[Federal Register Volume 67, Number 204 (Tuesday, October 22, 2002)]
[Notices]
[Pages 64943-64944]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26784]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46658; File No. SR-GSCC-2002-08]


Self-Regulatory Organizations; Government Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change Revising GSCC's Schedule of Money Tolerances

October 11, 2002.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 11, 2002, the 
Government Securities Clearing Corporation (``GSCC'') filed with the 
Securities and Exchange Commission (``Commission'') 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 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change amends GSCC's schedule of money 
tolerances.

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 statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed 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 such 
statements.\2\
---------------------------------------------------------------------------

    \2\ The Commission has modified parts of these statements.
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    GSCC's rules contain a Schedule of Money Tolerances (``Schedule'') 
that permits GSCC to compare a trade with a discrepancy in its 
settlement amount or start amount if the discrepancy falls within a 
specified money tolerance. Specifically, the Schedule provides for: (i) 
a money tolerance of $1 per million on the settlement amount of a 
trade, which is applied to buy-sell transactions and to the close leg 
of repo transactions in real time; (ii) a money tolerance of $40 per 
million on the settlement amount of a trade, which is applied to buy-
sell transactions and the close leg of repo transactions at the end-of-
day phased comparison process; and (iii) a money tolerance of $1 per 
repo transaction on the start amount of a repo transaction.
    GSCC understands, based on member input, that one of the tolerances 
in the Schedule is inappropriate and creates risk. Specifically, the 
real-time money tolerance of $1 per million on the settlement amount is 
causing repo transactions with differences of as much as nearly four 
basis points in the rate to compare immediately during the day. (The 
data on repo transactions is submitted to GSCC interactively, which now 
is how the large majority of data is submitted to GSCC.) In the past, 
these differences normally were discovered and corrected by members on 
a unilateral basis during the day, but because trades submitted in real 
time typically are compared shortly after execution, there is not 
sufficient time for them to be unilaterally corrected on GSCC's system. 
In order to remedy this problem, the proposed rule change amends the 
money tolerance on settlement money that is applied in real time to ten 
cents per million.
    The proposed rule change also amends this section of the Schedule 
to indicate that a settlement money difference of less than $1.00 will 
not prevent a trade from being matched by GSCC. For example, assume 
that two members submit a $9 million trade with a $0.98 difference in 
the settlement amount. Applying the $0.10 per million money tolerance, 
which in this case is $0.90, without the $1.00 minimum would lead to 
the trade not being matched because the discrepancy of $0.98 is greater 
than the tolerance of $0.90. The minimum tolerance of $1.00, however, 
would permit this trade to match. GSCC believes that a money difference 
of less than $1.00 is de minimis and should not result in trades not 
being compared.
    GSCC believes that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
because it lessens the risk of members' trades with significant money 
differences being compared before such differences can be corrected.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    GSCC does not believe that the proposed rule change will have any 
impact, or impose any burden, on competition.

[[Page 64944]]

(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)(iii) of the Act \3\ and Rule 19b-4(f)(4) \4\ promulgated 
thereunder because the proposal effects a change in an existing service 
of GSCC that (A) does not adversely affect the safeguarding of 
securities or funds in the custody or control of GSCC or for which it 
is responsible and (B) does not significantly affect the respective 
rights or obligations of GSCC or persons using the service. At any time 
within sixty days of the filing of the 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 the Act.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

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 NW., Washington, DC 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 NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of GSCC. All submissions 
should refer to the File No. SR-GSCC-2002-08 and should be submitted by 
November 12, 2002.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
---------------------------------------------------------------------------

    \5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-26784 Filed 10-21-02; 8:45 am]
BILLING CODE 8010-01-P