[Federal Register Volume 64, Number 172 (Tuesday, September 7, 1999)]
[Notices]
[Page 48692]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23110]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41803; File No. SR-MBSCC-99-05)]


Self-Regulatory Organizations; MBS Clearing Corporation; Order 
Granting Accelerated Approval of a Proposed Rule Change Relating to the 
Acceptance of Letters of Credit

August 27, 1999.
    On June 25, 1999, the MBS Clearing Corporation (``MBSCC'') filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change (File No. SR-MBSCC-99-05) pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ to permit MBSCC to 
replace its current letter of credit form with a letter of credit form 
developed by the Uniform Clearing Group (``UCG'').\2\ Notice of the 
proposal was published in the Federal Register on August 13, 1999.\3\ 
No comment letters were received. For the reasons discussed below, the 
Commission is granting accelerated approval of the proposed rule 
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ The UCG is an organization comprised of all of the major 
securities and futures clearing organizations and depositories in 
the U.S. 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.
    \3\ Securities Exchange Act Release No. 41717 (August 6, 1999), 
64 FR 44250.
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I. Description

    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 reserve 
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 UCG.
    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 to 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.\4\
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    \4\ MBSCC will file a proposed rule change with the Commission 
prior to requiring members to comply with any substantive change 
made to the ULC by the UCG.
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II. Discussion

    Section 17A(b)(3)(F) \5\ of the Act requires that the rules of a 
clearing agency be designed to foster cooperation and coordination with 
persons engaged in the clearance and settlement of securities 
transactions. MBSCC and the other members of the UCG developed the ULC 
to foster uniformity among the various U.S. securities and futures 
clearing organizations with respect to letters of credit that are 
deposited as collateral. This uniformity will help reduce operational 
burdens for securities and futures industry participants and their 
letter of credit issuers. It should also enhance the legal certainty 
that the letters of credit received by MBSCC and other UCG members as 
collateral will be enforceable. Accordingly, the Commission finds that 
the rule change is consistent with MBSCC's obligations under the Act.
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    \5\ U.S.C. 78q-1(b)(3)(F).
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    MBSCC has requested 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 for so approving the proposed rule change because accelerated 
approval will permit MBSCC to implement the ULC by September 1, 1999, 
at which time its previous letters of credit expire. Since September 1, 
1999, is the scheduled implementation date of the ULC by certain UCG 
members, accelerated approval will also provide for a more coordinated 
implementation of the ULC. Furthermore, the Commission has not received 
any comment letters and does not expect to receive any comment letters 
on the proposal.

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular 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-99-05) 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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-23110 Filed 9-3-99; 8:45 am]
BILLING CODE 8010-01-M