63088 Federal Register / Vol. 60, No. 236 / Friday, December 8, 1995 / Notices

2Rule 8.14 was approved by the Commission on

September 1, 1988. See Securities Exchange Act

Release No. 26053 (September 1, 1988), 53 FR

34851 (September 8, 1988) (order approving File

No. SR–CSE–88–1). A subsequent addition of a rule

to the Rule 8.14 Violations List was made in

Securities Exchange Act Release No. 27609 (January

11, 1990), 55 FR 1758 (January 18, 1990) (order

approving File No. SR–CSE–89–6).

3CSE Rule 8.14, entitled Imposition of Fines for

Minor Violation(s) of Rules, contains a list of minor

rule violations as to which the Exchange may

impose such fines. Although the CSE’s Board of

Trustees makes the initial determination of whether

a CSE rule violation is ‘‘minor’’ for purposes of CSE

Rule 8.14, this determination is subject to

Commission approval pursuant to Section 19(d)(1)

of the Act and paragraph (c)(2) of Rule 19d–1 under

the Act. See Release No. 26053 n.5, supra note 2.

4 Id.

5 Id.

6CSE rule 4.2 provides that ‘‘every member shall

furnish to the Exchange, upon request and in a time

and manner required by the Exchange, current

copies of any financial information filed with the

Commission, as well as any records, files or

financial information pertaining to transactions

executed on or through the Exchange. Further, the

Exchange shall be allowed access, at any time, to

the books and records of the member in order to

obtain or verify information related to transactions

executed on or through the Exchange or activities

relating to the Exchange.’’

7 15 U.S.C. 78f(b)(6).

8 15 U.S.C. 78f(b)(7) and 78f(d)(1).

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange hereby amends Rule

8.14 regarding the imposition of fines

for minor violations. The text of the

proposed rule change is as follows (new

text is italicized; deleted text is

bracketed]:

Rule 8.14 Imposition of Fines for

Minor Violation(s) of Rule

Interpretations and Policies: .01

(d) Rule 4.1, Rule 4.2 and

Interpretation, thereunder, requiring the

submission of responses to Exchange

requests for trading data within

specified time period.

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

CSE 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. The CSE 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

1. Purpose

Rule 8.14 2 authorizes the Exchange,

in lieu of commencing a disciplinary

proceeding before a hearing panel, to

impose a fine not to exceed $2,500, on

any member, member organizations, or

registered or non-registered employee of

a member organization for a minor

violation of certain specified Exchange

rules.3

The purpose of the Rule 8.14

procedure is to improve the Exchange’s

ability to efficiently meet its statutory

enforcement responsibilities by

establishing a program for the

imposition of fines for minor violations

of Exchange Rules and by designating

certain specified Rule violations as

minor Rule violations.4 In File No. SR–

CSE–88–1,5 which initially set forth the

provisions and procedures of Rule 8.14,

the Exchange indicated that it would

periodically prepare and announce to its

members and member organizations a

revised list of Exchange Rules for

violation of which the Exchange may

impose fines pursuant to Rule 8.14, as

well as the fines that may be imposed

for such violation.

The Exchange is presently adding

Rule 4.2 6 to the list of rules subject to

possible imposition of fines under Rule

8.14 procedures. The purpose of the

proposed Rule Change is to clarify that

Exchange Rule 4.2 is a part of the

Exchange’s Minor Rule Violation Rule.

Exchange Rule 4.2 deals with the

furnishing of information to the

Exchange upon request. Rule 4.2 is not

currently included in the specific list of

Rules to which the Minor Rule Plan

applies, however, the text listed under

Rule 4.1 which is noted therein,

addresses the requirements of Rule 4.2

as well as Rule 4.1. The Exchange

believes that the specific inclusion of

Rule 4.2 will make it clear to members

that the Minor Rule Plan provisions

apply to it.

2. Statutory Basis

The proposed rule change is

consistent with Section 6(b)(6) of the

Act 7 in that it will provide a procedure

whereby member organizations can be

‘‘appropriately disciplined’’ in those

instances when a rule violation is minor

in nature, but a sanction more serious

than a warning or cautionary letter is

appropriate. The rule change provides a

fair procedure for imposing such

sanctions, in accordance with the

requirements of Sections 6(b)(7) and

6(d)(1) of the Act.8

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CSE does not believe that the

proposed rule change will impose any

inappropriate burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

No written comments were either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal Register or

within such other period (i) as the

Commission may designate up to 90

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 the 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, D.C. 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. § 552, will be

available for inspection and copying at

the Commission’s Public Reference

Section, 450 Fifth Street NW.,

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–CSE–95–09

and should be submitted by December

29, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29922 Filed 12–7–95; 8:45 am]

BILLING CODE 8010–01–M
Federal Register / Vol. 60, No. 236 / Friday, December 8, 1995 / Notices 63089

1 15 U.S.C. § 78s(b)(1) (1988).

