[Federal Register Volume 60, Number 11 (Wednesday, January 18, 1995)]
[Notices]
[Pages 3686-3687]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1195]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35218; International Series Release No. 769; File No. 
SR-ISCC-94-03]


Self-Regulatory Organization; International Securities Clearing 
Corporation; Order Approving a Data Transmission Link With Caja de 
Valores, S.A.

January 11, 1995.
    On August 9, 1994, the International Securities Clearing 
Corporation (``ISCC'') submitted a proposed rule change (File No. SR-
ISCC-94-03) to the Securities and Exchange Commission (``Commission'') 
pursuant to Section 19(b) of the Securities Exchange Act of 1934 
(``Act'').\1\ Notice of the proposal appeared in the Federal Register 
on September 22, 1994.\2\ No comments were received. This order 
approves the proposal.

    \1\15 U.S.C. 78s(b) (1988).
    \2\Securities Exchange Act Release No. 34678 (September 15, 
1994), 59 FR 48651.
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I. Description of the Proposal

    ISCC has entered into a contract to establish a data transmission 
link with Caja de Valores (``CVSA'').\3\ The link will permit CVSA to 
hold U.S. securities in The Depository Trust Company (``DTC'') through 
ISCC. The service agreement, dated December 2, 1993, between ISCC and 
CVSA provides that ISCC will sponsor an account for CVSA at DTC which 
will provide CVSA access to certain DTC services.\4\

    \3\CVSA is an Argentine corporation organized to provide 
settlement and depository services for securities.
    \4\Under the service agreement, ISCC upon instructions received 
from CVSA will: (1) Accept receives of securities by book-entry 
through DTC; (2) initiate book-entry delivery of securities on 
deposit at DTC; (3) initiate reclamations of securities received at 
DTC; (4) make delivery of due bill checks or payments received by 
ISCC with respect to securities; (5) initiate messages to other DTC 
participants through the broadcast function of DTC; (6) process 
securities on deposit at DTC and securities subject to a 
reorganization, takeover, or similar action provided that requisite 
funds, if applicable, have been received in advance; (7) withdraw 
rights exited from DTC and deliver such rights to the agent 
designated by CVSA along with instructions received with respect to 
such rights; (8) at the discretion of ISCC, facilitate withdrawal-
by-transfer of securities on deposit at DTC; and (9) order proxy 
materials for securities on deposit at DTC and complete such proxy 
material as instructed.
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    ISCC on behalf of CVSA will initiate book-entry deliveries for no 
value and will accept receives of securities by book-entry for no 
value.\5\ Both the receive and deliver functions will be pursuant to 
instructions received from CVSA, and such instructions will identify 
the CVSA member for whom the receipt or delivery is being effected.\6\ 
In special circumstances and at ISCC's discretion, DTC's withdrawal-by-
transfer services also may be utilized. In such case, the securities 
will be delivered as directed by CVSA. CVSA will deposit with ISCC 
collateral to cover CVSA's obligations to ISCC.\7\ To the extent that 
any money settlement is required, ISCC will receive payment in the form 
of an official bank check or a wire transfer through the CVSA 
designated correspondent bank.

    \5\The related money settlements for the securities movements 
will take place between the parties outside of ISCC.
    \6\As reflected on the DTC records, securities deposits will 
form the basis for the bookkeeping entries at CVSA on behalf of 
CVSA's participants.
    \7\The amount of the deposit shall be the average of the three 
highest one-month fees over the prior twelve months plus the amount 
ISCC is required to deposit with DTC with respect to the sponsored 
account. However, the amount of CVSA's cash deposit with ISCC cannot 
be less than $50,000.
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    On each business day at about 4:00 p.m., ISCC will transmit a 
preliminary [[Page 3687]] settlement statement which will detail the 
net amount due to ISCC from CVSA or from ISCC to CVSA. Under the 
service agreement, CVSA agrees to pay to ISCC all fees and charges in 
connection with ISCC's provision of services and any assessment that 
ISCC must pay to DTC.\8\ The preliminary settlement statement also will 
indicate dividend and possibly interest payments received by ISCC from 
DTC with respect to shares on deposit.

    \8\Because the account is limited to free movements of 
securities, monetary obligations to DTC should be limited to the 
payments of fees for DTC services. Under the sponsored account 
relationship, DTC will look to ISCC for any liability related to 
activity in that account.
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    ISCC will transmit a final settlement statement by 10:00 a.m. of 
the business day following the day the related preliminary settlement 
statement was sent. The final settlement statement will indicate sums 
paid by CVSA. Dividend and interest credited to the ISCC/CVSA account 
at DTC will be reflected in the final settlement statement. The final 
settlement also will reflect a debit for the total dividend and 
interest ISCC pays to CVSA's withholding bank.
    CVSA has agreed to consult with ISCC's auditors with regard to 
CVSA's financial condition, and CVSA will furnish its financial 
statements to ISCC. Further, CVSA has agreed to appoint a registered 
agent in the U.S. for service of process and will provide ISCC of proof 
of such appointment. CVSA will be subject to jurisdiction in New York 
for the resolution of disputes arising from the link. CVSA will be 
assigned one ISCC account number for use on behalf of CVSA members.

II. Discussion

    The Commission believes that the proposed rule change is consistent 
with Section 17A of the Act and therefore is approving the proposal. 
Specifically, the Commission believes the proposal is consistent with 
Section 17A(b)(3)(F) of the Act in that it promotes the prompt and 
accurate clearance and settlement of securities transactions. Without 
the linkage, Argentine purchasers of U.S. securities would be required 
to make individual arrangements for the custody of their stock.
    ISCC's provision of this service to CVSA enables CVSA to settle 
transactions in U.S. securities more efficiently. Further, the link 
between ISCC and CVSA should standardize the processing of U.S. 
securities traded in foreign countries in accordance with U.S. 
practices and procedures. The uniform standards should reduce record 
keeping errors and thereby enhance the accuracy of the settlement of 
securities transactions. In addition, this standardization should 
promote foreign investment in U.S. securities.
    In the initial order granting ISCC temporary registration as a 
clearing agency, the Commission stated that the development of 
efficient and comparable automated national and international 
clearance, settlement, and payment systems is one of the more important 
international goals.\9\ In that order, the Commission stressed the 
importance of developing linkages between existing clearance and 
settlement systems in light of the increase in foreign activity in U.S. 
stocks. This linkage agreement will increase the accessibility of the 
U.S. securities market to foreign investors by giving Argentine 
investors a more efficient method of settling U.S. securities.

    \9\Securities Exchange Act Release No. 26812 (May 12, 1989), 54 
FR 21691.
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III. Conclusion

    For the reasons stated above, the Commission finds that ISCC's 
proposal is consistent with Section 17A of the Act.\10\

    \10\15 U.S.C. 78q-1 (1988).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (File No. SR-ISCC-94-03) be, and 
hereby is, approved.\12\

    \11\15 U.S.C. 78s(b)(2) (1988).
    \12\17 CFR 200.30-3(a)(12) (1994).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\

    \13\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-1195 Filed 1-17-95; 8:45 am]
BILLING CODE 8010-01-M