Federal Register / Vol. 63, No. 84 / Friday, May 1, 1998 / Notices 24201

5See 15 U.S.C. 78c(f).

6 17 CFR 200.30–3(a)(12).

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

2Securities Exchange Act Release No. 39684

(February 19, 1998), 63 FR 9621.

3Treasury securities are defined in Delta’s

procedures as a treasury bill, treasury bond or

treasury note issued by the United States

Department of the Treasury.

4Mortgage backed securities are defined in

Delta’s procedures as book entry securities directly

issued by the Federal National Mortgage

Association (‘‘FNMA’’) or Federal Home Loan

Mortgage Corporation (‘‘FHLMC’’), as applicable,

through its mortgage origination program, and

which is designed to receive principal payments

using a predetermined principal balance schedule.

A mortgage security may either be a fixed rate

mortgage security or an adjustable rage mortgage

security. All of the following securities are

excluded from the definition of mortgage securities:

(i) securities which are issued in registered or

bearer form, (ii) securities which are not

transferable through the Federal Reserve System,

(iii) securities which are not issued or guaranteed

directly by FNMA or FHLMC, (iv) securities where

the underlying assets are mortgage backed

securities, rather than a pool of mortgages, and (v)

notional, interest only, principal only, accrual and

partial accrual securities, and floaters and inverse

floaters.

5Federal funds are defined in Delta’s procedures

as cash balances available for immediate

withdrawal in accounts maintained at banks that

are members of the Federal Reserve system.

6Section 3(a)(42)(B) of the Act defines

government securities to include securities which

are issued or guaranteed by corporations in which

the United States has a direct or indirect interest

and which are designated by the Secretary of the

Treasury for exemption as necessary or appropriate

in the public interest or for the protection of

investors. The Department of Treasury has

designated securities issued by FNMA and by

FHLMC as exempt. Notice issued by the

Department of Treasury (October 7, 1987), 52 FR

38559.

7Rule 15c3–1(c)(2)(vi)(A)(1), 17 CFR 240.15c3–

1(c)(2)(vi)(A)(1).

8 15 U.S.C. 78q–1(b)(3)(F).

9 17 CFR 200.30–3(a)(12).

purposes of the Act. In reviewing this

filing, the Commission considered the

proposal’s impact on efficiency,

competition, and capital formation.5

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, N.W.,

Washington, D.C. 20549. Copies of the

submissions, 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 persons, 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, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the Exchange. All submissions

should refer to File No. SR–BSE–98–4

and should be submitted by May 22,

1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Jonathan G. Katz,

Secretary.

[FR Doc. 98–11566 Filed 4–3010–98; 8:45

am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39920; File No. SR–DCC–

98–01]

Self-Regulatory Organizations; Delta

Clearing Corp.; Order Granting

Approval of a Proposed Rule Change

to Permit the Use of Mortgage Backed

Securities as Margin Collateral

April 27, 1998.

On January 5, 1998, Delta Clearing

Corp. (‘‘Delta’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) a proposed rule change

(File No. SR–DCC–98–01) 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 February 25, 1998.2

No comment letters were received. For

the reasons discussed below, the

Commission is approving the proposed

rule change.

I. Description

Delta’s participants may clear and

settle repurchase and reverse repurchase

agreements in both treasury securities 3

(‘‘treasury repos’’) and in mortgage

backed securities 4 (‘‘mortgage backed

repos’’) through Delta’s system. Some

participants only clear and settle

mortgage backed repos through Delta.

Because Delta currently only accepts

federal funds 5 or treasury securities as

margin collateral, these participants

incur an additional cost associated with

obtaining treasury securities for

purposes of supplying margin collateral.

Because these participants already

possess mortgage backed securities

related to the transactions they are

clearing through Delta, it would be a

more straightforward process for them

to honor their margin obligations with

these mortgage backed securities.

Delta has stated its belief that with

appropriate haircuts, the acceptance of

margin in the form of mortgage backed

securities should pose no additional risk

to the system. Delta notes that the

Commission under its net capital rule

generally applies the same haircuts to

treasury securities and mortgage backed

securities.6 Consistent with Delta’s

treatment of treasury securities used for

margin collateral, Delta will value

mortgage backed securities in

accordance with the schedule of

applicable haircuts found in the

Commission’s uniform net capital rule.7

Furthermore, Delta notes that its

clearing bank, The Bank of New York,

will accept mortgage backed securities

from Delta without further haircuts.

II. Discussion

Section 17A(b)(3)(F) of the Act 8

requires that the rules of a clearing

agency be designed to promote the

prompt and accurate clearance and

settlement of securities transactions.

The Commission believes that the rule

change is consistent with Delta’s

obligations under the Act. The rule

change should encourage wider use of

Delta’s system by providing participants

with the ability to more efficiently and

more economically meet their margin

requirements. The revised margin

collateral procedures should especially

encourage more use of Delta’s system by

those participants that only clear and

settle mortgage backed repos by

allowing these participants to honor

their margin obligations with mortgage

backed securities they possess. Wider

use of Delta’s system should assist Delta

in promoting the prompt and accurate

clearance and settlement of securities

transactions.

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, prusuant to

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

proposed rule change (File No. SR–

DCC–98–01) be and hereby is approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Jonathan G. Katz,

Secretary.

[FR Doc. 98–11653 Filed 4–30–98; 8:45 am]

BILLING CODE 8010–01–M