[Federal Register Volume 67, Number 241 (Monday, December 16, 2002)]
[Notices]
[Pages 77123-77124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-31555]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46958; File No. SR-NSCC-2002-08]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change Relating to New 
Clearing Fund Valuation of Deposited Securities

December 6, 2002.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 3, 2002, the 
National Securities Clearing Corporation (``NSCC'') 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 by NSCC. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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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 modify NSCC's clearing fund rules to 
permit NSCC to apply haircuts to securities pledged by NSCC 
participants as clearing fund collateral.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NSCC 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. NSCC has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by NSCC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to modify Rule 4 
(Clearing Fund) and Procedure XV (Clearing Fund Formula and Other 
Matters) of NSCC's Rules and Procedures to establish haircuts for 
securities posted by NSCC members as clearing fund collateral.
    Under Rule 4, NSCC members are required to make deposits to NSCC's 
clearing fund.\3\ Rule 4 also states that NSCC, at its discretion, may 
permit part of a member's (with the exception of ``mutual fund/
insurance services members'') clearing fund deposit to be evidenced by 
an open account indebtedness secured by (a) unmatured bearer bonds that 
are either direct obligations of or obligations guaranteed as to 
principal and interest by the United States or its agencies 
(``qualifying bonds'') and/or (b) one or more irrevocable letters of 
credit under certain guidelines established within NSCC's rules.\4\
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    \3\ The amount of each member's required deposit is determined 
by NSCC in accordance with one or more formulas.
    \4\ The Commission recently approved a NSCC proposed rule change 
(File No. SR-NSCC-2002-05) that increased the minimum amount of cash 
that must be deposited by members (with the exception of ``mutual 
fund/insurance services members'') to satisfy clearing fund 
requirements and that limited the amount of a deposit that may be 
collateralized with letters of credit. Securities Exchange Act 
Release Nos. 46931 (Nov. 27, 2002) and 46389 (Aug. 21, 2002), 67 FR 
55053 (Aug 27, 2002).
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    In its efforts to ensure that it has adequate collateral to cover 
its members' obligations, NSCC has decided to haircut the value of 
securities deposited to meet clearing fund requirements. The proposed 
haircut percentages will range from 2% to 5% and will be based on the 
type of security deposited, its market risk, and years to maturity.\5\ 
The proposed haircuts are similar to those currently applied by The 
Depository Trust Company as a part of its risk management controls. 
These percentages may change from time to time and NSCC will 
communicate any changes to participants should this occur.
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    \5\ NSCC's proposed haircut schedule for U.S. Treasury and 
agency securities is: Interest bearing with remaining terms to 
maturity of up to 10 years--2%; Interest bearing with remaining 
terms to maturity in excess of 10 years--5%; Zero coupon with 
remaining terms to maturity of up to 5 years--2%; Zero coupon with 
remaining terms to maturity in excess of 5 years--5%.
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    NSCC intends to implement this change no sooner than thirty days 
after the Commission's approval of this proposed rule filing provided, 
however, that NSCC would like to make this change effective concurrent 
with the changes covered by proposed rule change File No. SR-NSCC-2002-
05.\6\
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    \6\ Supra note 4.
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    NSCC believes that this proposed rule change is consistent with the 
provisions of the Act and the rules and regulations there under because 
it will ensure that NSCC is able to better safeguard securities and 
funds in its possession.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will have an 
impact on or impose a burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments relating to the proposed rule change have been 
solicited or received. NSCC will notify the Commission of any written 
comments it receives.

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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory

[[Page 77124]]

organization consents, the Commission will:
    (A) By order approve such proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
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 rule filing that are filed with the Commission, and all 
written communications relating to the rule filing between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with provisions of 5 U.S.C. 552, will be 
available for inspection and copying in the Commission's Public 
Reference Room in Washington, DC. Copies of such filing will also be 
available for inspection and copying at NSCC's principal office. All 
submissions should refer to File No. SR-NSCC-2002-08 and should be 
submitted by December 31, 2002.

    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-31555 Filed 12-13-02; 8:45 am]
BILLING CODE 8010-01-P