[Federal Register Volume 66, Number 107 (Monday, June 4, 2001)]
[Notices]
[Pages 30034-30035]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13956]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44364; File No. SR-GSCC-2001-04]


Self-Regulatory Organizations; The Government Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Amendments to Fee Structures

May 29, 2001.
    Pursuant to section 19(b)(1) of the Securities and Exchange Act of 
1934 (``Act,'') \1\ notice is hereby given that on April 18, 2001, the 
Government Securities Clearing Corporation (``GSCC'') filed with the 
Securities and Exchange Commission (``Commission'') and on April 27, 
2001, amended the proposed rule change as described in Items I, II, and 
III below, which items have been prepared primarily by GSCC. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested parties.
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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 proposed rule change will allow GSCC to amend its fee structure 
to reallocate certain repurchase transaction (``repo'') processing fees 
in both its delivery-versus-payment (``DVP'') and GCF Repo services to 
provide for a more equitable distribution among its members. These 
changes became effective on May 1, 2001.

[[Page 30035]]

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 statement 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the 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 these statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by GSCC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    Effective February 2, 1998, GSCC revised its pricing structure for 
the cost of carry related to term repo transactions (i.e., repo 
transactions in which the close leg is scheduled to settle more than 
one day after the start leg) in its DVP service to: (a) Cover the true 
cost of providing its netting services to such transactions, which 
involves significant risk management, operational, and technological 
resources and (b) more closely reflect the benefits derived by members 
from the service.\3\ To accomplish these goals, GSCC shifted from a 
transactional charge to a basis point charge, which is a more 
appropriate pricing method because it is based on the size of the term 
repo transaction in dollar terms. It thus reflects the fact that the 
larger the dollar amount of the repo the more risk it brings to GSCC. 
Moreover, the larger the dollar amount of the repo the greater the 
benefits incurred by the member, including balance sheet relief and 
guaranteed settlement.
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    \3\ Securities Exchange Act Release No. 34-39685 (February 27, 
1998), 63 FR 10055 [File No. SR-GSCC-97-09] (approving amendments to 
GSCC's fees for processing term repurchase agreements).
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    The basis point charges that were adopted by GSCC and are currently 
in effect are as follows: (1) A .015 basis point fee is applied to the 
gross dollar amount of each repo transaction that has been compared and 
netted but which has not yet settled and (2) a .060 basis point fee is 
applied to the net dollar amount of a member's repo transactions within 
a CUSIP that have been compared and netted; but which has not yet 
settled. The fee in subsection (1) reflects the potential balance sheet 
offset benefit derived by the member for its repo activity. The fee in 
subsection (2) reflects the guarantee of settlement and other risk 
management benefits provided by GSCC once a member's activity has been 
netted within a CUSIP. A similar set of fees applies to GCF Repo 
transactions with no distinction between overnight and term GCF Repo 
transactions.
    The proposed rule change addresses the manner in which the fee in 
subsection (1) above is applied to brokered term repo transactions. 
Currently if Dealer A and Dealer B enter into a DVP term repo 
transaction or a GCF Repo transaction through Repo Broker C, each of 
Dealer A and Dealer B would be subject to the .015 basis point charge. 
Repo Broker C, however, would be subject to two .015 basis point 
charges (i.e., the repo transaction with Dealer A and the reverse with 
Dealer B for a total .030 basis point fee). It is the inequity in the 
application of the fee structure to brokers and dealers that GSCC is 
proposing to address herein.
    Specifically, GSCC is proposing to reduce the fee for repo brokers 
with respect to their DVP term brokered repo transaction activity and 
their GCF Repo transaction activity to a .010 basis point fee and to 
increase the fee for all other netting members (including repo brokers 
with respect to their non-brokered repo transaction activity) to a .020 
basis point fee. Therefore, in the example above, each of Dealer A, 
Dealer B, and Repo Broker C would be required to pay a .020 basis point 
fee. Repo Broker C's fee reflects a .010 basis point charge for the 
repo with Dealer A and a .010 basis point charge for the reverse with 
Dealer B. This results in a more equitable treatment of all of the 
parties to the transaction.
    GSCC is not proposing any changes to the current .060 basis point 
fee applicable to the net dollar amount of DVP term repo transactions 
within a CUSIP or GCF Repo transactions. The .060 basis point fee, 
which is based on netted dollar amounts, does not raise issues of 
inequitable application because brokers maintain flat positions.
    The proposed rule change is consistent with the requirements of Act 
because it involves changes to GSCC's fee structure that more fairly 
reflects the distribution of the costs incurred by GSCC in providing 
services to its members.

(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) of the Act and Rule 19b-4(f)(2) thereunder because the 
proposed rule change is changing a due, fee, or charge imposed by the 
self-regulatory organization. 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 in furtherance of the purposes of 
Act.

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-
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. 552, will be available for inspection and copying in the 
Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of GSCC. All 
submissions should refer to File No. SR-GSCC-2001-04 and should be 
submitted by June 25, 2001.

    For the Commission, by the Division of Market Regulations, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-13956 Filed 6-1-01; 8:45 am]
BILLING CODE 8010-01-M