33564 Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Notices

2 17 CFR 200.30–3(a)(12).

1 15 U.S.C. § 78s(b)(1) (1988).

2Securities Exchange Act Release No. 36945

(March 7, 1996), 61 FR 10614.

3 GSCC amended the filing to request that the

proposed rule change become effective upon

approval by the Commission and not with the

implementation of the second stage of netting

services for repurchase and reverse repurchase

transactions involving government securities as the

underlying instrument (‘‘repos’’) as originally

requested. Letter from Jeffrey F. Ingber, General

Counsel and Secretary, GSCC, to Jerry W. Carpenter,

Assistant Director, Division of Market Regulation,

Commission (May 16, 1996).

4 15 U.S.C. § 78o (1988).

5 15 U.S.C. § 78o–5 (1988).

6 17 CFR 15c3–1(a) (1975).

7 GSCC maintains a list of grandfathered entities

which are non-netting system members that

historically have done business with GSCC’s

interdealer broker netting members. Business done

by the interdealer broker netting members with

grandfathered entities is treated by GSCC as

business done with an actual netting member.

8Unlike a category one IDB, a category two IDB

is permitted to have up to ten percent of its

business with non-netting members other than

grandfathered, nonmember firms. This

determination is based on the category two IDB’s

dollar volume of next-day and forward settling

activity in eligible securities over the prior twenty

business days.

9 15 U.S.C. 78q–1(b)(4)(B) (1988).

10 15 U.S.C. § 78q–1(b)(3)(F) (1988).

11 17 CFR 200.30–3(a)(12) (1995).

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 CBOE. All submissions should

refer to File No. SR–CBOE–96–28 and

should be submitted by July 18, 1996.

It is therefore ordered pursuant to

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

proposed rule change is approved on an

accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.2

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–16369 Filed 6–26–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37343; File No. SR–GSCC–

96–02]

Self-Regulatory Organizations;

Government Securities Clearing

Corporation; Order Approving

Proposed Rule Change Modifying the

Minimum Financial Criteria for

Category One Interdealer Broker

Netting Membership

June 20, 1996.

On February 13, 1996, the

Government Securities Clearing

Corporation (‘‘GSCC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) a proposed rule change

(File No. SR–GSCC–96–02) 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 March 14, 1996.2

GSCC amended the filing on May 16,

1996.3 No comment letters were

received regarding the proposed rule

change. For the reasons discussed

below, the Commission is approving the

proposed rule change.

I. Description

GSCC is modifying its rules to reflect

a new minimum financial criteria for

category one interdealer broker (‘‘IDB’’)

membership in GSCC’s netting system.

Such financial criteria will be based on

levels of (1) excess net capital if the

member is a broker-dealer registered

with the Commission pursuant to

Section 15 of the Act 4 or (2) excess

liquid capital if the member is a

government securities broker registered

pursuant to Section 15C of the Act.5

Excess net capital is defined in GSCC’s

rules as the difference between the net

capital of a broker or dealer and the

minimum net capital such broker or

dealer must have to comply with the

requirements of Rule 15c3–1(a) under

the Act.6 Excess liquid capital is defined

in GSCC’s rules as the difference

between the liquid capital of a

government securities broker or dealer

and the minimum liquid capital that

such broker or dealer must have to

comply with the requirements of 17 CFR

402.2 (a), (b), and (c).

Currently, GSCC has two categories of

netting system membership for IDBs.

Category one IDBs act exclusively as

brokers and trade only with netting

members and with certain

‘‘grandfathered’’ nonmember firms.7

Currently, the minimum financial

requirement for category one IDBs is

$4.2 million in excess net or liquid

capital, as applicable. Category two IDBs

have a minimum financial requirement

of $25 million in net worth and $10

million in excess net or liquid capital,

as applicable.8

GSCC’s proposed rule change will

modify the minimum financial

requirement for category one IDBs to

require $10 million in excess net or

liquid capital, as applicable. Category

one IDBs will continue not to have a

minimum net worth requirement.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the Act, and specifically with Sections

17A(b)(4)(B) 9 and 17A(b)(3)(F).10

Section 17A(b)(4)(B) provides that a

registered clearing agency may deny

participation to or condition the

participation of any person if such

person does not meet such standards of

financial responsibility as are prescribed

by the rules of the clearing agency.

Section 17A(b)(3)(F) requires the rules

of a clearing agency be designed to

assure the safeguarding of securities and

funds which are in the custody or

control of the clearing agency or for

which it is responsible. GSCC believes

that given the large dollar volume of

activity that the IDBs have submitted

and continue to submit to GSCC for

netting and settlement and their

principal nature vis-a-vis GSCC, it is

appropriate to require as a condition to

participation that all IDBs have and

maintain a minimum level of excess net

or liquid capital of at least $10 million.

The Commission believes that

modifying the minimum financial

criteria for category one IDBs should

strengthen GSCC’s overall risk

management process and enhance its

membership standards. The

Commission believes that the increased

capital requirement for category one

IDBs should provide for greater

financial responsibility, operational

capacity, experience, and competence.

The Commission also believes that by

enhancing its risk management process

the increase will facilitate GSCC in

fulfilling its statutory obligations under

Section 17A of the Act with respect to

the safekeeping of securities or funds in

its custody or control or for which it is

responsible.

IV. Conclusion

On the basis of the foregoing, the

Commission finds that the proposal is

consistent with the requirements of the

Act and in particular with Section 17A

of the Act.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

GSCC–96–02) be and hereby is

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–16450 Filed 6–26–96; 8:45 am]

BILLING CODE 8010–01–M