[Federal Register Volume 62, Number 35 (Friday, February 21, 1997)]
[Notices]
[Pages 8069-8070]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4235]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38283; File No. SR-NSCC-96-19]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Granting Approval of a Proposed Rule Change To 
Discontinue the Operation of the Securities Clearing Group's Data Base

February 13, 1997.
    On October 3, 1996, the National Securities Clearing Corporation 
(``NSCC'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change (File No. SR-NSCC-96-19) 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'').\1\ Notice of the proposal was published in the Federal 
Register on November 6, 1996.\2\ No comment letters were received. For 
the reasons discussed below, the Commission is granting approval of the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 37904 (October 31, 
1996), 61 FR 57506.
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I. Description

    The proposed rule change amends the Securities Clearing Group 
Agreement of the Securities Clearing Group (``SCG'')\3\ to discontinue 
the operation of the SCG data base. The SCG data base contains 
information on common participants of the SCG members relating to 
settlement payment obligations, clearing fund and margin requirements 
and deposits, and other related information. The members of the SCG 
created the SCG data base as a means to coordinate and share 
information on common participants and increase cooperation among the 
SCG members.
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    \3\ The SCG was established in 1989 as a result of developments 
surrounding the October market break and subsequent studies on the 
causes of the market break. The stated purpose of the SCG is to 
increase cooperation and coordination among securities clearing 
entities and to facilitate the sharing of certain clearance and 
settlement information regarding surveillance and member risk 
monitoring. For a further description of the SCG, refer to 
Securities Exchange Act Release No. 27044 (July 25, 1989), 54 FR 
30963 [File Nos. SR-DTC-88-20, SR-MCC-88-10, SR-MSTC-88-07, SR-NSCC-
88-09, SR-OCC-89-02, SR-Philadep-89-01, and SR-SCCP-89-01] (order 
approving the establishment of the SCG).
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    Termination of the SCG data base is desirable for several reasons. 
First, NSCC has established and agreed to make available to the SCG 
members access to its Collateral Management Service (``CMS'').\4\ The 
CMS will not only make available to the SCG members information similar 
to that

[[Page 8070]]

contained in the SCG data base but will also provide members with 
enhanced features and capabilities. For example, the SCG data base 
contains aggregate information on clearing fund and margin deposits 
including excess and deficit amounts whereas the CMS contains both 
aggregate information on clearing fund and margin deposits including 
excess and deficit amounts as well as detailed information on the 
underlying collateral comprising clearing fund and margin deposits 
(i.e., cash, securities, and letters of credit). The SCG members 
recognize that termination of the SCG data base is desirable at this 
point to avoid redundancies with the CMS.
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    \4\ For a description of the Collateral Management Service, 
refer to Securities Exchange Act Release No. 36091 (August 10, 
1995), 60 FR 42931 [File No. SR-NSCC-95-06] (order approving a 
proposed rule change establishing the CMS).
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    Second, termination of the SCG data base will eliminate the 
occurrence of a significant increase in costs that would be required to 
maintain the SCG data base because the data base on which it is built 
is no longer supported by the original vendor. As a result, SCG members 
would be required to enter into a new and more costly contract with a 
new vendor. Third, because the CMS contains more detailed information 
and more features than the SCG data base, use of the CMS in place of 
the SCG data base should enable the SCG members to better coordinate 
and share information and to monitor clearing fund and margin deposits 
with respect to common participants.
    Accordingly, the SCG members have executed Amendment No. 6 to the 
SCG Agreement.\5\ The Amendment: (i) authorizes the termination of the 
SCG data base, (ii) authorizes NSCC to use all data information, 
computer coding, and programs contained in the SCG data base in 
establishing and maintaining the operation of CMS, and (iii) grants to 
each SCG Member a nonexclusive and nontransferable license to use 
NSCC's CMS.
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    \5\ A copy of the Amendment is attached to NSCC's filing. A copy 
of the filing is available for copying and inspection in the 
Commission's Public Reference Room or through NSCC.
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II. Discussion

    Section 17A(b)(3)(F) provides that the rules of a clearing agency 
must be designed to assure the safeguarding of securities and funds in 
the custody or control of the clearing agency or for which it is 
responsible and to foster cooperation and coordination with persons 
engaged in the clearance and settlement of securities transactions.\6\ 
The Commission believes that the proposed rule change is consistent 
with the Act because the amendment to the SCG Agreement provides for 
each SCG member to have access to the CMS, and the Commission believes 
the CMS and the data contained in it should assist SCG members in 
assuring the safeguarding of securities and funds in their custody or 
control. The Commission also believes the termination of the SCG data 
base in conjunction with NSCC's grant to each SCG member of a 
nonexclusive and nontransferable license to use the CMS, should foster 
cooperation and coordination with persons engaged in the clearance and 
settlement of securities transactions.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A of the Act and the rules and regulations 
thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-NSCC-96-19) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4235 Filed 2-20-97; 8:45 am]
BILLING CODE 8010-01-M