[Federal Register Volume 60, Number 11 (Wednesday, January 18, 1995)]
[Notices]
[Pages 3687-3688]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1194]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35212; International Series Release No. 767; File No. 
SR-ISCC-94-06]


Self-Regulatory Organizations; International Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change Relating to the 
Global Clearance Networking Service

January 10, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),<SUP>1 notice is hereby given that on December 17, 1994, the 
International Securities Clearing Corporation (``ISCC'') 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 ISCC. The Commission is publishing this 
notice to solicit comments from interested persons.

    \1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of ISCC's proposed rule change is to add additional 
service providers to ISCC's Global Clearance Networking (``GCN'') 
service and to permit other international data formats to be used.

II. Self-Regulatory Organization's Statement on the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, ISCC 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. ISCC 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

    ISCC's Rule 50 provides that ISCC may establish a foreign clearing, 
settlement, and custody service in conjunction with banks and trust 
companies. Presently, ISCC has established a GCN relationship with 
Citibank, N.A. The purpose of the proposed rule change is to add two 
additional GCN service providers: Standard Bank of South Africa 
(``Standard'')<SUP>2 and Westpac Custodian Nominees Limited of 
Australia (``Westpac'').<SUP>3 Standard will offer to ISCC members 
clearance, settlement, and custody services in South Africa. Westpac 
will offer to ISCC members [[Page 3688]] clearance, settlement, and 
custody services in Australia.

    \2\Standard was established in 1862. Standard's Securities 
Services Division provides comprehensive services to over three 
hundred foreign banks, stockbrokers, and custodian accounts. 
Standard also is positioned through their subsidiary, Stanbic Bank, 
to provide clearance and settlement services in other southern and 
central African countries. Standard meets the requirements under 
Rule 17f-5 under the Investment Company Act of 1940 to be an 
eligible foreign custodian. Standard currently manages in excess of 
30 billion in U.S. dollars.
    \3\Westpac was established in 1944. Westpac currently provides 
custodial and securities settlement services to over 500 local and 
international clients. Westpac is qualified as an eligible foreign 
custodian under Rule 17f-5 under the Investment Company Act of 1940. 
Westpac manages over 50.2 billion in Australian dollars in assets 
under custody.
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    ISCC, along with a steering committee of the GCN participants, 
decided to expand the number of GCN service providers in order to 
expand and improve processing capabilities. Requests for proposals were 
sent to banks selected by the steering committee. After a review of the 
proposals received, the steering committee selected Standard and 
Westpac to become GCN service providers. ISCC intends to continue to 
add additional service providers as often as necessary in order that 
participant requirements are adequately addressed.
    Each of the additional service providers has entered into an 
agreement with ISCC pursuant to which they agree to provide access to 
clearing, settlement, and custody services to GCN participants that 
qualify to be customers of such bank. Each service provider has agreed 
to provide the services at reduced prices. ISCC has not provided any 
volume guarantees to either of these banks, and each of the banks will 
be responsible to collect fees directly from the participants. The 
agreements may be terminated by mutual agreement of the parties on 
ninety days prior notice.
    The proposed rule change also will modify the procedures for using 
the GCN service contained in Addendum E to ISCC's rules. Initially, 
participants could submit data to ISCC via their office computer's 
central processing unit (``CPU'') or any personal computer (``PC'') 
connection using an ISCC universal trade record (``UTR'') format. In 
addition to submission via CPU or PC, the proposal will allow ISCC to 
accept data submitted via S.W.I.F.T.\4\ In addition to the UTR format, 
the proposal will allow ISCC to accept data in ISO 7775 format.\5\ Data 
submitted via PC or CPU will be routed through ISCC's Datatrak system 
to validate the sender's identity against ISCC's masterfile prior to 
the validation and edit process. Data submitted via S.W.I.F.T. will go 
directly to the validation and edit process.\6\ Currently, participants 
receive a confirmation that ISCC has received the data. The proposal 
will eliminate the sending of the confirmation. If the data is not 
received in ISO 7775 format, ISCC will convert the data into this 
format for transmission to the service provider. Information that does 
not pass the validation or edit process will be rejected, and the 
participant will be required to resubmit the data.

    \4\The Society for Worldwide Interbank Financial 
Telecommunication (``S.W.I.F.T.'') operates a secure data 
communication and processing system which enables thousands of 
financial institutions in more than 100 countries to communicate 
with each other 24 hours a day and facilitates the sending in excess 
of 500 million messages annually.
    \5\The International Organization for Standardization (``ISO'') 
was founded in 1949 to promote standards worldwide. ISO 7775, the 
standard for international securities messages, was developed in 
close cooperation with S.W.I.F.T. It was first published in 1984. 
S.W.I.F.T. has assumed responsibility for maintenance of the 
standard.
    \6\S.W.I.F.T. automatically verifies the identity of the sending 
party.
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    Data will be routed to the service provider using the method 
required by the service provider. In general, ISCC will receive 
confirmation that the data has been received by the service provider. 
If the data is sent using S.W.I.F.T., ISCC only will receive 
confirmation that the data was transmitted.\7\ If the service provider 
is unable to process the data, the service provider will contact the 
participant directly. Each day, the service provider will provide 
reports on behalf of the participants' accounts to ISCC which ISCC will 
retransmit to the participants.

    \7\Additionally, S.W.I.F.T., instead of ISCC, will verify the 
number of records transmitted.
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    The proposed rule change will facilitate and centralize the 
processing of international transactions at a beneficial cost to 
members which ultimately will be reflected in services to the investing 
public. Accordingly, these changes are consistent with the requirements 
of the Act, specifically Section 17A of the Act, and the rules and 
regulations thereunder.

B. Self-Regulatory Organization's Statement on Burden on Competition

    ISCC does not believe a burden will be placed on competition as a 
result of the proposed rule change.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Changes Received From Members, Participants, or Others

    ISCC has not solicited or received any comments.

III. Date of Effectiveness of the Proposed Rule Changes 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 ISCC 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 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 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 Section, 450 Fifth Street, NW., 
Washington, DC 20549, and at the principal offices of ISCC. All 
submissions should refer to File No. SR-ISCC-94-06 and should be 
submitted by February 8, 1995.

    For the Commission by the Division of Market Regulation, 
pursuant to delegate authority.\8\

    \8\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-1194 Filed 1-17-95; 8:45 am]
BILLING CODE 8010-01-M