2Securities Exchange Act Release No. 35009

(November 25, 1994), 59 FR 61913 [File No. SR–

MBS–94–02] (order temporarily approving

proposed rule change).

3The Commission has modified the text of the

summaries prepared by MBS.

4The number of securities eligible for the EPN

service will be greater than those eligible for the

comparison and clearing service at MBS. All

mortgage-backed securities eligible for comparison

and clearing at MBS will be eligible for the EPN

service. In addition, securities which are not

eligible for comparison and clearing because of lack

of volume or inability to be valued will be eligible

for the EPN service.

5MBS commenced the EPN service on a pilot

basis in February 1995. During September 1995,

EPN users processed 6,936 messages comprised of

56,224 pools with a current face value of

approximately $58 billion. Currently there are

fourteen EPN users.

6 15 U.S.C. § 78q–1(b)(3)(F) (1988).

7 15 U.S.C. 78q–1(b)(3)(F) (1988).

[Release No. 34–36540; File No. SR–MBS–

95–09]

Self-Regulatory Organizations; MBS

Clearing Corporation; Notice of Filing

and Order Granting Accelerated

Approval of Proposed Rule Change

Requesting Permanent Approval of the

Electronic Pool Notification Service

November 30, 1995.

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

Securities Exchange Act of 1934

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

November 3, 1995, the MBS Clearing

Corporation (‘‘MBS’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change (File No. SR–MBS–95–09) as

described in Items I and II below, which

Items have been prepared primarily by

MBS. The Commission is publishing

this notice and order to solicit

comments from interested persons and

to grant accelerated approval of the

proposed rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change requests

permanent approval of the rules that set

forth and establish the Electronic Pool

Notification (‘‘EPN’’) service. The

Commission previously approved on a

temporary basis through November 30,

1995, a proposed rule change that added

Articles VI, VII, VIII, IX, and X to MBS’s

rules to establish the EPN service.2

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

MBS 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. Summaries of the

most significant aspects of such

statements are set forth in sections A, B,

and C below.3

A. Self-Regulatory Organization’s

Statement of the Purpose of, and the

Statutory Basis for, the Proposed Rule

Change

The purpose of the proposed rule

change is to request permanent approval

of the rules that set forth and establish

the EPN service. EPN was developed by

MBS in response to a Public Securities

Association (‘‘PSA’’) initiative to

automate the pool notification process

with the ultimate goal of supplementing

and/or replacing the manually intensive

telephone and fax environment. EPN is

an electronic, post-trade communication

system for mortgage-backed securities.4

EPN provides an electronic

communications network through

which EPN users can quickly and

efficiently transmit mortgage-backed

securities pool allocation information

regarding deliveries of securities for

settlement. EPN was designed for use by

organizations actively engaged in the

allocation and notification process

associated with mortgage-backed

securities and derivative securities. EPN

user firms may be acting as principal to

the underlying trade activity or as agent

on behalf of another EPN user in a fully

disclosed capacity.5

An EPN message will be required to

contain (1) the lot sequence of ‘‘good

delivery millions’’ (i.e., the number of

million dollar lots delivered in

accordance with PSA guidelines), (2) a

pool number that references a specific

pool of mortgages, (3) the principal

amount at date of issue, (4) the coupon

rate, and (5) a termination code. In

addition, an EPN message may contain,

among other things, additional

information such as the maturity date,

CUSIP number, current outstanding

principal amount, an MBS trade

number, internal control number, and

interest accrued.

MBS decided that a complete standalone set of rules for EPN was preferable

to trying to integrate the EPN rules into

existing MBS rules. As a result, many of

the EPN rules mirror the language of

existing MBS rules in order to make the

provisions of those rules applicable to

the EPN service. There has been an

attempt to use the same terms and

definitions that MBS uses in its current

rules wherever possible. However, the

EPN rules do differ from existing MBS

rules in several respects. The EPN rules

define new terms specifically related to

EPN. Another change from existing MBS

rules concerns who can become an EPN

user. Because EPN is essentially a

sophisticated e-mail/database system

that does not involve traditional

clearance or settlement functions, the

risk to MBS from defaulting EPN users

is limited to nonpayment of fees. As a

result, the standards for applicants to

become EPN users are significantly less

demanding than the standards for

applicants that wish to become full

participants of MBS. It is anticipated

that some applicants that do not qualify

as full participants of MBS will still

qualify to become EPN users. The EPN

rules also provide for an EPN user fund.

The EPN user fund will be similar in

purpose to the existing MBS

participants fund, but because the risk

to MBS is limited to nonpayment of

fees, the EPN user fund will be smaller.

