[Federal Register Volume 68, Number 146 (Wednesday, July 30, 2003)]
[Notices]
[Pages 44825-44826]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-19329]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48220; File No. SR-GSCC-2002-03]


Self-Regulatory Organizations; Government Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change Relating to the 
Revision of the Comparison-Only Membership Application Approval Process

July 23, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 22, 2002, Government 
Securities Clearing Corporation (``GSCC'') \2\ filed with the 
Securities and Exchange Commission (``Commission'') and on June 25, 
2002, amended 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''). The functions previously performed 
by GSCC are now performed by the Government Securities Division 
(``GSD'') of FICC, and the functions previously performed by MBSCC 
are now performed by the Mortgage-Backed Securities Division 
(``MBSD'') of FICC. The GSD succeeded to the GSCC proposed rule 
change upon the merger of MBSCC and GSCC. To avoid confusion and 
maintain consistency with the Notice, in this Order, we will 
continue to refer to GSCC instead of the GSD of FICC. Securities 
Exchange Act Release No. 47015 (December 17, 2002), 67 FR 78531 
[File Nos. SR-GSCC-2002-09 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 allow GSCC's management to approve 
or reject comparison-only membership applications.

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),

[[Page 44826]]

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

    In the beginning of 2002, GSCC implemented various rule changes 
that effectuated GSCC's new governance structure resulting from the 
integration of GSCC with The Depository Trust & Clearing 
Corporation.\4\ As part of the new structure, the newly formed GSCC/
MBSCC Membership and Risk Management Committee (``Committee'') was 
given the authority to approve or reject comparison-only and netting 
membership applications. Upon further review, GSCC has determined that 
it would be more appropriate for GSCC management to approve or reject 
applications for comparison-only membership.\5\
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    \4\ Securities Exchange Act Release No. 45378 (January 31, 
2002), 67 FR 6064 [File No. SR-GSCC-2001-13].
    \5\ The Committee voted to delegate the authority to approve 
comparison-only membership applicants to management during its March 
7, 2002 meeting. The purpose of this rule filing is to allow GSCC's 
to implement this change. The term ``comparison-only member'' means 
a member that is a member only of the comparison system.
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    The proposed rule change will permit GSCC to effectively balance 
the interests involved in the membership approval process, including 
the need for a prudent review of membership applicants as well as the 
need to admit members on a timely basis. This goal is most 
appropriately met by having management approve GSCC comparison-only 
membership applicants.\6\ GSCC believes that, given the difference in 
the level of risk posed by the two types of GSCC membership applicants, 
only applications to become members of GSCC's netting service should 
require the Committee's review and approval.\7\
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    \6\ This is consistent with the process currently employed by 
the National Securities Clearing Corporation (``NSCC''). The 
President of NSCC, or a Managing Director of NSCC Risk Management, 
may authorize a Vice President of NSCC Risk Management to approve 
non-guaranteed service applicants that meet membership requirements. 
The NSCC Membership and Risk Management Committee receives a list 
showing the name of each approved non-guaranteed service member.
    \7\ GSCC's netting service provides for GSCC's guarantee of 
settlement. GSCC's comparison-only service does not do so.
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    GSCC will activate membership for qualified applicants upon 
completion of the requisite financial and/or other operational reviews 
and upon receipt of all membership documentation as is provided in 
GSCC's rules. In addition, management will provide the Committee with a 
listing of comparison-only firms being considered for approval by 
management prior to activating any firm's comparison-only membership.
    Consistent with these changes and in order to clarify relevant 
terms for members, GSCC is also expanding the current definition of 
``Corporation'' in its Rules. Going forward, ``Corporation'' will also 
mean ``Management,'' unless otherwise indicated, and these terms will 
be used interchangeably.
    The proposed rule change is consistent with the requirements of 
Section 17A of the Act \8\ and the rules and regulations thereunder 
applicable to GSCC because it involves a change in GSCC's governance 
structure that will streamline GSCC's membership application process. 
In doing so, it will allow GSCC to prudently and more appropriately 
assess the risk posed by a particular applicant and will allow GSCC to 
review and approve applicants in a timelier manner.
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    \8\ 15 U.S.C. 78q-1.
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(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.

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 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-2002-03. 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-2002-03 and should be submitted by August 20, 2003.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-19329 Filed 7-29-03; 8:45 am]
BILLING CODE 8010-01-P