9222 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Notices

1Cedel Bank is a wholly-owned subsidiary of

Cedel International. On January 1, 1995, Cedel,

which was established in 1970, was converted into

Cedel Bank to perform lending, clearing, and

settlement activities, and a parent company, Cedel

International, was created into which Cedel

transferred the nonbanking subsidiaries. Cedel Bank

is licensed in Luxembourg both as a bank and as

a ‘‘professionnel du secteur financier’’ (‘‘PSF’’) and

is under the supervision of the Institute Monetaire

Luxembourgeois (‘‘IML’’), Luxembourg’s banking

and securities regulatory authority. Cedel

International is licensed as a non-bank PSF and also

is under the supervision of the IML. The IML

establishes capital and liquidity requirements,

evaluates the financial condition and performance

of all Luxembourg financial institutions, conducts

on-site inspections, and monitors all financial

institutions and their controlling companies for

adherence to Luxembourg laws and regulations. On

April 24, 1996, the Federal Reserve Board granted

Cedel’s request to establish a representative office

in New York.

2Copies of the application for exemption are

available for inspection and copying at the

Commission’s Public Reference Room, in File No.

600–29.

3 15 U.S.C. 78q–1.

4 17 CFR 240.17Ab2–1.

5Securities Exchange Act Release No. 37309

(June 12, 1996), 61 FR 31201 (Notice of filing of

application for exemption from registration as a

clearing agency) (‘‘Cedel notice’’).

6Securities Exchange Act Release No. 38328

(February 24, 1997), (order approving application

for exemption from registration as a clearing

agency) (‘‘Cedel exemption order’’). The definition

of ‘‘eligible U.S. government securities’’ is set forth

in Section II of this notice.

7For a more detailed description of Cedel’s

clearance, settlement, and credit support services,

see the Cedel notice, 61 FR at 31201–04.

8 GCSS became operational on a limited basis on

September 30, 1996, with four institutions

participating (Bank of America, Banque Paribas,

Dresdner Bank, and Salomon Brothers). Pursuant to

the Cedel exemption order, eligible U.S.

government securities can be included in GCSS.

However, the Cedel exemption order does not

permit Cedel to provide securities processing

services through GCSS or otherwise for other U.S.

debt or equity securities transactions involving U.S.

entities.

President’s budget submission to

Congress. This version of the appendix

is valid through the end of February,

1998. Copies of the updated appendix

and the Circular can be obtained from

the OMB Publications Office (202–395–

7332) or in an electronic form through

the OMB home page on the world-wide

WEB, http://www.whitehouse.gov/WH/

EOP/omb. Updates of this appendix are

also available upon request from OMB’s

Office of Economic Policy (202–395–

3381), as is a table of past years’ rates.

Nominal Discount Rates. Nominal

interest rates based on the economic

assumptions from the budget are

presented below. These nominal rates

are to be used for discounting nominal

flows, which are often encountered in

lease-purchase analysis.

NOMINAL INTEREST RATES ON TREASURY NOTES AND BONDS OF SPECIFIED MATURITIES

[In percent]

3-year 5-year 7-year 10-

year

30-

year

5.8 5.9 6.0 6.1 6.3

Real Discount Rates. Real interest

rates based on the economic

assumptions from the budget are

presented below. These real rates are to

be used for discounting real (constantdollar) flows, as is often required in

cost-effectiveness analysis.

REAL INTEREST RATES ON TREASURY

NOTES AND BONDS OF SPECIFIED

MATURITIES

[In percent]

3-year 5-year 7-year 10-

year

30-

year

3.2 3.3 3.4 3.5 3.6

Analyses of programs with terms

different from those presented above

may use a linear interpolation. For

example, a four-year project can be

evaluated with a rate equal to the

average of the three-year and five-year

rates. Programs with durations longer

than 30 years may use the 30-year

interest rate.

[FR Doc. 97–4992 Filed 2–27–97; 8:45 am]

BILLING CODE 3110–01–P

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38329; International Series

Release No. 1059; File No. 600–29]

Self-Regulatory Organizations; Cedel

Bank, Notice of Filing To Amend Order

Exempting Cedel Bank From

Registration as a Clearing Agency

February 24, 1997.

Introduction

On August 31, 1995, Cedel Bank,

socie ́te ́ anonyme, Luxembourg

(‘‘Cedel’’) 1 filed with the Securities and

Exchange Commission (‘‘Commission’’)

an application on Form CA–2 2 for

exemption from registration as a

clearing agency pursuant to Section 17A

of the Securities Exchange Act of 1934

(‘‘Exchange Act’’) 3 and Rule 17Ab2–1

thereunder.4 Notice of Cedel’s

application was published in the

Federal Register on June 19, 1996.5 On

February 24, 1997, the Commission

granted Cedel’s application for

exemption from registration as a

clearing agency to permit Cedel to offer

clearance, settlement, and credit

support services to U.S. entities for

transactions in eligible U.S. government

securities.6 The exemption is subject to

certain conditions and limitations

which are set forth in the Cedel

exemption order.

