Federal Register / Vol. 62, No. 146 / Wednesday, July 30, 1997 / Notices 40871

1 15 U.S.C. 78s(a).

2Letter from Stephen K. Lynner, Delta Clearing

Corp. (June 12, 1997).

3 15 U.S.C. 78q–1 and 78s(a).

4 17 CFR 240.17Ab2–1(c).

5Securities Exchange Act Release No. 27611

(January 12, 1990), 55 FR 1890. Prior to a 1996

name change, DCC was named Delta Government

Options Corp.

6Securities Exchange Act Release Nos. 31856

(February 11, 1993), 58 FR 9005 (extension until

January 12, 1995); 35198 (January 6, 1995), 60 FR

3286 (extension until January 31, 1997); and 38224

(January 31, 1997), 62 FR 5869 (extension until July

31, 1997).

7Securities Exchange Act Release No. 36367

(October 13, 1995), 60 FR 54095.

8 15 U.S.C. 78q–1(b)(3)(C).

Moreover, applicants will comply with

section 15(f)(1)(B) of the Act for at least

two years following consummation of

the Transaction, and applicants agree

that all Interested Directors will

continue to be treated as interested

persons of the Companies and the

Advisers for all purposes other than

section 15(f)(1)(A) for so long as such

directors are ‘‘interested persons’’ as

defined in section 2 (a) (19) of the Act

and are not exempted from such

definition by any applicable rules or

orders of the SEC. Applicants are not

seeking any assurances from the SEC

regarding the future status of any such

director. Accordingly, applicants argue

that no unfair burdens will be placed on

the Companies as a result of the

Transaction. In addition, because the

Transaction will result in the automatic

termination of the existing advisory or

subadvisory agreement between one of

the Advisers and each Company, the

Board and shareholders of each

Company will have the opportunity to

consider and approve the new contract

with each Adviser. Such arrangements

will continue only if it is determined

that they continue to be in the best

interests of such Company’s

shareholders.

Applicants’ Condition

Applicants agree that any order of the

SEC granting the requested relief will be

subject to the following condition:

If, within three years of the

completion of the Transaction, it

becomes necessary to replace any

director, that director will be replaced

by a director who is not an ‘‘interested

person’’ of any Adviser within the

meaning of section 2(a)(19)(B) of the

Act, unless at least 75% of the directors

at that time are not interested persons of

any Adviser, provided that this

condition will not preclude

replacements with or additions of

directors who are interested persons of

an Adviser solely by reason of being

affiliated persons of broker or dealers

who are affiliated persons of another

investment adviser to a Company,

provided that such brokers or dealers

are not affiliated persons of any Adviser.

For the SEC, by the Division of Investment

Management, under delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–20049 Filed 7–29–97; 8:45 am]

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Agency Meetings; Sunshine Act

Meeting

Federal Register Citation of Previous

Announcement: (62 FR 40127, July 25,

1997)

STATUS: Closed Meeting.

PLACE: 450 Fifth Street, N.W.,

Washington, D.C.

DATE PREVIOUSLY ANNOUNCED: July 25,

1997.

CHANGE IN THE MEETING: Additional

Items.

The following items will be added to

the closed meeting scheduled for

Tuesday, July 29, 1997, following the

10:00 a.m. open meeting:

Institution of administrative

proceedings of an enforcement nature.

Institution of injunctive actions.

The following item will be added to

the closed meeting scheduled for

Thursday, July 31, 1997, following the

10:00 a.m. open meeting: Opinion.

Commissioner Hunt, as duty officer,

determined that Commission business

required the above changes and that no

earlier notice thereof was possible.

At times, changes in Commission

priorities require alterations in the

scheduling of meeting items. For further

information and to ascertain what, if

any, matters have been added, deleted

or postponed, please contact:

The Office of the Secretary (202) 942–

7070.

Dated: July 28, 1997.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–20168 Filed 7–28–97; 12:24 pm]

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[Release 34–38869; File No. 600–24]

Self-Regulatory Organizations; Delta

Clearing Corp.; Notice of Filing and

Order Approving a Request for

Extension of Temporary Registration

as a Clearing Agency

July 24, 1997.

Notice is hereby given that on June

25, 1997, Delta Clearing Corp. (‘‘DCC’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) an

application pursuant to Section 19(a) of

the Securities Exchange Act of 1934

(‘‘Act’’) 1 to extend DCC’s temporary

registration as a clearing agency.2 The

Commission is publishing this notice

and order to solicit comments from

interested persons and to extend DCC’s

temporary registration as a clearing

agency through July 31, 1998.

On January 12, 1990, pursuant to

Sections 17A and 19(a) of the Act 3 and

Rule 17Ab2–1(c) thereunder,4 the

Commission granted DCC’s application

for registration as a clearing agency on

a temporary basis for a period of thirtysix months.5 Since that time, the

Commission has extended DCC’s

temporary registration through July 31,

1997.6 DCC now requests that the

Commission grant an extension of its

original order granting DCC temporary

registration as a clearing agency, subject

to the same terms and conditions, for a

period of twelve months or for such

longer period as the Commission deems

appropriate.

One of the primary reasons for DCC’s

registration as a clearing agency was to

enable it to provide for the safe and

efficient clearance and settlement of

transactions involving the over-thecounter trading of options of U.S.

Treasury securities. Since that time, the

Commission has approved DCC’s

request to begin clearance and

settlement of repurchase agreement

transactions involving U.S. Treasury

securities as the underlying

instrument.7 Currently, repurchase

agreement transactions constitute the

majority of the transactions cleared by

DCC.

