Federal Register / Vol. 62, No. 188 / Monday, September 29, 1997 / Notices 50977

27The Commission notes that with respect to

WEBS, broker-dealers and other persons are

cautioned in the prospectus and/or the Fund’s SAI

that some activities on their part may, depending

on the circumstances, result in their being deemed

statutory underwriters and subject them to the

prospectus delivery and liability provisions of the

Securities Act of 1933.

28 15 U.S.C. 78s(b)(2).

29 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries prepared by DTC.

3For a more detailed description of CCS, refer to

Securities Exchange Act Release No. 35750 (January

22, 1996), 61 FR 2852 [File No. SR–DTC–95–18]

(order approving proposed rule change).

4The coupons contained in a shell must all be for

the same CUSIP number, series, and payable date.

5 15 U.S.C. 78q–1.

6 15 U.S.C. 78s(b)(3)(A)(ii).

7 17 CFR 240.19b–4(e)(2).

8 DTC’s rule filing originally was submitted for

consideration pursuant to Section 19(b)(2) of the

Act. 15 U.s.C. 78s(b)(2). However, DTC

subsequently requested that the Commission

consider the rule filing pursuant to Rule 19(b)(3)(A)

of the Act. Letter from Larry Thompson, Senior Vice

President and Deputy General Counsel, DTC

(September 22, 1997).

issuer as appropriate to facilitate the

maintenance of a fair and orderly

market in that security. The

Commission believes that such market

activities should enhance liquidity in

such security and facilitate a specialist’s

market making responsibilities. In

addition, because the specialist only

will be able to purchase and redeem

WEBS on the same terms and conditions

as any other investor (and only at the

NAV), and Creation transactions must

occur through the distributor and not

directly with the issuer, the Commission

believes that concerns regarding

potential abuse are minimized. As noted

above, the Exchange’s surveillance

procedures also should ensure that such

purchases are only for the purpose of

maintaining fair and orderly markets,

and not for any other improper or

speculative purposes. Finally, the

Commission notes that its approval of

this aspect of the Exchange’s rule

proposal does not address any other

requirements or obligations under the

federal securities laws that may be

applicable.27

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,28 that the

proposed rule change (SR–CHX–96–14)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.29

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25687 Filed 9–26–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39114; File No. SR–DTC–

97–15]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing of Proposed Rule Change

Relating to the Coupon Collection

Service

September 22, 1997.

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

Securities Exchange Act of 1934

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

July 15, 1997, The Depository Trust

Company (‘‘DTC’’) 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 DTC. The

Commission is publishing this notice to

solicit comments from interested

persons on the proposed rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change revises

DTC’s fee schedule for its coupon

collection service (‘‘CCS’’). DTC will

give participants that use CCS a

discount of $0.25 per shell for any

month in which the participant’s shell

deposit volume is 6,250 or greater. If a

participant’s year-end shell deposit

volume is 75,000 or greater, DTC will

rebate to the participant the $0.25 per

shell for any month(s) in that year for

which the participant did not receive a

discount because its shell deposit

volume was less than 6,250.

In addition, DTC will charge

participants $0.60 per shell received

without a valid CUSIP number. This

additional fee is designed to serve as an

incentive to Participants to identify

their shells properly. As all of DTC’s

fees are reviewed on an annual basis,

this surcharge will be reevaluated each

year, based on the proportion of shells

that DTC receives without a valid CUSIP

number.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

DTC 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. DTC 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

CCS provides participants with a

method for the collection of interest

relating to coupons from municipal

bearer bonds.3 Participants using CCS

are required to deposit coupons in a

standard sealed envelope or ‘‘shell’’

each of which may contain no more

than 200 coupons. Participants also

must identify each shell properly,

which includes labeling each shell with

a valid CUSIP number.4 After verifying

the contents of the shells, DTC credits

the participants with the interest due on

the coupons contained in the shells.

The purpose of the proposed rule

change is to revise the fees associated

with CCS. DTC continually strives to

align service fees with estimated service

costs and the subject revisions are part

of that effort.