Contemporaneously with the granting

of Cedel’s limited exemption from

registration as a clearing agency, the

Commission is publishing this notice to

solicit comments from interested

persons on the specific issue of whether

Cedel should be permitted, without

registering as a clearing agency, to offer

its securities processing and collateral

management services to U.S. entities for

U.S. debt and equity securities in

addition to U.S. government securities.

The Commission seeks comment on this

issue because the Commission believes

that the provision of clearance,

settlement, and collateral management

services by a non-U.S. clearing agency

for U.S. entities in U.S. debt and equity

securities raises issues that were not

addressed sufficiently in the Cedel

notice or the comments thereto.

II. Description of the Proposal

As more fully described in the Cedel

notice and the Cedel exemption order,

Cedel offers to its customers

international clearance and settlement,

trade confirmation, securities custody,

and securities lending services.7 Cedel

also offers to its customers its Global

Credit Support Service (‘‘GCSS’’) which

is a book-entry, real-time collateral

management service for cross-border

securities collateralization.8 In its

application for exemption, Cedel

requested that it be permitted to provide

clearance and settlement, securities

lending, and GCSS services for

transactions involving U.S. securities,

including equity and debt securities.

The comment letters regarding the

Cedel notice generally indicated that the

ability to provide clearance, settlement,

and collateral management services for

transactions involving U.S. Treasury

securities (‘‘U.S. Treasuries’’) appeared

to be the most critical element of Cedel’s

proposed services. This is especially

true for GCSS because U.S. Treasuries

appear to be the preferred securities for

use as collateral in securing

international credit obligations.

Commenters did not specifically discuss

any unique or additional benefits to be
Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Notices 9223

9 ‘‘Government securities’’ is defined in Section

3(a)(42) of the Exchange Act, 15 U.S.C. 78c(a)(42).

Fedwire is a large-value transfer system operated

cooperatively by the twelve Federal Reserve Banks

that supports the electronic transfer of funds and

the electronic transfer of book-entry securities.

10 GNMAs, unlike other mortgage-backed

securities such as those guaranteed by the Federal

National Mortgage Association (‘‘FNMAs’’) and the

Federal Home Loan Mortgage Association

(‘‘FHLMCs’’), are issued in certificated form and

therefore cannot be transferred over Fedwire.

11 ‘‘Eligible U.S. government securities’’ also

includes any collateralized mortgage obligation

(‘‘CMO’’) whose underlying securities are Fedwireeligible U.S. government securities or GNMA

guaranteed mortgage-backed pass-through securities

and which are depository eligible securities in a

U.S. registered clearing agency.

12As more fully described in the Cedel exemption

order, for purposes of the volume limitation,

securities ‘‘processed through Cedel’’ means a

security that is processed in GCSS, Cedel’s tripartite

repo service, Cedel’s securities lending program, or

Cedel’s clearance and settlement system. The

inclusion of the volume limitation reflects the

Commission’s determination to take a gradual

approach toward permitting an unregistered, nonU.S. clearing agency such as Cedel to provide

securities processing services to U.S. market

participants. In this regard, the Commission notes

that the eligible U.S. government securities covered

by the Cedel exemption order trade in a market

characterized by the highest level of liquidity.

13Securities Exchange Act Release No. 16900

(June 17, 1980), 45 FR 41920. See also the Cedel

exemption order, supra note 6.

14See note 12, supra.

15For example, under the Commission’s net

capital rule, a ready market is defined to include

(i) a recognized established securities market in

which there exists independent bona fide offers to

buy and sell so that a price reasonably related to

the last sales price or current bona fide competitive

bid and offer quotations can be determined for a

particular security almost instantaneously and

where payment will be received in settlement of a

sale at such price within a relatively short time

conforming to trade custom, or (ii) where securities

have been accepted as collateral for a loan by a bank

as defined in section 3(a)(6) of the Securities

Exchange Act of 1934 and where the broker or

dealer demonstrates to its examining authority that

such securities adequately secure such loans. 17

CFR 240.15c3–1(c)(11)(i) and (ii).

