[Federal Register Volume 64, Number 172 (Tuesday, September 7, 1999)]
[Notices]
[Pages 48693-48694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23111]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41801; File No. SR-NSCC-99-05]


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

August 27, 1999.
    On April 20, 1999, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-NSCC-99-05) 
pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ to permit NSCC 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 members of the UCG include the Boston Stock Exchange 
Clearing Corporation, The Depository Trust Company, Government 
Securities Clearing Corporation, MBS Clearing Corporation, NSCC, The 
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. 41716 (August 6, 1999), 
64 FR 44252.
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I. Description

    Rule 4, Section 1 of NSCC's Rules and Procedures permits NSCC to 
accept letters of credit in addition to cash and government securities 
as collateral for its clearing fund.\4\ The proposed rule change will 
require that letters of credit delivered to NSCC on or after September 
1, 1999, be in the form of the uniform letter of credit (``ULC'') 
developed by the UCG.
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    \4\ Securities Exchange Act Release No. 18052 (August 21, 1981), 
46 FR 43341.
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    The ULC consists of a cover page plus the uniform terms. All 
variable terms of the ULC, such as the name of the clearing member, the 
beneficiary clearing corporation, the issuing bank, the amount of the 
credit, and the expiration date, are set forth on the cover page. To 
assist members in completing the ULC, the UCG drafted general 
instructions. In addition, NSCC has provided supplemental instructions

[[Page 48694]]

relating specifically to letters of credit furnished to NSCC.
    NSCC expects that modifications may be made to the ULC in the 
future. If and when that occurs, NSCC will require its members to use 
the revised form.\5\
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    \5\ NSCC will file a proposed rule change with the Commission 
prior to requiring members to comply with any substantive changes 
made to the ULC.
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II. Discussion

    Section 17A(b)(3)(F) \6\ 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. NSCC 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 NSCC and other UCG members as 
collateral will be enforceable. Accordingly, the Commission finds that 
the rule change is consistent with NSCC's obligations under the Act.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    NSCC 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 NSCC 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-NSCC-99-05) be and hereby is 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-23111 Filed 9-3-99; 8:45 am]
BILLING CODE 8010-01-M