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Notice

Self-Regulatory Organizations; Government Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Imposing a Fee on Members That Fail To Submit Their Transaction Data Within One Hour of Trade Execution

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Start Preamble July 30, 2001.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), [1] notice is hereby given that on June 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 primarily by GSCC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

To encourage use of its Real-Time Trade Matching (“RITM”) service, GSCC is proposing to impose a fee on members that do not submit their trade data within one hour of trade execution. Specifically, if a member does not submit all of the transactions in its account within one hour of trade execution, at the end of each month GSCC will charge 5 cents per side of a transaction other than a repo transaction or per repo transaction for each transaction in the account.

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 these 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 these statements.[2]

(A) Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

During the latter part of 2000, GSCC implemented an interactive messaging facility for GSCC-eligible securities transactions. This facility has provided members with the ready ability to submit trade input on an automated basis to GSCC intraday as trades are executed. The facility will allow GSCC to establish an RTTM service which will provide straight-through processing by allowing for the prompt and easy identification and resolution of trades intraday to achieve 100 percent comparison. GSCC believes that interactive messaging and RTTM Start Printed Page 41074processing are critical steps in helping reduce risk by ensuring that more transactions are compared earlier in the day and then promptly netted and guaranteed through GSCC so that intraday exposure to counterparties is minimized.

While GSCC has continued to support its existing batch input and output facilities, it plans to discourage the use of and eventually stop supporting these older formats because the move to interactive messaging is so essential.[3] As an initial step to encourage members to submit their transaction data closer to the time of trade execution, GSCC is proposing to impose a fee on members that do not submit their trade data within one hour of trade execution. Specifically, effective July 1, 2001, if a member does not submit all of the transactions in its account within one hour of trade execution, at the end of each month GSCC will charge 5 cents per side of a transaction other than a repo transaction or per repo transaction for each transaction in the account. Members can avoid the fee if they submit all of their transactions through their account: (i) Interactively as transactions occur using SWIFT-based messages, (ii) via a terminal within one hour of execution, or (iii) in multiple batch format within one hour of execution. GSCC has reserved the right to waive the charges for a particular month if GSCC determines, in its sole discretion, that a portion of a member's transactions were not submitted within one hour of trade execution because of a nonrecurring operational problem. The proposed fee is designed to encourage members to make the development investment necessary to join the RTTM service. This fee will be reviewed periodically by GSCC and may be increased if it is determined that it does not provide sufficient incentive for members to submit trade data on a timelier basis.

GSCC believes that the proposed rule change is consistent with the requirements of Section 17A of the Act [4] and the rules and regulations thereunder applicable to GSCC because it involves a change to GSCC's fee structure that will encourage members to move to interactive processing and thereby allow them to achieve important risk management benefits.

(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, Participate or Others

Written comments relating to the proposed rule change have not yet been solicited or received. GSCC will notify the Commission of any written comments received by GSCC.

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

The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) [5] of the Act and Rule 19b-4(f)(2) [6] promulgated thereunder because the proposal establishes or changes a due, fee, or other charge imposed by GSCC. At any time within sixty days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the proposes of the Act.

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 Section, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of GSCC. All submissions should refer to File No. SR-GSCC-2001-07 and should be submitted by August 27, 2001.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[7]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

2.  The Commission has modified the text of the summaries prepared by GSCC.

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3.  In addition, other areas of the fixed-income industry are also moving to interactive messaging and RTTM. GSCC is currently in the process of developing RTTM services for mortgage-backed securities jointly with the MBS Clearing Corporation. Further, GSCC has begun working with The Depository Trust & Clearing Corporation to provide interactive messaging and a centralized RTTM service for other fixed-income products, including corporate and municipal bonds.

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5.  15 U.S.C. 78s(b)(3)(A)(ii).

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[FR Doc. 01-19584 Filed 8-3-01; 8:45 am]

BILLING CODE 8010-01-M