[Federal Register Volume 69, Number 8 (Tuesday, January 13, 2004)]
[Notices]
[Pages 2027-2028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-618]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49027; File No. SR-BSECC-2003-01]


Self-Regulatory Organizations; Boston Stock Exchange Clearing 
Corporation; Notice of Filing of Proposed Rule Change To Clarify 
Liability and Clearing Agency Services

January 6, 2004.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 29, 2003, the Boston 
Stock Exchange Clearing Corporation (``BSECC'') filed with the 
Securities and Exchange Commission (``Commission'') and on July 21, 
2003, August 25, 2003, and September 12, 2003, amended the proposed 
rule change described in Items I, II, and III below, which items have 
been prepared primarily by BSECC. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
parties.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    BSECC is seeking to delete or amend certain Sections of its Rules 
to clarify BSECC's liability and clearing agency services.

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

    In its filing with the Commission, BSECC 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. BSECC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.\2\
---------------------------------------------------------------------------

    \2\ The Commission has modified the text of the summaries 
prepared by BSECC.
---------------------------------------------------------------------------

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 delete or amend 
certain sections of the BSECC Rules to clarify BSECC's liability and 
clearing agency services.
    BSECC is seeking to make several changes to its Rules as they 
pertain to BSECC's liability in order to maintain a consistent approach 
with the Boston Stock Exchange's (``BSE'') proposed rule changes 
clarifying BSE's liability in relation to its members' contractual 
obligations.\3\ In sum, these changes:
---------------------------------------------------------------------------

    \3\ The Boston Stock Exchange has filed a proposed rule change 
to amend various Articles of its Constitution and Sections of its 
Rules to clarify the liability of the exchange in relation to its 
members' contractual obligations. Securities Exchange Act Release 
No. 49026 (January 6, 2004), [File No. SR-BSE-2002-06].
---------------------------------------------------------------------------

    [sbull] Clarify in Rule II, Section 1, that BSECC's clearing fund 
is to make good losses suffered by BSECC without the losses of its 
members having priority;
    [sbull] Eliminate a provision in Rule II, Section 5(e), which 
allows the retained earnings of BSECC to be used to satisfy any loss or 
liability resulting from a BSECC member's default;
    [sbull] Eliminate Rule III, Section 4, stating that BSECC 
guarantees settlement of all trades executed on the floor of BSE; \4\
---------------------------------------------------------------------------

    \4\ BSE guarantees exchange trades until they are accepted by 
the National Securities Clearing Corporation (``NSCC'').
---------------------------------------------------------------------------

    [sbull] Strengthen the BSECC indemnification clause, Rule XII, 
section 6, by stating that each member will remain ``solely 
responsible'' and liable for its transactions;
    [sbull] Amend Rule III, section 3(e), to make BSECC loans to 
members discretionary, not automatic. The current automatic loan 
provision is inconsistent with the purpose of the proposed rule change 
that members will be solely liable for their transactions and that 
BSECC is not the ultimate guarantor for its members; and
    [sbull] Amend Rule XI, section 3 to increase the fine from $5,000 
to $30,000 for violations of BSECC Rules.
    The proposed rule change would delete all references to Boston 
Representative Broker/Dealer Accounts, BSE Service Corporation, and 
Institutional Members. Such references are no longer applicable as they 
relate to services or lines of business in which BSECC is no longer 
involved. Also, BSECC has in various places added references to NSCC to 
make consistent BSECC's references to NSCC in its Rules and to clarify 
that BSECC will perform functions for the usual settlement of 
transactions with NSCC and DTC on behalf of BSECC members upon request.
    BSECC is not seeking these amendments in response to any recent or 
perceived action by any of its members. Rather, BSECC is seeking to 
clarify, by eliminating inconsistencies and providing succinct 
language, the position which it holds with respect to liability on the 
part of its members. Moreover, BSECC is seeking to maintain a 
consistent approach in the application of its various regulatory 
responsibilities

[[Page 2028]]

while at the same time updating various sections of its Rules.
    BSECC believes that the proposed rule change is consistent with the 
requirements of section 17A of the Act \5\ and the rules and 
regulations thereunder applicable to BSECC because it will permit the 
resources of BSECC to be appropriately utilized for promoting the 
accurate clearance and settlement of securities.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

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

    BSECC does not believe that the proposed rule change will impose 
any burden on competition.

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

    BSECC has neither solicited nor received comments on the proposed 
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 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-BSECC-2003-01. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your 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 BSECC.
    All submissions should refer to File No. SR-BSECC-2003-01 and 
should be submitted by February 3, 2004. 

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-618 Filed 1-12-04; 8:45 am]
BILLING CODE 8010-01-P