19774 Federal Register / Vol. 63, No. 76 /Tuesday, April 21, 1998 / Notices

7 17 CFR 200.30–3(a)(12).

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

2The Commission has modified parts of these

statements.

3 GSCC’s Rule 4, Clearing Fund, Margin, and Loss

Allocation.

4For example, if the contract value exceeds the

market value, the mark to the market amount will

be collected from the buyer and paid to the seller.

Conversely, if the market value exceeds the contract

value, the mark to the market amount will be

collected from the seller and paid to the buyer.

5 GSCC is authorized to pay FOS obligations to

members by 10:00 a.m. eastern time (‘‘ET’’).

Members must satisfy clearing fund deficiences by

the later of two hours after the receipt of GSCC’s

call or 10:00 a.m. ET. However, if the notification

is not made earlier than two hours before the close

of the cash FedWire, members may satisfy the calls

on the next business day.

6 GSCC does not plan to exercise the offset right

unless it has a significant FOS obligation to a

member (i.e., $5 million or more) and the member

has a significant clearing fund deficiency (i.e., $5

million or more).

7 GSCC currently plans to set the preestablished

time at fifteen minutes before GSCC’s deadline to

make its own FOS payments to members.

8 15 U.S.C. 78q–1(b)(3)(F).

the Commission’s Public Reference

Section, 450 Fifth Street, N.W.,

Washington, D.C. 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–97–21 and

should be submitted by May 12, 1998.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–10422 Filed 4–20–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39860; File No. SR–GSCC–

98–01]

Self-Regulatory Organizations;

Government Securities Clearing

Corporation; Notice of Filing of a

Proposed Rule Change Relating to

Funds-Only Settlement Payment

Procedures

April 14, 1998.

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

Securities Exchange Act of 1934

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

February 17, 1998, the Government

Securities Clearing Corporation

(‘‘GSCC’’) 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 GSCC.

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

The proposed rule change will amend

GSCC’s rules regarding funds-only

settlement (‘‘FOS’’) payments

procedures to permit GSCC to retain

significant FOS payments it owes to a

member to offset such amounts against

any significant clearing fund deposit

obligation the member owes to GSCC.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Purposed 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 such statements.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

Two important elements of GSCC’s

risk management process are the daily

calculation and collection of clearing

fund deposit deficiency amounts and of

mark to the market margin. The amount

of a member’s clearing fund deposit

generally is the sum of (1) the absolute

value of its average FOS amounts, (2)

the highest of several margin

calculations using the absolute value of

each of the member’s net settlement

positions, and (3) the highest of two

volatility calculations using the market

value of each repo transaction that

comprises its outstanding net settlement

position.3 The mark to the market

collections are included as part of

GSCC’s FOS payment procedures and

are calculated and collected on every

forward settling position (i.e., a position

not scheduled to settle the next day).

The calculated mark to the market

amount is collected from a member with

a debit and paid to a member with a

credit.4

At times, GSCC is obligated to pay a

member a FOS amount on a day on

which that member also has a clearing

fund deficiency call. Pursuant to its

rules, GSCC is required to make the FOS

payment to such a member prior to the

time the member must make its clearing

fund deficiency payment to GSCC.5 This

results in exposure to GSCC and its

members for a period of time due to the

potential that the member will fail after

it has received a FOS payment from

GSCC but before it has satisfied the

clearing fund deficiency call. The

proposed rule change will permit GSCC

to retain FOS payments it owes to a

member and to offset such amounts

against any clearing fund deposit

obligation the member owes to GSCC.6

Under the proposed amendment to

Rule 13 Section 5, GSCC will be entitled

to retain the lesser of the FOS amount

or the amount of the clearing fund call

(or the entire FOS amount if the

difference between the amounts is zero)

and apply it to the member’s clearing

fund deposit requirement. If a member

pays all or a portion of its clearing fund

deficiency in any type of eligible

collateral by a preestablished time

before GSCC’s deadline to make its own

FOS payments to members,7 GSCC will

only be entitled to offset its FOS

obligation to the member against the

member’s remaining clearing fund

deficiency. Pursuant to GSCC’s existing

rules, a member will have the right to

substitute eligible collateral for any cash

that GSCC applies to its clearing fund

deposit as a result of an offset.