DTC believes that the proposed rule

change is consistent with the

requirements of Section 17A of the Act 5

and the rules and regulations

thereunder because it provides for the

equitable allocation of dues, fees, and

other charges among DTC’s participants.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

DTC does not believe that the

proposed rule change will impose any

burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

Not applicable.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective pursuant to Section

19(b)(3)(A)(ii) of the Act 6 and Rule 19b–

4(e)(2) thereunder 7 because the

proposal establishes or changes a due,

fee, or other charge imposed by DTC.8

At any time within sixty days of the

filing of such 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,
50978 Federal Register / Vol. 62, No. 188 / Monday, September 29, 1997 / Notices

9 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries prepared by NSCC.

3The minimum net capital requirements are set

forth in Rule 13c3–1(a) under the Act. 17 CFR

240.15c3–1(a).

4 ‘‘Municipal securities brokers’ broker’’ is

defined in Rule 15c3–1(a)(8) under the Act. 17 CFR

240.15c3–1(a)(8).

5NSCC believes that this is consistent with the

Commission’s approach of maintaining separate

capital rules for municipal securities brokers’

brokers.

6See 17 CFR 240.15c3–1(a)(2)(i).

7Under the proposed rule change, NSCC will

maintain its current right to impose higher capital

requirements on members depending on the

circumstances and type of business that the member

is in.

or otherwise in furtherance of the

purposes of the Act.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549. 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 DTC. All submissions should

refer to File No. SR–DTC–97–15 and

should be submitted by October 20,

1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25692 Filed 9–26–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39110; File No. SR–NSCC–

97–07]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of a Proposed

Rule Change Relating to Changes in

Membership Standards

September 22, 1997.

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

Securities Exchange Act of 1934

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

August 5, 1997, the National Securities

Clearing Corporation (‘‘NSCC’’) 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 NSCC.

The Commission is publishing this

notice to solicit comments from

interested persons on the proposed rule

change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change will amend

NSCC’s membership standards to

increase the minimum excess net capital

requirements imposed on members and

applicants for membership.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NSCC 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. NSCC 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

The purpose of the proposed rule

change is to amend NSCC’s membership

standards to increase the amount of net

capital required over the Commission’s

minimum net capital requirements

(‘‘excess net capital’’).3 Currently, the

excess net capital requirement for all

members is $50,000. The proposed

amendments: (i) Will increase the

excess net capital requirement for full

service members to $500,000 except for

municipal securities brokers’ brokers 4

for which the excess net capital

requirement will be $100,000 5 and (ii)

will increase the excess net capital

requirement for members that clear for

other broker-dealers to $1,000,000.

NSCC’s current excess net capital

requirements were implemented in 1976

when NSCC was formed. The

environment in which NSCC members

operate has changed significantly since

that time. In terms of the change in the

value of money alone, $50,000 in 1976

dollars is worth nearly $150,000 today.

Trading volumes and the average value

of securities traded have increased even

more significantly. The Commission

also has changed its minimum net

capital requirements for most NSCC

members during this time period from

$25,000 (i.e., one-half of NSCC’s current

excess net capital requirement) to

$250,000 (i.e., one-half of NSCC’s

proposed excess net capital

requirement).6

As a result of the changing

environment, it has been NSCC’s recent

experience that when a member with

less than $500,000 in excess net capital

has problems with even one transaction

that would not be considered large by

today’s standards, concerns arise with

respect to that member’s ability to settle

on a timely basis and to post additional

required collateral with NSCC.

Additionally, even though the size of

the exposure due to the failure of any

one of these small firms is relatively

small, NSCC believes that the time and

resources that it must spend addressing

problems related to small firms is

disproportionate to the magnitude of the

potential loss and is unjustifiably

disruptive of NSCC’s daily surveillance

process.

NSCC also believes that the owners or

principals of an NSCC member should

have a meaningful amount of their own

assets at stake to absorb losses before a

member’s excess net capital falls below

regulatory minimums and the member

is required to cease doing business.

NSCC believes that this provides a

strong motivation for firms to

implement appropriate risk

management controls on their own. In

today’s environment, NSCC does not

believe that $50,000 is a meaningful

amount and believes that $500,000 is a

more appropriate amount.7

In addition, NSCC has recognized that

members that clear for other brokerdealers present special risks to the

clearance and settlement process. These

firms become legally responsible for the

settlement of transactions of other firms

and generally do not have complete

control over those transactions. Many of

these firms have surveillance

procedures and other risk controls in

place and can cease clearing for a

correspondent broker-dealer if they

perceive that a risk has developed. But

the clearing arrangements of these firms

and marketplace rules generally require

that the clearing firm (i.e., the NSCC

member) take on settlement

responsibility for most of the