[Federal Register Volume 67, Number 26 (Thursday, February 7, 2002)]
[Notices]
[Pages 5861-5862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-2960]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45357; File No. SR-GSCC-2001-14]


Self-Regulatory Organizations; Government Securities Clearing 
Corporation; Order Approving a Proposed Rule Change Relating to 
Liability of Affiliated Entities

January 29, 2002.
    On October 11, 2001, the Government Securities Clearing Corporation 
(``GSCC'') filed with the Securities and Exchange Commission 
(``Commission'') pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ a proposed rule change (File No. 
GSCC-2001-14). Notice of the proposal was published in the Federal 
Register on December 20, 2001.\2\ No comment letters were received. For 
the reasons discussed below, the Commission is approving the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 45155 (Dec. 14, 2001), 
66 FR 65768.
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I. Description

    The rule change addresses liability issues that may arise after the 
completion of the integration of GSCC, MBS Clearing Corporation 
(``MBSCC''), and Emerging Markets Clearing Corporation (``EMCC'') with 
The Depository Trust and Clearing Corporation (``DTCC'').\3\ For 
purposes of this notice, DTCC, GSCC, MBSCC, EMCC, The Depository Trust 
Company (``DTC''), and National Securities Clearing Corporation 
(``NSCC'') \4\ are collectively referred to as the ``Synergy 
Companies.'' \5\
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    \3\ Securities Exchange Act Release Nos. 44989 (Oct. 25, 2001), 
66 FR 55220 (Nov. 1, 2001) (order approving integration of GSCC), 
44988 (Oct. 25, 2001), 66 FR 55222 (Nov. 1, 2001) (order approving 
integration of MBSCC), and 44987 (Oct. 25, 2001), 66 FR 55218 (Nov. 
1, 2001) (order approving integration of EMCC).
    \4\ DTC and NSCC are wholly-owned subsidiaries of DTCC.
    \5\ After the completion of the integration, GSCC, MBSCC, and 
EMCC shall each be a wholly-owned subsidiary of DTCC, and a single 
group of individuals shall serve as directors of each of the Synergy 
Companies. Following the integration, GSCC will continue to exist as 
a separate registered clearing agency. The retained earnings of GSCC 
existing at the time of (or as of the end of the last full calendar 
month preceding) the integration of GSCC with DTCC will, as a matter 
of DTCC policy, be dedicated to supporting the business of GSCC. 
GSCC will be managed and operated so as to be appropriately 
capitalized for its activities as a clearing agency.
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    An important aspect of the integration plan is to insulate GSCC, 
its members, and its clearing fund from the risks and obligations that 
may arise from the

[[Page 5862]]

activities of the other Synergy Companies.\6\ The rule change will add 
a section 2 to Rule 39 that provides that notwithstanding any 
affiliation between GSCC and any other entity, including any clearing 
agency, except as otherwise provided by written agreement between GSCC 
and such other entity, (1) GSCC shall not be liable for any obligations 
of such other entity and the clearing fund or other assets of GSCC 
shall not be available to such other entity and (2) such other entity 
shall not be liable for any obligations of GSCC and any assets of such 
other entity shall not be available to GSCC.
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    \6\ The integration plan attempts to similarly insulate MBSCC 
and EMCC. Securities Exchange Act Release Nos. 45358 (Jan. 29, 2002) 
(order approving MBSCC's limitation of liability) and 45359 (Jan. 
29, 2002) (order approving EMCC's limitation of liability). DTC and 
NSCC adopted rules similar to this proposed rule as part of their 
1999 integration with DTCC. Securities Exchange Act Release Nos. 
42013 (Oct. 15, 1999), 64 FR 57168 (Oct. 22, 1999) (order approving 
NSCC's limitation of liability) and 42014 (Oct. 15, 1999), 64 FR 
57171 (Oct. 22, 1999) (order approving DTC's limitation of 
liability).
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II. Discussion

    Section 17A(b)(3)(F) of the Act \7\ requires that the rules of a 
clearing agency assure the safeguarding of securities and funds that 
are in the custody or control of the clearing agency or for which it is 
responsible. The Commission finds that the proposed rule change is 
consistent with GSCC's obligations under section 17A(b)(3)(F) because 
it should help ensure that GSCC's assets, including it's participants 
fund, are not diminished as a result of its affiliation with the 
Synergy Companies.
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    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of 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-GSCC-2001-14) be, and hereby 
is, approved.

    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. 02-2960 Filed 2-6-02; 8:45 am]
BILLING CODE 8010-01-P