[Federal Register Volume 67, Number 27 (Friday, February 8, 2002)]
[Notices]
[Pages 6065-6066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-3045]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45358; File No. SR-MBSCC-2001-04]


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

January 29, 2002.
    On October 11, 2001, the MBS Clearing Corporation (``MBSCC'') filed 
with the Securities and Exchange Commission (``Commission'') pursuant 
section 19(b)(1) of the Securities Exchange Act of 1945 (``Act'') \1\ a 
proposed rule change (File NO. MBSCC-2001-04). 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. 45153 (Dec. 14, 2001), 
66 FR 65769.
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I. Description

    The rule change addresses liability issues that may arise after the 
completion of integration of MBSCC, the Government Securities Clearing 
Corporation (``GSCC''), and the Emerging Markets Clearing Corporation 
(``EMCC'') with The Depository Trust and Clearing Corporation 
(``DTCC'').\3\ For purposes of this notice, MBSCC, GSCC, EMCC, DTCC, 
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. 44988 (Oct. 25, 2001), 
66 FR 55222 (Nov. 1, 2001) (order approving integration of MBSCC), 
44989 (Oct. 25, 2001), 66 FR 55220 (Nov. 1, 2001) (order approving 
integration of GSCC), 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, MBSCC, GSCC, 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, MBSCC will continue to exist 
as a separate registered clearing agency. The retained earnings of 
MBSCC existing at the time of (or as of the end of the last full 
calendar month preceding) the integration of MBSCC with DTCC will, 
as a matter of DTCC policy, be dedicated to supporting the business 
of MBSCC. MBSCC 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 MBSCC, 
its members, and its clearing fund from the risks and obligations that 
may arise from the activities of the other Synergy Companies.\6\ The 
rule change will add a new Rule 15 to Section V of MBSCC's Rules and a 
new Rule 14 to Article X of MBSCC's EPN Rule that provides that 
notwithstanding any affiliation between MBSCC and any other entity, 
including any clearing agency, except as otherwise provided by written 
agreement between MBSCC and such other entity, (1) MBSCC shall not be 
liable for any obligations of such other entity and the clearing fund 
or other assets of MBSCC shall not be available to such other entity 
and (2) such other entity shall not be liable for any obligations of 
MBSCC and any assets of such other entity shall not be available to 
MBSCC.
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    \6\ The integration plan attempts to similarly insulate GSCC and 
EMCC. Securities Exchange Act Release Nos. 45357 (Jan. 29, 2002) 
(order approving GSCC'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

[[Page 6066]]

Commission finds that the proposed rule change is consistent with 
MBSCC's obligations under section 17A(b)(3)(F) because it should help 
ensure that MBSCC's assets, including it 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-MBSCC-2001-04) 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. 02-3045 Filed 2-7-02; 8:45 am]
BILLING CODE 8010-01-M