[Federal Register Volume 65, Number 116 (Thursday, June 15, 2000)]
[Notices]
[Pages 37586-37587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15088]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42911; File No. SR-GSCC-00-06]


Self-Regulatory Organizations; Government Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Suspension of the Discount in Fee Structure

June 8, 2000.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 5, 2000, the 
Government Securities Clearing Corporation (``GSCC'') 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).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule filing suspends GSCC's discount for comparison 
and netting fees for buy-sell transactions.

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.\2\
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    \2\ 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

    Recently, GSCC's Board and Management reviewed the results of a 
study of GSCC's fee structure, the fundamental part of which has 
remained unchanged since the inception of netting in 1989. In response 
to this review, GSCC has determined it appropriate to temporarily 
suspend its discount for comparison and netting fees for buy-sell 
transactions, effective as of July 3, 2000.
    The current discount was implemented in 1995 and resulted in a 10 
percent reduction in the fees charged to members for comparison and 
netting of their buy-sell transactions. At that time, GSCC was focusing 
its management and technological resources on the imminent introduction 
of comparison and netting services for repo transactions. Because those 
services are income-earning and self-funding, GSCC was in a position to 
effectively return to its members the surplus generated by its core 
services for buy-sell transactions. The Board of Directors had approved 
the discount in 1995 based on GSCC's financial strength and continued 
projections for profitability with the intent that the discount 
appropriateness be monitored and reassessed periodically.
    Since 1995, GSCC has continued to steadily expand both the variety 
and scope of the services it provides to members. This trend will 
accelerate in 2000 and beyond as GSCC gradually moves to a real-time 
messaging, risk management, and settlement environment and achieves 
other important initiatives such as establishing cross-margining 
arrangements with multiple clearing organizations.
    The determination to temporarily suspend the discount allows GSCC 
to

[[Page 37587]]

position itself to ensure continued service enhancements and the 
achievement of various business initiatives without deterioration of 
its capital base. GSCC's costs to develop, implement, and support these 
new services will be considerable. For example, real-time messaging 
will involve extensive systems development as well as the costs 
associated with maintaining multiple imput environments. Moreover, many 
of these services, such as the shift to real-time comparison and risk 
management, will, in and of themselves, not generate any additional 
revenues for GSCC.
    Assuming that current net income levels are sustained, it is GSCC's 
intention to reinstate a discount methodology as a business incentive 
for members to move to real-time messaging. The reinstated discount 
would be applied to both buy-sell and repo transactions; currently, the 
discount lowers fees only for buy-sell transactions, which creates 
inequities in the manner in which it applies to members.
    GSCC believes that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to GSCC and in particular with Section 17A(b)(3)(F) of the 
Act because it will permit GSCC to cover the high costs involved in 
providing its members with new and important services.

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

    GSCC does not believe that the proposed rule change will have an 
impact 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

    Written comments relating to the proposed rule change have not yet 
been solicited or received. Members will be notified of the rule change 
filing, and comments will be solicited, by an Important Notice. 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 Act

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) \3\ of the Act and Rule 19b-4(f)(2) \4\ promulgated 
thereunder because the proposal establishes or changes a due, fee, or 
other charge imposed by GSCC. At any time within sixty days of the 
filing of such proposed rule change, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.
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    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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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. 
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 submission 
should refer to File No. SR-GSCC-00-06 and should be submitted by July 
6, 2000.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-39A)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-15088 Filed 6-14-00; 8:45 am]
BILLING CODE 8010-01-M