[Federal Register Volume 67, Number 27 (Friday, February 8, 2002)]
[Notices]
[Page 6066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-3048]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45377; File No. SR-MBSCC-2001-05]


Self-Regulatory Organizations; MBS Clearing Corporation; Order 
Granting Accelerated Approval of a Proposed Rule Change Relating to a 
New Governance Structure

January 31, 2002.
    On October 11, 2001, the MBS Clearing Corporation (``MBSCC'') 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. MBSCC-2001-05). On December 26, 
2001, MBSCC filed an amendment to the proposed rule change. Notice of 
the proposal was published in the Federal Register on January 15, 
2001.\2\ No comment letters were received.\3\ For the reasons discussed 
below, the Commission is approving the proposed rule change on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 45248 (Jan. 7, 2002), 67 
FR 2006.
    \3\ This proposed rule change had a fifteen day comment period.
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I. Description

    The proposed rule change will amend MBSCC's rules to reflect 
MBSCC's new ownership and governance structure that will result from 
the integration of MBSCC, the Government Securities Clearing 
Corporation (``GSCC''), and Emerging Markets Clearing Corporation 
(``EMCC'') with The Depository Trust & Clearing Corporation (``DTCC'') 
whereby MBSCC, GSCC, and EMCC will become operating subsidiaries of 
DTCC.\4\
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    \4\ For explanations of the mechanics of these integration 
plans, refer to 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). The 
Depository Trust Company (``DTC'') and National Securities Clearing 
Corporation (``NSCC'') are currently operating subsidiaries of DTCC. 
Securities Exchange Act Release Nos. 41786 (Aug. 24, 1999), 64 FR 
47882 (Sept. 1, 1999) and 41800 (Aug. 27, 1999), 64 FR 48694 (Sept. 
7, 1999) (orders approving integration of DTC, NSCC, and DTCC).
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    In order for MBSCC to maintain orderly and efficient operations, 
MBSCC will implement a three-tiered governance structure. The first 
tier will be the Board of Directors of MBSCC that will be identical in 
composition to the Board of Directors of GSCC, EMCC, DTC, NSCC, and 
DTCC. MBSCC's business will be managed under the direction of the MBSCC 
Board, which will set the basic policy direction for MBSCC. The second 
tier will consist of committees of or established by the MBSCC Board 
and committees of or established by the DTCC Board.\5\ The third tier 
will be MBSCC management, which will oversee the daily routine 
operations of MBSCC. The changes to MBSCC's rules will reassign various 
management responsibilities to the MBSCC Board, the new committees, or 
MBSCC management in light of the revised management structure 
summarized above.
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    \5\ Many of MBSCC's Board committees will be joint committees of 
the Boards of DTCC and its operating subsidiaries. For example, 
there will be a DTCC/DTC/NSCC/GSCC/MBSCC/EMCC Nominating Committee, 
a DTCC/DTC/NSCC/GSCC/MBSCC/EMCC Fixed Income Operations and Planning 
Committee, a DTCC/DTC/NSCC/GSCC/MBSCC/EMCC Audit Committee, and a 
GSCC/MBSCC Membership and Risk Management Committee.
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II. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder and particularly with the requirements of section 
17A(b)(3)(A) \6\ of the Act, which requires, among other things, that a 
clearing agency be so organized and have the capacity to facilitate the 
prompt and accurate clearance and settlement of securities 
transactions. The Commission finds that the proposed rule change is 
consistent with this obligation because MBSCC's new governance 
structure should help ensure that MBSCC's operations will continue to 
be conducted in an efficient and orderly manner once it is integrated 
into the DTCC organization.
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    \6\ 15 U.S.C. 78q-1(b)(3)(A).
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    The Commission has previously found that MBSCC's integration plan 
satisfies the requirement of Section 17A(b)(3)(C) \7\ the MBSCC assure 
the fair representation of its member in the selection of its directors 
and in the administration of its affairs.\8\ The Commission finds that 
this proposal is also consistent with the fair representation 
requirement because the integration plan has been refined so that the 
Board committees primarily responsible for MBSCC's operations are now 
also joint committees of the MBSCC Board.
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    \7\ 15 U.S.C. 78q-1(b)(3)(C).
    \8\ Securities Exchange Act Release No. 44988 (Oct. 25, 2001), 
66 FR 55222 (Nov. 1, 2001) (order approving integration of MBSCC).
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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 filing. The Commission finds good 
cause for approving the proposed rule change prior to the thirtieth day 
after the date of publication of notice of filing because such approval 
will allow MBSCC to implement changes to its governance structure in an 
efficient, orderly, and expeditious manner once it is integrated into 
the DTCC organization.

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-2001-05) be, and 
hereby is, approved.
    For the Commission by the Division of Market Regulation, pursuant 
to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-3048 Filed 2-7-02; 8:45 am]
BILLING CODE 8010-01-M