[Federal Register Volume 62, Number 239 (Friday, December 12, 1997)]
[Notices]
[Page 65466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32485]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39405; File No. SR-MBSCC-97-5]


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

December 5, 1997.
    On August 1, 1997, MBS Clearing Corporation (``MBSCC'') filed with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change (File No. SR-MBSCC-97-5) pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal 
was published in the Federal Register on September 26, 1997.\2\ 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. 39103 (September 22, 
1997), 62 FR 50646.
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I. Description

    Pursuant to MBSCC's current rules, participants that process any 
contracts or other transactions through MBSCC for other participants 
are liable as principal for such contracts or transactions. The 
proposed rule change clarifies that participants also are liable as 
principal for any contracts or other transactions submitted to MBSCC on 
behalf of entities that are not participants (``nonparticipants'') and 
that nonparticipants are not deemed to possess any rights or benefits 
of participants.
    As a result, MBSCC will treat all of a participant's accounts \3\ 
and obligations as belonging to such participant regardless of the 
identity of the underlying party. Thus, a participant's participant 
fund \4\ deposits will be available for all of the participant's 
transactions regardless of the source.
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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 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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II Discussion

    Section 17A(b)(3)(F) of the Act \5\ requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in its custody or control or for which it is 
responsible. The Commission believes that the proposed rule change adds 
certainty as to the treatment of the positions submitted on behalf of 
nonparticipants upon default of a participant. Thus, the proposal 
should enhance MBSCC's ability to protect itself and its participants 
against loss. Therefore, the Commission believes that MBSCC's proposal 
is consistent with its obligations 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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    \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-97-5) 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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Jonathan G. Katz,
Secretary.
[FR Doc. 97-32485 Filed 12-11-97; 8:45 am]
BILLING CODE 8010-01-M