[Federal Register Volume 68, Number 119 (Friday, June 20, 2003)]
[Notices]
[Pages 37035-37036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-15646]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48010; File No. SR-GSCC-2002-07]


Self-Regulatory Organizations; Government Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change Relating to the 
Elimination of the Comparison-Only Requirement for New GSCC Netting 
Members

June 10, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 5, 2002, 
Government Securities Clearing Corporation (``GSCC'')\2\ 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 
parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ On January 1, 2003, MBS Clearing Corporation (``MBSCC'') was 
merged into the Government Securities Clearing Corporation 
(``GSCC'') under New York law and GSCC was renamed the Fixed Income 
Clearing Corporation (``FICC''). Securities Exchange Act Release No. 
47015 (December 17, 2002), 67 FR 78531 (December 24, 2002) File Nos. 
(SR-GSCC-2002-07 and SR-MBSCC-2002-01).
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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 eliminate the requirement that 
before a new member can become a netting member, it must be a 
comparison-only member for six months.

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 these 
statements.\3\
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    \3\ The Commission has modified the text of the summaries 
prepared by GSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    GSCC's rules currently provide that an entity is eligible to become 
a netting member if, among other things, it has been a comparison-only 
member for at least six months unless this requirement is waived by 
GSCC's Membership and Risk Management Committee (``Committee''). The 
comparison-only membership requirement was included in GSCC's rules 
when GSCC first began operations. The purpose of this provision was to 
give GSCC staff the opportunity to ensure that a member firm was 
operationally sound and had the ability to properly communicate with 
GSCC before being permitted to participate in the netting system. Over 
the years, GSCC netting membership has become more critical for active 
market participants, and it has become increasingly common for 
management to seek and receive approval to waive the comparison-only 
membership requirement. Unlike other netting membership requirements, 
including minimum financial standards and regulation by an established 
regulatory body, the comparison-only membership requirement has not 
been necessary to ensure the integrity of the admission and membership 
processes. GSCC staff has gained significant experience in making 
determinations about a firm's an operational capability without any 
comparison-only membership history prior to a firm's commencing netting 
activity with GSCC. Such a review process has not presented GSCC with 
any operationally-deficient members.
    For these reasons, GSCC is proposing to amend its rules to (1) 
eliminate the imposition of the six-month comparison-only membership 
requirement as a routine matter and (2) permit the imposition of a 
comparison-only membership requirement for a time period deemed 
necessary if management is concerned about the operational capability 
of the applicant based on the presence of one or more of the following 
conditions: (a) It is a newly-formed entity with little or no 
functional history, (b) its operational staff lacks significant 
experience, (c) if one of the above conditions is present, it has not 
engaged a service bureau or correspondent clearing member with which 
GSCC has had a relationship, or (d) any other factor(s) that management 
believes might suggest insufficient operational ability.
    The proposed rule change is consistent with the requirements of 
section 17A of the Act, and the rules and regulations thereunder 
because it would allow new members to achieve netting member status in 
a more efficient and timely manner.

(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 comments received by GSCC.

[[Page 37036]]

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

    Within 35 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 90 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 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 
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-GSCC-2002-07. 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 also will be available for inspection and copying at the 
principal office of GSCC. All submissions should refer to File No. SR-
GSCC-2002-07 and should be submitted by July 11, 2003.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-15646 Filed 6-19-03; 8:45 am]
BILLING CODE 8010-01-P