On October 11, 2001, the Government Securities Clearing Corporation (“GSCC”) filed with the Securities and Exchange Commission (“Commission”) pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)  a proposed rule change (File No. GSCC-2001-14). Notice of the proposal was published in the Federal Register on December 20, 2001. No comment letters were received. For the reasons discussed below, the Commission is approving the proposed rule change.
The rule change addresses liability issues that may arise after the completion of the integration of GSCC, MBS Clearing Corporation (“MBSCC”), and Emerging Markets Clearing Corporation (“EMCC”) 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”)  are collectively referred to as the “Synergy Companies.” 
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 Start Printed Page 5862activities of the other Synergy Companies. The rule change will add a section 2 to Rule 39 that provides that notwithstanding any affiliation between GSCC and any other entity, including any clearing agency, 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 the clearing fund or other assets of GSCC 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.
Section 17A(b)(3)(F) of the Act  requires that the rules of a clearing agency assure the safeguarding of securities and funds that are in the custody or control of the clearing agency or for which it is responsible. The Commission finds that the proposed rule change is consistent with GSCC's obligations under section 17A(b)(3)(F) because it should help ensure that GSCC's assets, including it's participants fund, are not diminished as a result of its affiliation with the Synergy Companies.
On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of section 17A of the Act and the rules and regulations thereunder.
It is therefore ordered, pursuant to section 19(b)(2) of the Act, that the proposed rule change (File No. SR-GSCC-2001-14) be, and hereby is, approved.Start Signature
For the Commission by the Division of Market Regulation, pursuant to delegated authority.
Margaret H. McFarland,
3. Securities Exchange Act Release Nos. 44989 (Oct. 25, 2001), 66 FR 55220 (Nov. 1, 2001) (order approving integration of GSCC), 44988 (Oct. 25, 2001), 66 FR 55222 (Nov. 1, 2001) (order approving integration of MBSCC), and 44987 (Oct. 25, 2001), 66 FR 55218 (Nov. 1, 2001) (order approving integration of EMCC).Back to Citation
4. DTC and NSCC are wholly-owned subsidiaries of DTCC.Back to Citation
5. 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.Back to Citation
6. The integration plan attempts to similarly insulate MBSCC and EMCC. Securities Exchange Act Release Nos. 45358 (Jan. 29, 2002) (order approving MBSCC's limitation of liability) and 45359 (Jan. 29, 2002) (order approving EMCC's limitation of liability). DTC and NSCC adopted rules similar to this proposed rule as part of their 1999 integration with DTCC. Securities Exchange Act Release Nos. 42013 (Oct. 15, 1999), 64 FR 57168 (Oct. 22, 1999) (order approving NSCC's limitation of liability) and 42014 (Oct. 15, 1999), 64 FR 57171 (Oct. 22, 1999) (order approving DTC's limitation of liability).Back to Citation
[FR Doc. 02-2960 Filed 2-6-02; 8:45 am]
BILLING CODE 8010-01-P