[Federal Register Volume 62, Number 95 (Friday, May 16, 1997)]
[Notices]
[Page 27091]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12826]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38595; File No. SR-MBSCC-96-08]


Self-Regulatory Organizations; MBS Clearing Corporation; Order 
Approving a Proposed Rule Change Relating to Liens on Participants' 
Property

May 9, 1997.
    On November 20, 1996, MBS Clearing Corporation (``MBSCC'') filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change (File No. SR-MBSCC-96-08) pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ to explicitly state 
that MBSCC has a lien on all property placed in its possession by its 
participants. On January 3, 1997, and on January 14, 1997, MBSCC filed 
amendments to the proposed rule change. Notice of the proposal was 
published in the Federal Register on February 26, 1997.\2\ On April 10, 
1997, MBSCC again amended the proposed rule change.\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. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 38314 (February 19, 
1997), 62 FR 8809.
    \3\ The amendment was technical in nature and therefore did not 
require republication of the notice.
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I. Description

    Unlike other clearing agencies, MBSCC's rules did not contain 
specific language stating that MBSCC has a lien on all property placed 
into its possession by its participants.\4\
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    \4\ For example, the rules of the National Securities Clearing 
Corporation (``NSCC'') and the International Securities Clearing 
Corporation (``ISCC'') provide NSCC and ISCC with liens on property 
placed in their possession by their participants. The language 
contained in the present proposed rule change is substantially 
similar to the language contained in NSCC's and ISCC's respective 
rules. NSCC Rule 18, Section 2(f) and ISCC Rule 18, Section 3.
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    However, MBSCC has stated that it always intended to have such a 
lien. The proposed rule change modifies MBSCC's rules to explicitly 
state that MBSCC has a lien on all property placed in its possession by 
its participants.
    The proposed rule change also revises MBSCC's rules to clarify that 
any cash received with respect to deposits to MBSCC's participants fund 
from and not yet distributed to a participant is available to MBSCC for 
satisfaction of participant liabilities.

II. Discussion

    Section 17A(b)(3)(F) \5\ of the Act requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. The Commission 
believes that the proposed rule change is consistent with MBSCC's 
obligations under the Act because the proposed rule change adds 
language providing MBSCC with assurances that, in the event one of its 
participants fails to discharge its liabilities, MBSCC will have a lien 
on the participant's property in MBSCC's possession. Therefore, MBSCC 
can utilize the participant's cash or securities subject to the lien to 
cover the participant's unpaid obligations to MBSCC. As a result, MBSCC 
is in a better position to protect itself and its participants from a 
defaulting participant.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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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-96-08) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-12826 Filed 5-15-97; 8:45 am]
BILLING CODE 8010-01-M