[Federal Register Volume 67, Number 235 (Friday, December 6, 2002)]
[Notices]
[Pages 72714-72715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30888]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46931; File No. SR-NSCC-2002-05]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Granting Approval of a Proposed Rule Change Relating 
To Clearing Fund Requirements and Letters of Credit Collateralization

November 27, 2002.

I. Introduction

    On July 16, 2002, the National Securities Clearing Corporation 
filed with the Securities and Exchange Commission (``Commission'') and 
on July 25, 2002, and November 25, 2002, amended a proposed rule change 
File No. SR-NSCC-2002-05 pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'').\1\ Notice of the proposal was published 
in the

[[Page 72715]]

Federal Register on August 27, 2002.\2\ No comment letters were 
received. For the reasons discussed below, the Commission is granting 
approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 46389, (August 21, 
2002), 67 FR 55053 (August 27, 2002).
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II. Description

    Under NSCC's current rules, each member, except for a Mutual Fund/
Insurance Services Member, is required to maintain a minimum 
contribution to the clearing fund of $10,000. The first $10,000 of a 
member's contribution must be in cash, and if all or a part of the 
member's contribution is collateralized with letters of credit, the 
greater of $50,000 or ten percent of the member's contribution up to a 
maximum of $1,000,000 is required to be in cash.
    To assure NSCC of more cash to meet any liquidity needs, NSCC is 
modifying rule 4 (Clearing Fund) and procedure XV (Clearing Fund 
Formula and Other Matters) of its rules and procedures to require that, 
except with respect to a Mutual Fund/Insurance Services Member: (1) The 
first 40%, but no less than $10,000, of a member's required deposit to 
the clearing fund must be in cash and (2) with respect to the remaining 
amount, no more than 25% of the required deposit may be collateralized 
with a letter of credit. Mutual Fund/Insurance Services Members' 
clearing fund requirements will remain unchanged.
    Based on NSCC's current calculations, increasing the percentage of 
cash that must be deposited to the clearing fund will impact 
approximately 48 member firms. Reducing the permitted use of letters of 
credit will affect 21 of the approximately 33 member firms that post 
letters of credit. NSCC will implement these clearing fund changes no 
earlier than 30 days after the Commission approves the proposed rule 
change.

III. Discussion

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in the custody or control of the clearing agency or 
for which it is responsible. \3\ By increasing the minimum percentage 
of cash that NSCC members must deposit to meet their required deposits 
to the clearing fund and by lowering the maximum percentage of their 
required clearing fund deposit that may be collateralized with letters 
of credit, the rule change will result in NSCC maintaining a higher 
percentage of cash in its clearing fund which will make the clearing 
fund more liquid. This will result in NSCC being in a better position 
to address any situation in which the clearing fund is called into 
play. As a consequence, NSCC will be better able to provide for the 
safeguarding of funds and securities under its custody or control or 
for which it is responsible.
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    \3\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular with the requirements of section 17A(b)(3)(F) 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-NSCC-2002-05) be and hereby 
is approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\
Jill M. Peterson,
Assistant Secretary.
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    \4\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 02-30888 Filed 12-5-02; 8:45 am]
BILLING CODE 8010-01-P