16Pursuant to the Cedel exemption order, the

average daily volume of eligible U.S. government

securities processed through Cedel may not exceed

5% of the total average daily dollar value of the

aggregate volume in eligible U.S. government

securities. The total average daily dollar value of

eligible U.S. government securities volume is

derived from total daily value of securities activity

through Fedwire, Government Securities Clearing

Corporation, MBS Clearing Corporation,

Participants Trust Company, and any other source

that the Division of Market Regulation deems

appropriate to reflect the aggregate volume in

eligible U.S. government securities. Cedel’s average

daily volume is derived from the value of eligible

Continued

derived from permitting Cedel to

provide securities processing services

for U.S. equity and debt securities in

addition to U.S. Treasuries, what types

of equity and debt securities should be

deemed to be ‘‘U.S. debt and equity

securities,’’ or how the restrictions and

conditions, such as volume limitations,

should be applied with respect to such

securities.

The Cedel exemption order permits

Cedel to provide clearance, settlement,

and collateral management services for

Fedwire-eligible U.S. government

securities 9 and mortgage backed passthrough securities that are guaranteed

by the Government National Mortgage

Association (‘‘GNMAs’’) 10 (collectively,

‘‘eligible U.S. government securities’’),11

subject to certain limitations and

conditions. Among other things, the

Cedel exemption order limits the

volume of eligible U.S. government

securities that can be processed through

Cedel and requires Cedel to provide the

Commission with certain information to

assist the Commission in ascertaining

whether Cedel is in compliance with the

terms of the exemption order, and

information relating to the default or

near default of certain Cedel customers

or their affiliates.12

III. Proposed Modification of

Exemption

A. Introduction

The Commission is further

considering Cedel’s request to offer its

securities processing and collateral

management services to U.S. entities for

U.S. debt and equity securities.

Accordingly, the Commission seeks

comment regarding the appropriateness

of permitting an unregistered non-U.S.

clearing agency such as Cedel to offer

clearance and settlement and other

securities processing services for U.S.

debt and equity securities in

transactions involving U.S. entities. If it

is appropriate for a non-U.S. clearing

agency to provide such services, the

Commission also seeks comment on the

types of U.S. debt and equity securities

which Cedel should be permitted to

process for U.S. entities. Furthermore,

the Commission seeks comment on

additional conditions, such as volume

limits and the methods by which such

limits should be calculated, that should

be included in an exemption order.

1. Appropriateness

The Commission seeks comment on

whether an exemption from clearing

agency registration under Section 17A

of the Exchange Act is appropriate for

a non-U.S. entity, and Cedel in

particular, that performs clearance,

settlement, and credit support services

for transactions in U.S. debt and equity

securities involving U.S. entities. The

Commission anticipates that such an

entity would substantially meet the

standards established for the registration

of clearing agencies 13 but cannot fully

comply with all of the registration

provisions because of certain

organizational, operational, and

jurisdictional differences.

The Commission specifically requests

comment on the manner in which an

unregistered non-U.S. clearing agency

may be integrated into the national

clearance and settlement system for U.S.

equity and debt securities, and whether

such integration would pose any

additional or unique risks to U.S.

investors or to the national clearance

and settlement system. In the event a

non-U.S. clearing agency may pose such

risks, commenters are invited to discuss

risk management controls that should be

required by or for such a clearing

agency. The Commission anticipates

that such risk management controls

would include special collateralization

requirements, waivers of immunity with

regard to pledged collateral, and

submission to the jurisdiction of U.S.

courts for such non-U.S. entity.

2. Types of Classes of Securities

If modification of Cedel’s exemption

order to include U.S. debt and equity

securities is appropriate, the

Commission seeks comment on the

specific types and classes of such

securities that may be encompassed by

such an exemption. In particular, the

Commission seeks comment as to

factors to be considered in connection

with such a determination. For example,

should eligible securities be limited to

those registered pursuant to Section 12

or Section 15(d) of the Exchange Act?

Should the domicile of the issuer be a

factor in such a determination? Should

an exemption be limited only to those

U.S. debt and equity securities for

which there is a ‘‘ready market’’ or

satisfy some liquidity standard? 14 If so,

how should a ready market or such

liquidity standard be defined? 15 Should

covered securities be limited to those

that are depository eligible at a U.S.

registered clearing agency and, if so,

should the exemption require an

effective linkage between the U.S. and

non-U.S. clearing agencies?

3. Volume Limitation and Other

Conditions

As discussed in the Cedel exemption

order, the Commission believes that

volume limitations on the amount of

securities that may be processed

through Cedel are necessary to limit any

potential negative effects on the national

clearance and settlement system.

Accordingly, the Commission seeks

comment on whether five percent or

another proportion of some defined

market would be an appropriate limit

with respect to U.S. debt and equity

securities.16 The Commission also seeks
9224 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Notices

U.S. government securities that are processed

through Cedel involving a U.S. counterparty or its

affiliate.

17 15 U.S.C. 781q–1(a)(2).

18 17 CFR 200.30–3(a)(16).

1 15 U.S.C. 78s(b)(1) (1988).

