[Federal Register Volume 67, Number 229 (Wednesday, November 27, 2002)]
[Notices]
[Pages 70987-70988]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30038]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46855; File No. SR-GSCC-2002-12]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the Government 
Securities Clearing Corporation Relating to the Schedule of Timeframes 
for Submitting Repo Collateral Substitution Notifications

November 20, 2002.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\, notice is hereby given that on October 22, 2002, the 
Government Securities Clearing Corporation (``GSCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which items have been 
prepared primarily by GSCC. The Commission is publishing this notice 
and order to solicit comments on the proposed rule change from 
interested parties and to grant accelerated approval of the proposed 
rule change.
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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 would allow GSCC to amend its schedule of 
timeframes to extend its repo collateral substitution deadline by one 
hour on days that GSCC determines to be high volume days.

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

[[Page 70988]]

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.

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

    GSCC's Schedule of Timeframes (``Schedule'') contains two deadlines 
that are applicable to requests for repo collateral substitutions: (i) 
A deadline of noon (12:00 p.m.) after which a member that initiated the 
substitution will be subject to a late fee of five hundred dollars 
($500.00) per substitution imposed and (ii) an absolute deadline of 
12:30 p.m. after which GSCC will reject the substitution request.\2\ 
The Schedule provides that GSCC may extend these deadlines by one hour 
on days that The Bond Market Association (``BMA'') announces in advance 
will be ``high volume days.''\3\
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    \2\ All times in GSCC's rules are New York time. GSCC's repo 
substitution notification deadlines were based upon guidelines 
issued by The Bond Market Association (``BMA'') that provide that on 
each business day market participants should notify their inter-
dealer broker of any collateral substitutions by 9:55 a.m. and 
should provide such brokers with the description of the substituted 
collateral by 11:00 a.m. GSCC provides members with an additional 
hour in which to send the request to GSCC.
    \3\ Pursuant to BMA's trading practices guidelines, high volume 
days are the first and last business day of each calendar quarter on 
which markets are open for trading and such other days as the BMA 
may announce no later than 24 hours prior to the occurrence of such 
day.
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    Given the unpredictable occurrence of days on which a large number 
of collateral substitution requests occur, the BMA recently 
supplemented its guidelines to provide a process for the same-day 
designation of high volume days and extension of repo collateral 
substitution deadlines.\4\ Specifically, the BMA has recommended that 
prior to 10:05 a.m. on each day on which the markets are open for 
trading, GSCC's inter-dealer broker netting members should notify GSCC 
of the number of collateral substitution requests they have received 
for that trading day. If the number of such collateral substitution 
requests exceeds 150 in the aggregate, GSCC will extend its repo 
collateral substitution deadlines by one hour and will notify the BMA 
which will issue a notice to market participants.\5\ In effect, under 
the new trading practice guidelines, it will be GSCC that determines 
when a trading day is a high volume day.
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    \4\ The BMA issued this supplement on an interim basis pending 
the approval of this rule change.
    \5\ GSCC, the BMA, and industry representatives have established 
150 as the number of requests that will trigger GSCC's determination 
that a trading day is a high volume day. This will be incorporated 
into the BMA's trading practice guidelines. Should this change, GSCC 
will file a proposed rule change under Section 19(b)(3)(A) with the 
Commission.
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    The Schedule currently permits GSCC to extend its repo collateral 
substitution deadlines only after the BMA has designated a high volume 
day. The proposed rule change would permit GSCC to determine when a 
trading day is a high volume day and therefore to institute a same-day 
extension of its deadlines without having the BMA designation.
    The proposed rule change is consistent with the requirements of 
Section 17A of the Act and the rules and regulations thereunder because 
it will provide members with additional time to submit their repo 
collateral notification requests on days that develop into high volume 
days.

(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.

(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 comment received by GSCC.

III. Date of Effectiveness of Proposed Rule Change and Timing for 
Commission Action

    The Commission finds that the proposal, which allows GSCC to react 
in a timely manner to volume increases by extending submission 
deadlines for repo collateral substitution requests by GSCC members, is 
consistent with Section 17A(b)(3)(F) because it should help perfect the 
mechanism of a national system for the prompt and accurate clearance 
and settlement of securities transactions. Allowing GSCC to designate 
high volume days independently of the BMA will enable GSCC to better 
serve its members because GSCC will be able to respond in real-time to 
market conditions affecting its clearance and settlement of repos.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice of the filing because approval prior to the thirtieth day of 
publication will give GSCC the ability to immediately handle any high 
volume day that might occur.

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 Room, 450 Fifth Street, NW., Washington, 
DC 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-2002-12 and should be submitted by December 
18, 2002.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\6\ that the proposed rule change is hereby approved on an 
accelerated basis.
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    \6\ 15 U.S.C. 78s(b)(2).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-30038 Filed 11-26-02; 8:45 am]
BILLING CODE 8010-01-P