As a part of its temporary registration,

DCC was granted a temporary

exemption from the requirements of

Section 17A(b)(3)(C),8 which requires

that the rules of a clearing agency assure

the fair representation of its

shareholders or members and

participants in the selection of its

directors and administration of its

affairs. While Commission staff and

DCC staff have conducted discussions

on DCC’s proposed method of

complying with Section 17A(b)(3)(C),

the Commission believes that the issue

of DCC’s compliance with the fair

representation requirements should be

completely resolved before DCC
40872 Federal Register / Vol. 62, No. 146 / Wednesday, July 30, 1997 / Notices

9 15 U.S.C. 78q–1(b).

10 15. U.S.C. 78q–1(b)(3).

11 17 CFR 200.30–3(a)(16).

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

2The Commission has modified the text of the

summaries prepared by DCC.

2Currently, DCC has separate procedures for repo

transactions and option transactions. DCC has filed

a proposed rule change to combine the two sets of

procedures into a single set of procedures [File No.

SR–DCC–97–04]. While the combined procedures

have not yet been approved by the Commission,

this proposed rule change amends the procedures

as combined.

4Paragraph 3 of FIN 41 sets forth the conditions

for the availability of offset for repo transactions.

While paragraph 3 requires that the counterparties

and settlement date be the same for all transactions

which are to be netted, there is no requirement that

the securities be of the same type. Therefore, to the

extent that offset was available for Treasury repo

transactions, it should be available for transactions

with mortgage-backed securities.

receives permanent registration as a

clearing agency under Section 17A(b) of

the Act.9

In light of DCC’s past performance,

the Commission believes that DCC

complies with the statutory

prerequisites for registration as a

clearing agency contained in Section

17A(b)(3) of the Act except for the fair

representation requirement discussed

above.10 Therefore, the Commission

believes that DCC should continue to be

registered on a temporary basis.

Comments received during DCC’s

temporary registration will be

considered in determining whether DCC

should receive permanent registration as

a clearing agency.

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing

application. Persons making written

submissions should file six copies

thereof with the Secretary, Securities

and Exchange Commission, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Copies of the application and all written

comments will be available for

inspection and copying at the

Commission’s Public Reference Room,

450 Fifth Street, N.W., Washington, D.C.

20549. All submissions should refer to

the File No. 600–24 and should be

submitted by August 29, 1997.

It is therefore ordered, pursuant to

Section 19(a) of the Act, that DCC’s

registration as a clearing agency (File

No. 600–24) be and hereby is

temporarily approved through July 31,

1998.

For the Commission by the Division of

Market Regulation pursuant to delegated

authority.11

Jonathan G. Katz,

Secretary.

[FR Doc. 97–20054 Filed 7–29–97; 8:45 am]

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[Release No. 34–38868; File No. SR–DCC–

97–06]

Self-Regulatory Organizations; Delta

Clearing Corp.; Notice of Filing of a

Proposed Rule Change Relating to the

Clearance and Settlement of MortgageBacked Securities Repurchase

Agreements

July 23, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

April 7, 1997, the Delta Clearing Corp.

(‘‘DCC’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

and on May 12, May 29, June 18, and

July 9, 1997, amended the proposed rule

change (File No. SR–DCC–97–06) as

described in Items I, II, and III below,

which items have been prepared

primarily by DCC. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

DCC is proposing amendments to its

Procedures for the Clearing of Securities

and Financial Instrument Transactions

(‘‘Procedures’’) that will establish

procedures for the clearance and

settlement of repurchase agreements

and reverse repurchase agreements

(‘‘repos’’) in which the underlying

collateral is book-entry mortgage-backed

securities issued by the Federal National

Mortgage Association (‘‘FNMA’’) or the

Federal Home Loan Mortgage

Corporation (‘‘FHLMC’’).

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

DCC 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. DCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.2

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

DCC proposes to revise its Procedures

to permit it to clear and settle repo

transactions on mortgage-backed

securities.3 Under the proposal, DCC

will limit its clearing activity to repos

on mortgage-backed securities which are

issued or guaranteed directly by FNMA

or FHLMC, secured by an underlying

pool of mortgages, held in book-entry

form, and transferable through the

Federal Reserve System.

According to DCC, the market for repo

transactions in mortgage-backed

securities is estimated to be

approximately 25% to 40% of the size

of the market for repo transactions in

U.S. Treasury securities. DCC states that

this estimate suggests that the

outstanding notional size of the market

is between $250 billion to $400 billion

with daily turnover at 10% of the

notional size. DCC believes that the

market in FNMA and FHLMC

instruments that may be cleared and

settled through DCC under its proposed

Procedures is approximately 60% to

70% of the marketplace for repo

transactions in mortgage-backed

securities.

The netting benefits which may

accrue to participants effecting

transactions through DCC’s clearing

system for mortgage-backed securities

are twofold. First, participants will be

able to net for balance sheet reporting

purposes repo transactions in mortgagebacked securities pursuant to the

provisions of FASB Interpretation No.

41 (‘‘FIN 41’’). Such netting could have

a positive and material effect on the

participants’ balance sheet. Second, also

pursuant to the provisions of FIN 41,

participants may be able to net repo

transactions in Treasury securities

cleared through DCC with repo

transactions in mortgage-backed

securities cleared through DCC. Thus,

the opportunities for a positive impact

on a participant’s balance sheet is

significantly enhanced. DCC does not

believe that any changes are required to

the structuring of its clearing system in

order for the netting benefits described

above to accrue to participants.4

DCC states that although most of the

primary dealer community is equipped

to effect repo transactions in mortgagebacked securities, there is a core group

of approximately twenty to twenty-five

primary dealers for whom mortgagebacked repo trading is considered to be

a core activity. Of the twenty to twentyfive active participants in the

marketplace, approximately ten to

fifteen consistently act as market makers

in mortgage-backed repo instruments.

According to DCC, the trading

practices and protocols associated with