[Federal Register Volume 61, Number 240 (Thursday, December 12, 1996)]
[Notices]
[Page 65424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31498]



[[Page 65424]]

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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38021; File No. SR-MBSCC-96-06]


Self-Regulatory Organizations; MBS Clearing Corporation; Notice 
of Filing of a Proposed Rule Change Relating to Satisfying Daily Margin 
Requirements

December 5, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ notice is hereby given that on October 7, 1996, MBS 
Clearing Corporation (``MBSCC'') 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 
MBSCC. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change will eliminate the depository receipt as a 
method of satisfying participants fund deposit requirements and instead 
will require participants that use securities to satisfy their daily 
margin requirements to deliver the securities in book-entry form to 
MBSCC's account at any entity approved by MBSCC which shall hold the 
securities on behalf of MBSCC.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for the Proposed Rule Change

    In its filing with the Commission, MBSCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. MBSCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of such 
statements.\2\
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    \2\ The Commission has modified the text of the summaries 
submitted by MBSCC.
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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 eliminate the use of 
the depository receipt as a method of satisfying participants fund 
deposit requirements. Instead, MBSCC will require that any participant 
who uses securities to satisfy such requirement to deliver the 
securities to MBSCC's account at any entity approved by MBSCC (``book-
entry method'').
    The depository receipt method involves the joint endorsement by the 
participant and the custodian of a receipt evidencing the pledge of 
specified securities. There are several potential risks associated with 
depository receipts that would be eliminated with the use of the book-
entry method of pledging securities. Such risks include: (1) Forgery, 
(2) unauthorized individuals executing on behalf of the participant or 
the custodian, (3) improper segregation of the pledged securities from 
other securities, (4) unauthorized releases of the pledged securities, 
and (5) the possibility that the custodian would not release the 
securities to MBSCC upon MBSCC's proper demand for such a release. For 
this year to date, MBSCC asserts that the average daily dollar value of 
securities pledged using the depository receipt method to satisfy daily 
margin requirements is $1.05 billion. MBSCC will be responsible for the 
payment of any fees associated with the establishment of a pledge 
account at a trust company approved by MBSCC's board of directors for 
use in connection with the book-entry method.
    MBSCC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act \3\ and the rules and 
regulations promulgated thereunder because the rule change will enhance 
MBSCC's ability to protect itself and its participants against loss.
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    \3\ 15 U.S.C. 781-1 (1988).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    MBSCC does not believe that the proposed rule change will impact or 
impose a burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received from Members, Participants, or Others

    No written comments relating to the proposed rule change have been 
solicited or received. MBSCC will notify the Commission of any written 
comments received by MBSCC.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reason for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (A) By order approve such proposed rule change or
    (B) Institute proceeding to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested person 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 N.W., Washington, D.C. 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 Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. Copies of such filing will also be available 
for inspection and copying at the principal office of MBSCC. All 
submissions should refer to File No. SR-MBSCC-96-06 and should be 
submitted by January 3, 1997.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12) (1996).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-31498 Filed 12-11-96; 8:45 am]
BILLING CODE 8010-01-M