GSCC believes that the proposed rule

change is consistent with Section

17A(b)(3)(F) because the proposed rule

change should enhance its risk

management process by increasing

settlement efficiency and reducing

payment related risks to GSCC and its

members.8

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

GSCC does not believe that the

proposed rule change will have an

impact on 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

members of the rule change filing and

comments will be solicited by an

important notice. 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
Federal Register / Vol. 63, No. 76 /Tuesday, April 21, 1998 / Notices 19775

9 17 CFR 200.3–3(a)(12).

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

2 17 CFR 240.19b–4.

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 GSCC consents, the

Commission will:

(A) By order approve such filing or

(B) Institute proceedings to determine

whether the rule filing 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 thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street NW.,

Washington, D.C. 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the rule filing that are

filed with the Commission, and all

written communications relating to the

rule filing between the Commission and

any person, other than those that may be

withheld from the public in accordance

with provisions of 5 U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Room in Washington, D.C. Copies of

such filing will also be available for

inspection and copying at the principal

office of GSCC. All submissions should

refer to the File No. SR–GSCC–98–01

and should be submitted by May 12,

1998.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–10421 Filed 4–20–98; 8:45 am]

BILLING CODE 8010–02–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39873; File No. SR–MSRB–

97–15]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Municipal Securities Rulemaking

Board Relating to Rules G–11, on

Sales of New Issue Municipal

Securities During the Underwriting

Period, G–12, on Uniform Practice, and

G–8, on Books and Records

April 14, 1998.

On December 23, 1997, the Municipal

Securities Rulemaking Board (‘‘Board’’

or ‘‘MSRB’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) a proposed

rule change (File No. SR–MSRB–97–15),

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

Securities Exchange Act of 1934

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

The proposed rule change is described

in Items I, II, and III below, which Items

have been prepared by the Board. 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

The Board is filing herewith an

amendment to Rule G–11, on sales of

new issue municipal securities during

the underwriting period, G–12, on

uniform practice, and G–8, on books

and records (hereinafter referred to as

the ‘‘proposed rule change’’). The

proposed rule change, among other

things, requires the managing

underwriter of a syndicate to maintain

a record of all issuer syndicate

requirements; requires the managing

underwriter to complete the allocation

of securities within 24 hours of the

sending of the commitment wire;

requires the managing underwriter to

disclose to syndicate members all

available designation information;

requires the managing underwriter to

disclose to members of the syndicate, in

writing, the amount of any portion of

the take-down that is directed to each

member of the syndicate by the issuer;

and shortens the deadline for payment

of designations to 30 calendar days after

the issuer delivers the securities to the

syndicate.

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

Board 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 texts of these

statements may be examined at the

places specified in Item IV below. The

Board 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

As part of the Board’s review of the

underwriting process, the Board has

determined to adopt the proposed rule

change to further strengthen the

integrity of the syndicate practices

process.

Issuer Syndicate Requirements

Issuer requirements involving

syndicate formation, order review,

designation policies and bond

allocations have become much more

prevalent in the municipal securities

market. Such requirements are

significant because they help to

determine which dealers, and ultimately

which investors, obtain the bonds. As

issuer syndicate requirements can affect

the functioning of the syndicate, and at

times the final costs to the issuer of the

new issue, the Board believes that

records of such requirements should be

maintained so that any problems or

concerns regarding the functioning of

the syndicate arising from these

requirements can be identified and

addressed and the information should

be provided to syndicate members and

others, upon request.

The proposed rule change amends

Rules G–8(a)(viii) and G–11(f) to require

the managing underwriter to maintain a

record of all issuer syndicate

requirements. If the requirements are in

a published guideline, such guidelines

should be maintained by the dealer and

supplemented by a statement of any

additional requirements that arise prior

to settlement. If the requirements are not

in published form, the managing

underwriter must create a written

detailed statement of such requirements

and maintain such statement in its

records. The managing underwriter

must provide a copy of the published

guidelines or underwriter prepared

statement of issuer syndicate

requirements to syndicate members

prior to the first offer of any securities

by the syndicate. Syndicate members

must furnish this summary promptly to

others, upon request. In addition, the

managing underwriter must provide the

issuer with a copy of any such statement

for its review.

Allocation of Securities

The proposed rule change amends

Rule G–11(g) to require the managing

underwriter to complete the allocation

of securities within 24 hours of the

sending of the commitment wire. Delays

in allocations seem to be a growing

problem in the municipal securities

market. Many delays in allocations

appear to be the result of issuers and

financial advisors failing to review

orders and proposed allocations in a

timely fashion. Investors complain that

they have difficulty finalizing their

portfolio positions when their orders