[Federal Register Volume 64, Number 156 (Friday, August 13, 1999)]
[Notices]
[Pages 44250-44251]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-21045]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41717; SR-MDSCC-99-05]


Self-Regulatory Organizations; MBS Clearing Corporation; Notice 
of Filing of Proposed Rule Change Relating To Acceptance of Letters of 
Credit

August 6, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 25, 1999, MBS 
Clearing Corporation (``MBSCC'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change 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 
from interested persons on the proposed rule change.
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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 purpose of the proposed rule change is to modify MBSCC's rule 
regarding letters of credit accepted for clearing fund purposes to 
facilities implementation of the uniform letter of credit developed by 
the Uniform Clearing Group.\2\
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    \2\ MBSCC attached a copy of the uniform letter of credit as 
Exhibit B to the filing.
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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, 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.\3\
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    \3\ 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

    Article IV, Rule 2, Section 9 of MBSCC's rules governs deposits of 
letters of credit by participants to the participants' fund for margin 
purposes. Currently, the rule requires participants to amend letters of 
credit expiring on September 1 by extending the expiration date to 
March 1 of the following year, and to deposit new letters of credit on 
March 1 of the following year. The proposed rule change will reverse 
these dates and require participants to annually provide new letters of 
credit by September 1 and to amend letters of credit by March 1. The 
proposed rule change will also require that letters of credit delivered 
to MBSCC on or after September 1, 1999, be in the form of the uniform 
letter of credit (``ULC'') developed by the United Clearing Group 
(``UCG'').
    The UCG is an organization comprised of all of the major securities 
and futures clearing organizations and depositories in the U.S.\4\ The 
ULC was developed to foster uniformity among the various U.S. 
securities and futures clearing organizations with respect to the 
acceptable terms of letters of credit that are deposited as margin and 
to reduce operational burdens for industry participants and their 
letters of credit issuers. In developing the ULC, the UCG consulted 
with the National Standby Letter of Credit Committee of the 
International Financial Services Association (formerly known as the 
U.S. Council on International Banking) and several letters of credit 
issuing banks.
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    \4\ The members of the UCG include the Boston Stock Exchange 
Clearing Corporation, The Depository Trust Company, Government 
Securities Clearing Corporation, MBSCC, National Securities Clearing 
Corporation, Options Clearing Corporation, Board of Trade Clearing 
Corporation, Chicago Mercantile Exchange, Clearing Corporation of 
New York, Kansas City Board of Trade, Minneapolis Grain Exchange, 
New York Mercantile Exchange, Emerging Markets Clearing Corporation, 
and Clearing Corporation for Options and Securities.
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    The ULC consists of a cover page with variable terms plus 
preprinted uniform terms. Variable terms include the name of the 
participant, the beneficiary clearing organization, the issuing bank, 
the amount of the credit, and the expiration date. To assist letter of 
credit issues and participants in completing the ULC, the UCG has 
drafted general instructions. In addition, MBSCC has provided 
supplemental instructions relating specifically to letters of credit 
furnished by MBSCC.
    MBSCC expects that in the future modifications may be made to the 
ULC. If and when that occurs, MBSCC will require its members to use the 
revised form.\5\
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    \5\ MBSCC will file proposed rule changes with the Commission 
prior to requiring members to comply with substantive changes made 
to the ULC by the UCG.
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    MBSCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act and the rules and regulations 
thereunder because, among other things, it is designed to assure the 
safeguarding of securities and funds which are in the custody or 
control of MBSCC or for which it is responsible and to foster 
cooperation and coordination with persons engaged in the clearance and 
settlement of securities transactions.

(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.

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

    No comments on the proposed rule change were solicited or received. 
MBSCC will notify the Commission of any written comments it receives.

[[Page 44251]]

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 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (a) By order approve the 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, 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, NW., Washington, DC 20549-0609. 
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. Sec. 552, will be available for inspection and copying in 
the Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of MBSCC. All 
submissions should refer to File No. SR-MBSCC-99-05 and should be 
submitted by September 3, 1999.

    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-21045 Filed 8-12-99; 8:45 am]
BILLING CODE 8010-01-M