75750 Federal Register / Vol. 65, No. 233 / Monday, December 4, 2000 / Notices

4 15 U.S.C. 78q–1(b)(3)(F).

5 15 U.S.C. 78s(b)(2).

6 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 GSCC.

3 In 1998, the Commission approved a rule

change that allowed GSCC to implement the GCF

Repo Service on an intrabank basis. Securities

Exchange Act Release No. 40623 (October 30, 1998),

63 FR 59831, (November 5, 1998) [File No. SR–

GSCC–98–02]. In 1999, the Commission approved

a rule change that allowed GSCC to implement the

second, interbank phase of the GCF Repo Service.

That enhancement has enabled participating dealers

to engage in GCF Repo trading with participating

dealers that use a different clearing bank. Securities

Exchange Act Release No. 41303 (April 16, 1999),

64 FR 20346 (April 26, 1999) [File No. SR–GSCC–

99–01].

4On March 20, 2000, GSCC activated the generic

CUSIP number representing Federal Home Loan

Mortgage Corporation and Federal National

Mortgage Association fixed-rate MBS.

Section 17A(b)(3)(F).4 Section

17A(b)(3)(A)(F) requires that the rules of

a clearing agency be designed, among

other things, to protect investors and the

public interest. DTC’s policy of

requiring low volume tender offers to be

processed through ATOP and of not

making securities available to an offeror

until payment for the shares tendered is

received should help to ensure that

those tendering shares will be paid for

their tendered shares. This should help

DTC and its participants to protect

investors and is in the public interest.

DTC has requested that the

Commission approve the proposed rule

change prior to the thirtieth day after

publication of the notice of the filing.

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after the

publication of notice because such

approval will allow DTC to immediately

apply the safeguards discussed above to

the processing of low volume tender

offers.

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

Room, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of DTC. All submissions should

refer to the File No. SR–DTC–00–13 and

should be submitted by December 26,

2000.

It Is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,5 that the

proposed rule change (File No. SR–

DTC–00–13) be and hereby is approved.

For the Commission by the Division

of Market Regulation, pursuant to

delegated authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–30718 Filed 12–1–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43626; File No. SR–GSCC–

00–05]

Self-Regulatory Organizations;

Government Securities Clearing

Corporation; Notice of Filing of

Proposed Rule Change Relating to

Enhancements to the Government

Collateral Finance Repo Service and

Clarifying Certain Risk Management

Practices of the Service

November 27, 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’’) and on

July 13, 2000, amended 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.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change will allow

GCF Repo securities lenders to satisfy

their collateral allocation requirements

with ‘‘comparable securities,’’

benchmark U.S. Treasury securities, or

cash. Similarly, the proposed rule

change will allow GCF Repo securities

borrowers, under certain conditions, to

return ‘‘comparable securities,’’

benchmark U.S. Treasury securities, or

cash. The proposed rule change also

would allow GSCC to alter its risk

management procedures associated with

the GCF Repo service to conform to the

mortgage-backed securities (‘‘MBS’’)

market practice.

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

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

GSCC introduced its GCF Repo

Service in November 1998.3 The GCF

Repo Service allows GSCC’s non-interdealer broker netting members

(‘‘dealers’’) to trade general collateral

repos involving U.S. Government

securities throughout the day without

requiring trade for trade settlement on a

delivery versus payment basis.

GSCC has been activating the generic

CUSIP numbers representing the

securities that are eligible for GCF Repo

processing in stages. U.S. Treasury

securities with a maturity of ten years or

less and U.S. Treasury securities with a

maturity of thirty years or less were the

first products to be made eligible for

GCF Repo processing. At the beginning

of this year, GSCC also began accepting

non-mortgage-backed agency securities

for GCF Repo processing and more

recently began accepting mortgagebacked securities (‘‘MBS’’) for GCF Repo

processing.4

Having gained the experience of

operating the GCF Repo Service for

more than one year, GSCC is now

seeking to enhance the service in certain

ways in order to make it more

responsive to its members’ needs and to

clarify certain risk management

practices, each in a manner consistent

with market practice.