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 38307

(February 19, 1997) (Amex–97–04).

4The industries represented by these companies

include: packaged software providers; computer

programming consulting firms; and computer

outsourcing services.

5See Exchange Rule 902C(c).

6See Exchange Rule 902C(d).

7See Exchange Rule 902C(e).

comment on whether there should be a

concentration limit whereby Cedel

would be prohibited from reaching its

entire volume limit for U.S. debt and

equity securities by processing

transactions involving the U.S. debt or

equity securities of only one or a limited

number of issuers.

The Commission invites commenters

to discuss any other issues that may

arise or restrictions that should be

imposed in connection with any

modification of Cedel’s exemption order

to permit Cedel to offer securities

processing services for U.S. debt and

equity securities that have not been

discussed in this notice or adequately

addressed in the Cedel exemption order.

B. Fair Competition

As discussed in the Cedel notice,

Section 17A of the Exchange Act

requires the Commission in exercising

its authority under that section to have

due regard for the maintenance of fair

competition among clearing agencies.17

Therefore, the Commission invites

commenters to address what the likely

effect on competition and on the U.S.

securities markets would be if the

Commission modifies Cedel’s

exemption from registration as a

clearing agency to permit Cedel to

process U.S. debt and equity securities

transactions involving U.S. entities.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing

application by March 31, 1997. Such

written data, views, and arguments will

be considered by the Commission in

deciding whether to expand Cedel’s

exemption from registration to include

processing U.S. debt and equity

securities. Persons desiring to make

written submissions should file six

copies thereof with the Secretary,

Securities and Exchange Commission,

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

20549. Reference should be made to File

No. 600–29. Copies of the application

and copying at the Commission’s Public

Reference Room 450 Fifth Street, N.W.,

Washington, D.C. 20549.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.18

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–5026 Filed 2–27–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38324; File No. SR–Amex–

97–07]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the American Stock

Exchange, Inc., Relating to the

Disclaimer Provisions of Amex Rule

902C

February 24, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’)1 and Rule 19b–4 thereunder,2

notice is hereby given that on January

29, 1997, the American Stock Exchange,

Inc. (‘‘Amex’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I and II below, which Items have

been prepared by the self-regulatory

organization. The Exchange has

requested accelerated approval for the

proposal. This order approves the

Amex’s proposal on an accelerated basis

and solicits comments from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Amex is proposing to amend

Exchange Rule 902C to include the de

Jager Year 2000 Index (‘‘Index’’) in the

disclaimer provisions of the Rule.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

self-regulatory organization 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 III below.

The self-regulatory organization has

prepared summaries, set forth in

Sections A, B, and C below, of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

In conjunction with a proposal to list

and trade options on the de Jager Year

2000 Index, the Amex is proposing to

amend Exchange Rule 902C to provide

a disclaimer for de Jager & Company, a

consulting company active in promoting

awareness of the ‘‘Year 2000’’ problem.

The Exchange’s proposal to list and

trade options on the Index has been

given summary effectiveness treatment

pursuant to Section 19(b)(3)(A) of the

Act.3

The Amex and de Jager & Company

have developed a new index called The

de Jager Year 2000 Index, based entirely

on shares of widely-held companies

whose business is expected to benefit

from the need of companies,

governments, and others to address and

resolve the ‘‘Year 2000’’ problem.4 The

‘‘Year 2000’’ problem arises because

most business application software

programs (mainframe, client/server, and

personal computer) written over the

past twenty years use only two digits to

specify the year, rather than four.

Therefore, on January 1, 2000, unless

the software is corrected, most

computers with time-sensitive software

programs will recognize the year as

‘‘00’’ and may assume that the year is

‘‘1900.’’ This could either force the

computer to shut down or lead to

incorrect calculations. The Index will be

calculated and maintained by the Amex.

A representative of de Jager & Company

will be available to advise the Exchange

when, pursuant to Exchange Rule

901C(b), the Amex substitutes stocks, or

adjusts the number of stocks included in

the Index, based on changing conditions

in the ‘‘Year 2000’’ industry or in the

event of certain types of corporate

actions. It is anticipated that the Amex

will consult with de Jager & Company

on a quarterly basis to review possible

candidates for removal from or

inclusion in the Index.

The disclaimer, identical in content to

disclaimers currently in place for

Standard & Poor’s Corporation (‘‘S&P’’),5

Morgan Stanley & Co. Incorporated,6

and Inter@ctive Enterprises L.L.C.,7

states that de Jager & Company does not

guarantee the accuracy or completeness

of the Index, makes no express or

implied warranties with respect to the

Index, and will have no liability for any

damages, claims, losses, or expenses

caused by errors in the Index

calculation.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act in general and