[Federal Register Volume 62, Number 187 (Friday, September 26, 1997)]
[Notices]
[Pages 50646-50647]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25519]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39103; File No. SR-MBSCC-97-5]


Self-Regulatory Organizations; MBS Clearing Corporation; Notice 
of Filing of a Proposed Rule Change Regarding Participant Liability for 
Transactions Submitted on Behalf of Nonparticipants

September 22, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ notice is hereby given that on August 1, 1997, MBS 
Clearing Corporation (``MBSCC'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change (File No. SR-
MBSCC-97-5) 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)(i).
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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 clarify that participants will be 
liable as principal for any contracts or other transactions submitted 
to MBSCC on behalf of entities that are not participants 
(``nonparticipants'') and that nonparticipants will not be deemed to 
possess any rights or benefits of participants.

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

    Currently, MBSCC's rules state that participants that process any 
contracts or other transactions through MBSCC for other participants 
are liable as principal for such contracts or transactions. However, it 
has always been MBSCC's intention that participants be principally 
liable whether they submit a contract or transaction on behalf of other 
participants or nonparticipants. Thus, the proposed rule change will 
clarify that participants will be liable as principal for any contracts 
or other transactions processed, compared, settled, or carried out on 
behalf of nonparticipants. In addition, the proposed rule change states 
that such nonparticipants will not be deemed to possess any of the 
rights or benefits of participants.

[[Page 50647]]

    MBSCC believes that the proposed rule change will further protect 
MBSCC in the event a participant fails to discharge its liabilities. In 
this respect, MBSCC will treat all of a participant's accounts \3\ and 
obligations as belonging to such participant regardless of the identity 
of the original underlying party. In addition, MBSCC believes that the 
proposed rule change will remove any doubt that a participant's 
participant fund \4\ deposits will be available for all of the 
participant's transactions regardless of the source. Furthermore, MBSCC 
believes that this proposed rule change will foreclose any attempt by a 
nonparticipant to assert a claim against MBSCC with respect to a trade.
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    \3\ According to MBSCC's rules, the term account generally means 
any account maintained by MBSCC on behalf of a participant for the 
comparison, margining, and clearing of trades.
    \4\ According to MBSCC's rules, the term ``participant fund'' 
means the fund for which provision is made in Article IV to which 
participants are required to make basic deposits, minimum market 
margin differential deposits, and market margin differential 
deposits.
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    MBSCC believes that the proposed rule change is consistent with 
Section 17A of the Act and the rules and regulations promulgated 
thereunder in that it will enhance MBSCC's ability to protect itself 
and its participants against loss.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    MBSCC does not believe that the proposed rule change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act.

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

    MBSCC has not solicited or received comments relating to the 
proposed rule change. 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 reasons for so 
findings or (ii) as to which MBSCC consents, the Commission will:
    (A) By order approve such proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 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 
inspections and copying at the principal office of MBSCC. All 
submissions should refer to the File No. SR-MBSCC-97-5 and should be 
submitted by October 17, 1997.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-25519 Filed 9-25-97; 8:45 am]
BILLING CODE 8010-01-M