(i) Authority To Deliver Comparable or

U.S. Treasury Securities

The first change proposed by GSCC

applies to the collateral allocation

Federal Register / Vol. 65, No. 233 / Monday, December 4, 2000 / Notices 75751

5As provided in GSCC’s Rule 46, the use of

borrowing and lending terminology in this

proposed rule change filing and in GSCC’s rules

and agreements shall not be deemed to affect the

intent of members as to their characterization of

their transactions in agreements entered into by the

members with each other or with third parties with

respect to such transactions.

6Rule 3 of MBS Clearing Corporation (‘‘MBSCC’’)

reflects MBS market practice of delivering

comparable securities in an insolvency situation. 7 17 CFR 200.30–3(a)(12).

obligations of securities lenders 5 in GCF

Repo transactions. Under the proposed

rule change, securities lenders will be

permitted to satisfy their collateral

allocation requirements in connection

with their GCF Repo activity with (1)

‘‘comparable securities’’ (i.e., those that

fall within the same generic CUSIP

number), (2) benchmark U.S. Treasury

securities (i.e., bills, notes, or bonds), or

(3) cash. Market participants consider

comparable securities to be acceptable

substitutes because securities that fall

within the same generic CUSIP number

tend to have the same level of liquidity.

U.S. Treasury securities are also

acceptable substitute securities because

of their high level of liquidity.

The second change proposed by GSCC

applies where the securities borrower,

due to reasons beyond its control and

despite exercising best efforts, is not

able to obtain in a timely manner the

securities that were delivered on the day

before by the securities lender. Under

the proposed rule change, the securities

borrower will have the right to return (1)

‘‘comparable securities,’’ (2) benchmark

U.S. Treasury securities, or (3) cash. The

securities borrower will be responsible

for making the securities lender whole

(through GSCC) for any actual damages

directly suffered by the securities lender

as a result of not receiving back the

same securities that were originally lent.

(ii) Insolvency Situation Involving

Mortgage-Backed Securities

The third change proposed by GSCC

relates to clarification of its risk

management procedures associated with

the GCF Repo Service to reflect the

nature of MBS and MBS market

practice. In the event of a securities

borrower’s insolvency, it may be

impractical or even impossible for GSCC

to obtain the identical types of MBS that

were originally lent. Moreover, MBS

market practice is such that in such a

situation, securities lenders in

repurchases transactions involving MBS

would not expect to receive the same

securities back.

The proposed rule change will amend

Rule 22, Section 4 of GSCC’s rules by

giving GSCC the authority in an

insolvency situation, where MBS were

the underlying collateral, to deliver back

to a securities lender ‘‘comparable

securities’’ or benchmark U.S. Treasury

securities.6 Alternatively, the proposed

rule change will permit GSCC to give a

securities lender the right to close out

the transaction by buying ‘‘comparable

securities’’ or U.S. Treasury securities in

return for a cash payment by GSCC

equal to the value of the securities it

bought. However, if GSCC determines

that the price paid by the securities

lender is unreasonably high, GSCC will

be entitled to pay the securities lender

a reasonable price as determined by an

independent third party pricing source

for the ‘‘comparable securities’’ or U.S.

Treasury securities.

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

enhance the GCF Repo Service by

making it more responsive to the needs

of GSCC’s members and by clarifying

certain of GSCC’s risk management

practices, each in a manner consistent

with market practice.

(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. 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 Action

Within thirty-five days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

ninety days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

(A) By order approve such proposed

rule change or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

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 of 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

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 submissions should refer to File

No. SR–GSCC–00–05 and should be

submitted by December 26, 2000.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–30771 Filed 12–1–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43603; File No. SR–NYSE–

00–36]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

No. 1 to the Proposed Rule Change by

the New York Stock Exchange, Inc.

Extending the Pilot Fee Structure

Governing the Reimbursement of

Member Organizations for Costs

Incurred in the Transmission of Proxy

and Other Shareholder Communication

Materials and Amending the

Components of Coordination Activities

November 21, 2000.

I. Introduction

On August 11, 2000, the New York

Stock Exchange, Inc. (‘‘NYSE’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or