MBS believes that the proposed rule

change is consistent with Section

17A(b)(3)(F) of the Act 6 and the rules

and regulations thereunder because it

facilitates the prompt and accurate

clearance and settlement of securities

transactions.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

MBS does not believe that the

proposed rule change will have an

impact or impose any burden on

competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Other

No written comments relating to the

proposed rule change have been

solicited or received. MBS will notify

the Commission of any written

comments received by MBS.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Section 17A(b)(3)(F) of the Act 7

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 MBS’s

proposal to establish the EPN service on

a permanent basis is consistent with this

obligation.

One reason the Commission

previously approved the EPN service

only on a temporary basis was EPN’s

lack of a disaster recovery program.

During the temporary approval period,

MSB established and thoroughly tested

the EPN service’s disaster recovery

program. Because the EPN disaster
63090 Federal Register / Vol. 60, No. 236 / Friday, December 8, 1995 / Notices

8On September 27, 1995, staff of the Division of

Market Regulation met with MBS to discuss the

disaster recovery program developed for the EPN

service. The staff also reviewed and assessed

documentation related to the management and

operation of the disaster recovery system and

conducted an examination of the primary data

center.

9 17 CFR 200.30–3(a)(12) (1994).

1 15 U.S.C. 78s(b)(1) (1988).

2STC/NJ is a subsidiary of CHX that currently

provides certain services, including a securities

custody service. STC/NJ is not a clearing agency as

defined in the Act and therefore is not required to

register with the Commission.

3The Commission has modified the text of the

summaries prepared by NSCC.

recovery program has operated

successfully during its testing, MBS has

decided to request permanent approval

of the EPN service.

Prior to the establishment of the EPN

service, participants in the mortgagebacked securities market had to

manually telephone or fax pool

information to other participants.

Historically, billions of dollars of fails

occurred because sellers were not able

to communicate with buyers because of

telephone and fax limitations (e.g., busy

signals preventing the exchange of

information). The Commission is

permanently approving the rules for the

EPN service because it believes that

replacing a manually intensive

communication system with an

electronic communication system

should help to significantly reduce the

number of fails in the mortgage-backed

securities market by making the

notification process more efficient and

more reliable. Furthermore, MBS has

demonstrated that the disaster recovery

program for the EPN service is capable

of ensuring the continuity of critical

EPN business operations in the event

the primary computer operations

become unavailable to EPN users.8

MBS has requested that the

Commission find good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice of the filing. The

temporary approval period for the EPN

service will expire on November 30,

1995. The Commission finds good cause

to grant accelerated approval of the

proposal because the EPN service has

operated successfully since its

implementation and because the

Commission did not receive any

comment letters during the comment

period before it granted temporary

approval or during the temporary

approval period and because the

Commission does not expect to receive

any during the current comment period.

Furthermore, accelerated approval will

allow the EPN service to continue

operating without interruption.

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, D.C. 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. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Section, 450 Fifth Street NW.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of MBS. All submissions should

refer to file number SR–MBS–95–09 and

should be submitted by December 29,

1995.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

MBS–95–09) be and hereby is approved

on an accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29921 Filed 12–7–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36547; File No. SR–NSCC–

95–15]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing of a

Proposed Rule Change Regarding

Arrangements Between the National

Securities Clearing Corporation and

Chicago Stock Exchange, Incorporated

Relating to a Decision by Chicago

Stock Exchange, Incorporated to

Withdraw From the Clearance and

Settlement, Securities Depository, and

Branch Receive Businesses

December 1, 1995.

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

Securities Exchange Act of 1934

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

November 24, 1995, the National

Securities Clearing Corporation

(‘‘NSCC’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

the proposed rule change (File No. SR–

NSCC–95–15) as described in Items I, II,

and III below, which items have been

prepared primarily by NSCC. 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 involves

proposed arrangements relating to a

decision by the Chicago Stock

Exchange, Incorporated (‘‘CHX’’) to

withdraw from the clearance and

settlement, securities depository, and

branch receive businesses. Parties to the

proposed arrangements are The

Depository Trust Company (‘‘DTC’’),

CHX, Midwest Securities Trust

Company (‘‘MSTC’’), NSCC, Midwest

Clearing Corporation (‘‘MCC’’) and

Securities Trust Company of New Jersey

(‘‘STC/NJ’’).2

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NSCC 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. NSCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.3

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

CHX has announced that it is closing

its clearance and settlement and

securities depository facilities in order

to focus its resources on the operations

of the exchange. CHX has determined to

take this step in response to

recommendations by industry users to

eliminate redundant facilities and

thereby reduce the costs of processing

securities transactions. The proposed

arrangements will assist in achieving

these objectives while affording

qualified sole MCC participants an

opportunity to become NSCC

participants and transfer their

continuous net settlement positions to

NSCC. NSCC’s primary purpose for

entering into the proposed arrangements

at this time is to facilitate the industry’s

planned conversion to same-day funds