[Federal Register Volume 66, Number 245 (Thursday, December 20, 2001)]
[Notices]
[Pages 65769-65770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31360]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45153; File No. SR-MBSCC-2001-04]


Self-Regulatory Organizations; MBS 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 MBS 
Securities Clearing Corporation (``MBSCC'') 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 MBSCC. 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

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

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

    In its filing with the Commission, MBSCC 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. MBSCC 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 MBSCC.
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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 MBSCC, the Government 
Securities Clearing Corporation (``GSCC''),<SUP>3</SUP> and the 
Emerging Markets Clearing Corporation (``EMCC'') <SUP>4</SUP> 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'') 
<SUP>5</SUP> are collectively referred to as the ``Synergy Companies.'' 
<SUP>6</SUP>
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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 DTCDC 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, MBSCC will continue to exist 
as a separate registered clearing agency. The retained earnings of 
MBSCC existing at the time of (or as of the end of the last full 
calendar month preceding) the integration of MBSCC with DTCC will, 
as a matter of DTCC policy, be dedicated to supporting the business 
of MBSCC. MBSCC will be managed and operated so as to be 
appropriately capitalized for its activities as a clearing agency.

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[[Page 65770]]

    An important aspect of the integration plan is to insulate MBSCC, 
its participants, its limited purpose participants, its Electronic 
Profile Network users, and its participants 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 new Rule 
15 to Section V of MBSCC's rules that states that MBSCC 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 MBSCC.
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    \7\ Similarly, the integration plan attempts to insulate GSSC 
and EMCC from the risks of MBSCC's business. Securities Exchange Act 
Release Nos. 45155 (Dec. 14, 2001) (SR-GSCC-2001-14); 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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    MBSCC 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 MBSCC because it promotes the 
safeguarding of securities and funds in MBSCC'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

    MBSCC 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 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 MBSCC's principal office. All submissions should refer 
to File No. SR-MBSCC-2001-04 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. 01-31360 Filed 12-19-01; 8:45 am]
BILLING CODE 8010-01-M