[Federal Register Volume 68, Number 98 (Wednesday, May 21, 2003)]
[Notices]
[Pages 27881-27882]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-12734]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47874; File No. SR-NSCC-2003-08]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of a Proposed Rule Change Relating to 
Rule 4, Section 12, Clearing Fund and Pledges of Deposits

May 15, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 6, 2003, 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 
primarily 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 Rule 4, Section 12, to 
make clear NSCC's ability to pledge clearing fund deposits and NSCC's 
members' rights to pledged deposits.

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

    Each NSCC member pays or receives the net debit or net credit 
balance in its NSCC money settlement account at the end of each day. 
NSCC's principal risk is the possible failure of one or more members to 
settle their net debit obligations. To assure that it is able to 
complete its settlement obligations each day, NSCC maintains liquidity 
resources, including a committed line of credit in the maximum amount 
of $1.9 billion with a consortium of banks that is part of a combined 
syndicated facility with The Depository Trust Company (``End of Day 
Facility'').
    The End of Day Facility matures annually. As part of the 
negotiations to extend the facility for the year beginning May 27, 
2003, NSCC's lenders have requested that Section 12 of NSCC's Rule 4, 
``Clearing Fund,'' be clarified. Section 12 currently provides that for 
the purpose of securing loans to NSCC, NSCC may pledge and repledge and 
grant its lenders a security interest in (i) cash deposits in the 
clearing fund, (ii) all securities, repurchase agreements, or deposits 
in which such cash is invested, and (iii) qualified bonds pledged by a 
member or letters of credit issued on a member's behalf for NSCC's 
benefit to secure the member's open account indebtedness to NSCC. This 
section provides that any such loan to NSCC may be on such terms as 
NSCC, in its discretion, may deem necessary or advisable and may be in 
amounts greater and extend for time periods longer than the obligations 
of any member in NSCC. Subject to the terms and conditions of such 
loan, NSCC remains obligated to its members to return any items of 
pledged collateral or permit substitutions and withdrawals thereof as 
provided in its rules.
    It was always the intent and understanding of NSCC and its members 
that by virtue of Rule 4, Section 12, members had authorized NSCC to 
pledge to its lenders a member's actual deposits.\3\ In order to 
accommodate NSCC's lenders, NSCC is proposing to modify the language of 
the rule itself to make clear NSCC's right to pledge its members' 
actual deposits to one or more lenders for the purposes enumerated in 
the rule. In addition, NSCC is also proposing to add language to the 
rule to make clear what is implicit in the current rule that while 
there remain any outstanding obligations under any such loan, no member 
may assert a claim against the lender for the return of any collateral 
pledged by NSCC as security therefore.\4\ Subject to the foregoing and

[[Page 27882]]

the terms of any such loan, the obligation of NSCC to return any items 
of pledged collateral to its members or to permit substitutions and 
withdrawals thereof remains unaffected.
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    \3\ Securities Exchange Act Release No. 28784 (January 16, 
1991), 56 FR 2575 (January 23, 1991) [File No. SR-NSCC-90-22].
    \4\ The proposed language would state, ``No Member, Insurance 
Carrier Member or Fund Member shall have any right, claim or action 
against any secured Lender (or any collateral agent of such secured 
Lender) for the return, or otherwise in respect, of any such 
collateral Pledged by the Corporation to such secured Lender (or its 
collateral agent), so long as any loans made by such Lender to the 
Corporation or other obligations, secured by such collateral, are 
unpaid and outstanding.''
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    NSCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act and the rules and regulations 
thereunder applicable to NSCC because it will assist NSCC in 
maintaining a committed end-of-day line of credit to facilitate 
completion of daily money settlement and as such will assist NSCC to 
assure the safeguarding of securities and funds which are in its 
custody or control or for which it is responsible.

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

    NSCC perceives no adverse impact on competition by reason of the 
proposed rule change.

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

    Comments from NSCC members or others have not been solicited or 
received on the proposed rule change.

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 organization consents, 
the Commission will:
    (a) By order approve the 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 
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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-NSCC-2003-08. This file number should be included on the 
subject line if e-mail is used. To help us process and review comments 
more efficiently, comments should be sent in hardcopy or by e-mail but 
not by both methods. 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 NSCC. All submissions should refer to the File No. 
SR-NSCC-2003-08 and should be submitted by June 11, 2003.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-12734 Filed 5-20-03; 8:45 am]
BILLING CODE 8010-01-P