at MBSCC to a 
minimum of $1,000 for each participant regardless of the number of 
accounts maintained.\6\ If a participant's average monthly services 
bill, as determined by MBSCC on a semiannual basis, exceeds $1,000, the 
participant's basic deposit requirement will be the amount of such 
average monthly services bill up to a maximum amount of $10,000 per 
account maintained by such participant.
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    \4\ The MBSCC participants fund is composed of a basic deposit, 
a minimum market margin differential deposit (``3MD''), and a daily 
margin requirement referred to as a market margin differential 
deposit (``MMD''). The purpose of the 3MD is to provide additional 
assurances that each participant's fund contributions will be 
adequate to satisfy all open commitments recorded with MBSCC. 
Currently, the deposit required to satisfy this component of the 
participants fund is $250,000 per participant. The purpose of the 
MMD is to ensure that a participant. The purpose of the MMD is to 
ensure that a participant's open obligations to MBSCC will be 
satisfied in the event the participant is unable to meet such 
obligations. MMD is derived from a formula which assesses various 
factors including the type of position held and marked-to-market 
value fluctuations. The rule change will not affect the requirements 
of MBSCC participants with regard to the MMD and 3MD components of 
the participants fund.
    \5\ Notwithstanding the purposes of the basic deposit, MMD, and 
3MD components of the participants fund, MBSCC is not limited in its 
application of participants fund proceeds. Rather, MBSCC can utilize 
the total participants fund to satisfy a participant's obligations 
to MBSCC irrespective of the nature of the obligation.
    \6\ MBSCC determined that its participants on average maintain 
two accounts at MBSCC. The monthly maintenance fee per account is 
$350 or $700 for two accounts. MBSCC based the minimum deposit 
amount of $1,000 upon these averages and other participant usage 
data.
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II. Discussion

    Section 17A(b) (3) (F) \7\ 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. The Commission believes that MBSCC's 
proposed rule change is consistent with MBSCC's obligations under the 
Act because the revised basic deposit requirements should adequately 
protect MBSCC from losses resulting from a participant's failure to pay 
MBSCC fees without placing an undue burden on participants. Moreover, 
revision of the basic deposit requirement should more closely

[[Page 41438]]

correlate a participant's actual usage of and billing for MBSCC 
services with its correspondent deposit to the participants fund.
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    \7\ 15 U.S.C. Sec. 78q-1(b)(3) (F) (1988).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A 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-96-01) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12) 1995).
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Jonathan G. Katz,
Secretary.
[FR Doc. 96-20184 Filed 8-7-96; 8:45 am]
BILLING CODE 8010-01-M