[Federal Register Volume 62, Number 186 (Thursday, September 25, 1997)]
[Notices]
[Pages 50415-50416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25462]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39099; File No. SR-GSCC-97-08]


Self-Regulatory Organizations; Government Securities Clearing 
Corporation; Notice of Filing and Order Granting Accelerated Approval 
of a Proposed Rule Change to Extend the Maximum Term for Repurchase 
Agreements

September 19, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 6, 1997, the 
Government Securities Clearing Corporation (``GSCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change (File No. SR-GSCC-97-08) as described in Items I and II below, 
which items have been prepared primarily by GSCC. The Commission is 
publishing this notice and order to solicit comments on the proposed 
rule change from interested persons and to grant accelerated approval 
of the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    GSCC proposes to amend the time frame for the maximum allowable 
number of calendar days that the term of a repurchase agreement 
(``repo'') may span.

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 section (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 GSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    GSCC proposes to extend the maximum number of calendar days that a 
repo's term may span and still be eligible for netting services from 
360 calendar days to two calendar years. GSCC Rule 11 states the 
requirements that a repo must meet in order to be eligible for netting 
services and provides that the number of calendar days between the 
scheduled settlement date for the close leg and the business day on 
which trade data is submitted may not be greater than the ``maximum 
number of business days established by the Corporation for such purpose 
and published in a schedule made available to members. * * *'' When 
GSCC introduced its repo netting service in November 1995, it set the 
maximum number of days allowable between scheduled settlement and data 
submission at 195 calendar days.\3\ Last year, it received Commission 
approval to extend this maximum time period to 360 calendar days.\4\
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    \3\ Securities Exchange Act Release No. 36491 (November 17, 
1995), 60 FR 61577 [File No. SR-GSCC-95-02] (order approving 
proposed rule change implementing netting services for certain repo 
transactions).
    \4\ Securities Exchange Act Release No. 37996 (November 27, 
1996), 61 FR 64778 [File No. SR-GSCC-96-11].
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    In response to rising repo volumes and at the request of GSCC's 
members that engage in repos with a term of greater than one year, GSCC 
proposes to extend the time period that a repo term may span and still 
be eligible for netting services to two years. Members will benefit 
from the inclusion of longer term repos in the netting service because 
clearing and settlement risks and costs will be further reduced by 
encompassing more repo transactions into the net. GSCC believes that 
its risk management procedures currently in place are sufficient to 
protect against any exposure created by longer repo terms. GSCC will 
continue to monitor and to evaluate all aspects of its repo netting 
services.
    GSCC believes that the proposed rule change is consistent with the 
requirements of Section 17A(b)(3)(F) \5\ of the Act and the rules and 
regulations thereunder because it promotes the prompt and accurate 
clearance and settlement of securities transactions and safeguards 
securities and funds in GSCC's custody or control.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    GSCC does not believe that the proposed rule change will have an 
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

    Written comments relating to the proposed rule change have not yet 
been solicited or received. Members will be notified of the rule change 
filing and comments will be solicited by an Important Notice. 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

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency must be designed to promote the prompt and accurate 
clearance and settlement of securities transactions and 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.\6\ The 
Commission believes that the proposed

[[Page 50416]]

rule change is consistent with GSCC's obligations under the Act because 
the proposal permits GSCC to provide the benefits of centralized, 
automated settlement to a broader segment of repos involving government 
securities. Thus, the proposal should assist in the prompt and accurate 
clearance and settlement of securities transactions.
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    \6\ Id.
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    As discussed in the order approving GSCC's repo netting system, the 
Commission believes that GSCC has put into place adequate risk 
management procedures to limit the settlement risk associated with repo 
transactions.\7\ The Commission also believes that GSCC has adequately 
analyzed the application of these risk management procedures to the 
risks associated with longer term repo transactions and therefore will 
be able to adequately safeguard itself and its participants from the 
risk associated with the inclusion of longer term repo transactions in 
the netting system. Thus the proposal is consistent with GSCC's 
obligation to assure the safeguarding of securities and funds which are 
in its custody or control or for which it is responsible.
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    \7\ Supra note 3.
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    GSCC requests that the Commission find good cause for approving the 
proposed rule change prior to the thirtieth day after the date of 
publication of notice of the filing. The Commission finds good cause 
exists for approving the proposed rule change prior to the thirtieth 
day after the date of publication of notice of the filing because 
accelerated approval will allow GSCC to immediately expand its netting 
services to include repos with terms between 360 calendar days and two 
years. This will permit more participants that conduct repo 
transactions to benefit from the positive effects of netting.

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, 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 Room, 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 GSCC. All submissions should 
refer to the file number SR-GSCC-97-08 and should be submitted by 
October 16, 1997.
    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-GSCC-97-08) 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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-25462 Filed 9-24-97; 8:45 am]
BILLING CODE 8010-01-M