Federal Register / Vol. 60, No. 54 / Tuesday, March 21, 1995 / Notices 14989

5 If the on-leg is scheduled to settle that day,

participants will not receive confirmation that

DGOC has accepted the trade until the day after the

trade has settled.

6Central Bank funds is defined as cash balances

available for immediate withdrawal in accounts

maintained at banks that are members of the

Federal Reserve System or any other wire system

operated in a similar characteristics or attributes. 7 15 U.S.C. 78q–1(b)(3)(F) (1988). 8 17 CFR 200.30–3(a)(12) (1994).

report trades DGOC accepted the

previous business day.5

The details of the trade will be sent

to the clearing bank along with the

delivery instructions. Participants must

maintain a bank account in one or more

correspondent banks for purposes of the

payment or return of margin, delivery or

acceptance of the Treasury securities, or

making or receiving payment for such

securities. The selected correspondent

bank must be a member of the Fed Wire

System. The selling participant must

deliver securities to the clearing bank

against payment no later than one

minute prior to the close of the Federal

Bank Wire System. The clearing bank

will redeliver such securities to the

purchasing participant against payment

for such securities.

DGOC will net trades under two

circumstances. If a participant has a

repo and a reverse repo with the same

underlying collateral and off-date, the

off-date settlement positions will be

netted as to par amount, price, and

accrued interest. If a participant renews

a maturing repo for the same underlying

collateral prior to the off-date for such

repo. DGOC will report to the

participant the net money difference

between the two repo transactions.

DGOC’s existing margining

methodology will be adapted to

incorporate repo transaction and reverse

repo transaction exposures. Margin may

be deposited in the form of ‘‘Central

Bank Funds,’’ 6 Treasury bills, Treasury

Notes, or Treasury bonds. Treasury

securities will be valued at 95% of their

market value. All participants will be

required to maintain a minimum margin

deposit of $1 million par amount

Treasury bills with a maturity of less

than 180 days. The amount of margin

will be derived from two calculations:

Mark to market and performance

margin. Mark to market will represent

the net amount of the estimated cost to

liquidate a participant’s under-margined

position offset by the estimated

proceeds from liquidation of its overmargined positions. Performance margin

will represent an estimate of the net

shortfall from the liquidation of a

participant’s repo positions at the close

of the next business day taking into

account the most adverse market

movement in the price of the underlying

Treasury securities which could

reasonably be anticipated.

Price files, which will be updated

several times intraday, as well as daily

mark to market prices on repos will

reference data on the underlying

collateral as well as the participant’s

existing positions which are then used

to calculate margin requirements. The

margining system will be run and

margin reports will be prepared and

distributed to participants for margin

collection. This process also will be the

beginning point for the accounting

system which will track all system

activity. Margin will be set for each

participant and will reflect the netting

of payments and any potential

exposures to the participant. Margin

requirements will go into effect at the

time the trade is accepted for clearance.

Prior to 8:00 a.m. of each business day,

each participant will be issued a daily

margin report which will indicate the

margin surplus or deficit. At or before

settlement time on each business day,

each participant will be obligated to

deposit sufficient margin to satisfy the

margin deficit shown on the daily

report.

In the event of a failure to deliver

securities on either the on-leg or off-leg,

DGOC will still margin the transaction.

DGOC also may elect to collect intraday

margin if DGOC deems such collection

necessary or advisable to reflect a

market price change, the size of the

participant’s positions, the financial or

operational condition of the participant,

or otherwise to protect DGOC.

DGOC believes the proposed rule

change is consistent with Section 17A of

the Act and the rules and regulations

thereunder applicable to DGOC and in

particular with Section 17A(b) (3) (F) of

the Act.7 That section requires that a

clearing agency’s rules be designed,

among other things, to promote the

prompt and accurate clearance and

settlement of securities transactions and

to remove impediments to and perfect

the mechanism of a national system for

the prompt and accurate clearance and

settlement of securities transactions.

DGOC believes the proposed rule

change will permit wider utilization of

its system by providing participants

with the ability to clear and settle repos

and reverse repos.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

DGOC does not believe that the

proposed rule change will impose any

burden on competition not necessary or

appropriate in furtherance of the

purpose of the Act.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

Comments have neither been solicited

nor received.

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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549. 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. 522, will be

available for inspection and copying in

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of DGOC. All

submissions should refer to the File

Number SR–DGOC–94–06 and should

be submitted by April 11, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Jonathan G. Katz,

Secretary.

[FR Doc. 95–6939 Filed 3–20–95; 8:45 am]

BILLING CODE 8010–01–M