[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