[Federal Register Volume 66, Number 245 (Thursday, December 20, 2001)]
[Notices]
[Pages 65768-65769]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31359]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45155; File No. SR-GSCC-2001-14]


Self-Regulatory Organizations; Government Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change Relating to 
Liability of Affiliated Entities

December 14, 2001.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ notice is hereby given that on October 11, 2001, the 
Government Securities Clearing Corporation (``GSCC'') 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 by GSCC. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    GSCC proposes to amend its rules in order to limit its liability 
with respect to affiliated entities. Specifically, GSCC proposes to add 
a section to its rules that states that, except as otherwise provided 
by written agreement between GSCC and such other entity, (1) GSCC shall 
not be liable for any obligations of such other entity and its clearing 
fund and other assets shall not be available to such other entity and 
(2) such other entity shall not be liable for any obligations of GSCC 
and any assets of such other entity shall not be available to GSCC.

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

    In its filing with the Commission, GSCC 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 the statements may be examined at the places specified in Item 
IV below. GSCC has prepared summaries, set forth in sections A, B, and 
C below, of the most significant aspects of such statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by GSCC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The proposed rule change addresses liability issues that may arise 
after the completion of the integration of GSCC, MBS Clearing 
Corporation (``MBSCC''),\3\ and Emerging Markets Clearing Corporation 
(``EMCC'') \4\ with The Depository Trust and Clearing Corporation 
(``DTCC''). For purposes of this notice, DTCC, GSCC, MBSCC, EMCC, The 
Depository Trust Company (``DTC''), and National Securities Clearing 
Corporation (``NSCC'') \5\ are collectively referred to as the 
``Synergy Companies.'' \6\
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    \3\ Because of the current functional integration of operations 
of GSCC and MBSCC, the integration of GSCC with DTCC is contingent 
upon the successful integration of MBSCC with DTCC and vice versa. 
Securities Exchange Act Release Nos. 44989 (Oct. 25, 2001), 66 FR 
55220 (Nov. 1, 2001) and 44988 (Oct. 25, 2001), 66 FR 55222 (Nov. 1, 
2001).
    \4\ Pursuant to a separate plan for the integration of EMCC with 
DTCC, it is contemplated that EMCC will become an operating 
subsidiary of DTCC at the same time that GSCC and MBSCC become 
operating subsidiaries of DTCC. However, the transaction involving 
GSCC and MBSCC is not contingent on the transaction involving EMCC 
and vice versa.
    \5\ DTC and NSCC are wholly-owned subsidiaries of DTCC.
    \6\ After the completion of the integration, GSCC, MBSCC, and 
EMCC shall each be a wholly-owned subsidiary of DTCC, and a single 
group of individuals shall serve as directors of each of the Synergy 
Companies. Following the integration, GSCC will continue to exist as 
a separate registered clearing agency. The retained earnings of GSCC 
existing at the time of (or as of the end of the last full calendar 
month preceding) the integration of GSCC with DTCC will, as a matter 
of DTCC policy, be dedicated to supporting the business of GSCC. 
GSCC will be managed and operated so as to be appropriately 
capitalized for its activities as a clearing agency.
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    An important aspect of the integration plan is to insulate GSCC, 
its members, and its clearing fund from the risks and obligations that 
may arise from the activities of the other Synergy Companies.\7\ The 
proposed rule change will specifically add a section 2 to Rule

[[Page 65769]]

39 that states that GSCC will not be liable for the obligations of any 
other entity or member of any other entity and that such other entity 
or member of such other entity shall not be liable for any obligations 
of GSCC.
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    \7\ Similarly, the integration plan attempts to insulate MBSCC 
and EMCC from the risks of GSCC's business. Securities Exchange Act 
Release Nos. 45153 (Dec. 14, 2001) (SR-MBSCC-2001-04); 45154 (Dec. 
14, 2001) (SR-EMCC-2001-04). See also Securities Exchange Act 
Release Nos. 42013 (Oct. 15, 1999), 64 FR 57168 (Oct. 22, 1999) (SR-
DTC-99-11) and 42014 (Oct. 15, 1999), 64 FR 57171 (Oct. 22, 1999) 
(SR-NSCC-99-07) (DTC and NSCC have adopted rules similar to this 
proposed rule as part of their 1999 integration with DTCC.)
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    GSCC believes that the proposed rule change is consistent with the 
requirements of section 17A of the Act \8\ and the rules and 
regulations thereunder applicable to GSCC because is promotes the 
safeguarding of securities and funds in GSCC's custody or control or 
for which it is responsible.
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    \8\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    GSCC does not believe that the proposed rule change will have any 
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 Others

    No written comments relating to the proposed rule change have been 
solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within the 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, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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 Room, 450 Fifth Street, NW., Washington, 
DC 20549. Copies of such filing will also be available for inspection 
and copying at GSCC's principal office. All submissions should refer to 
File No. SR-GSCC-2001-14 and should be submitted by January 4, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 01-31359 Filed 12-19-01; 8:45 am]
BILLING CODE 8010-01-M