[Federal Register Volume 63, Number 39 (Friday, February 27, 1998)]
[Notices]
[Pages 10055-10056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4986]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39685; File No. SR-GSCC-97-09]


Self-Regulatory Organizations; Government Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change Relating to Changes to the Fee Structure

February 19, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1935 
(``Act''),\1\ notice is hereby given that on January 5, 1998, the 
Government Securities Clearing Corporation (``GSCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change (File No. SR-GSCC-97-09) as described in Items I, II, and III 
below, which items have been prepared primarily by GSCC. The Commission 
is publishing this notice to

[[Page 10056]]

solicit comments on the proposed rule change from interested persons.
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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

    The prupose of the proposed rule change is to amend GSCC's fees for 
processing of term repurchase agreements (``repos'').\2\
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    \2\ A term repo is a repo for which the settlement date for the 
close leg is more than one business day after the settlement date 
for the start leg.
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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 sections (A), 
(B), and (C) below, of the most significant aspects of such 
statements.\3\
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    \3\ 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 currently provides a settlement service for repos with 
treasury securities as collateral.\4\ When CSCC clears and settles 
repos, it guarantees settlement of the repo from the date the repo is 
compared by GSCC. This proposed rule change amends GSCC's fees for 
clearance of term repos.
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    \4\ Securities Exchange Act Release No. 36491 (November 17, 
1995), 60 FR 61577.
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    As it currently exists and as it will be enhanced in the future, 
GSCC's repo netting service requires significant risk management 
resources and represents a large ongoing expense particularly from an 
operational and technological perspective. In light of this, the board 
of directors of GSCC now believes it is appropriate to revise the 
pricing structure for the netting and guaranteed settlement of term 
repos to cover the true cost of the service and to more closely reflect 
the benefits derived by members from the service. The board also 
believes it is appropriate to revise the pricing structure to cover the 
costs of other repo netting services and enhancements (such as the 
development effort to net same-day start legs) that are important from 
a settlement and risk management perspective and that provide 
operational and cost benefits to members but are not a significant 
source of revenue for GSCC.
    GSCC believes that these goals are best accomplished by shifting 
from a transactional charge to a basis point charge. A transactional 
charge is an inadequate pricing method because it does not reflect the 
size of the repo in dollar terms. Thus, a member carrying a $50 million 
repo incurs the same charge as a member carrying only a million dollar 
repo. GSCC believes this is inequitable because the former member 
brings more risk to GSCC and derives more benefit than the latter 
member.
    The proposed rule change will eliminate a two cents per calendar 
day fee on outstanding start and close term repo legs. Instead, there 
will be new fees for the processing of an outstanding term repo that 
has been compared and netted but has not yet settled. These basis point 
fees will be applied each calendar day but calculated on an annualized 
basis.
    A fee of a .015 basis point charge will be applied to the gross 
dollar amount of a member's term repos that have been entered into 
GSCC's netting system. This fee reflects the potential balance sheet 
offset benefit derived by the member from its repo activity. In 
addition, a fee of a .060 basis point charge will be applied to the net 
dollar amount of a member's term repo activity within a CUSIP. This fee 
reflects the guarantee of settlement and other risk management benefits 
provided by GSCC once a member's activity has been netted by CUSIP.
    GSCC believes that the proposed rule change is consistent with the 
requirements of section 17A(b)(3)(A) of the Act \5\ and the rules and 
regulations thereunder because it will promote the prompt and accurate 
clearance and settlement of securities transactions.
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    \5\ 15 U.S.C. 78q-1.
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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. 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) (ii) \6\ of the Act and Rule 19b-4(e) (2) \7\ promulgated 
thereunder because the proposal establishes or changes a due, fee, or 
other charge imposed by the self-regulatory agency. At any time within 
sixty days of the filing of such proposed rule change the Commission 
may summarily abrogate such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise win furtherance of the 
purposes of the Act.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \7\ 17 CFR 240.19b-4(e)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. 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 GSCC. All submissions should refer 
to the file number SR-GSCC 97-09 and should be submitted by March 20, 
1998.

    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. 98-4986 Filed 2-26-98; 8:45 am]
BILLING CODE 8010-01-M