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GSCC Rulemaking:
Notice of Filing, Order Granting Accelerated Approval of a Proposed Rule Change re: Year 2000 Testing

SECURITIES AND EXCHANGE COMMISSION

(Release No. 34-41153; File No. SR-GSCC-99-02)

March 10, 1999

Self-Regulatory Organizations; Government Securities Clearing Corporation; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Regarding Year 2000 Testing

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 ("Act"),1 notice is hereby given that on February 5, 1999, the Government Securities Clearing Corporation ("GSCC") filed with the Securities and Exchange Commission ("Commission") the proposed rule change as described in Items I and II below, which items have been prepared primarily by GSCC. The Commission is publishing this notice and order to solicit comments from interested persons and to grant accelerated approval of the proposal.

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

The propose of the proposed rule change is to clarify that GSCC's rules on operational capability include certain reporting and testing requirements such as the requirement that all GSCC members conduct Year 2000 testing with 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 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 such statements.2

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

The proposed rule change requires all GSCC members to participate in Year 2000 testing with GSCC. GSCC believes that its rules on operational requirements for members provide GSCC with the authority to require such testing. Nonetheless, GSCC proposes to supplement its rules on operational capability standards to clarify that these standards include the fulfillment of testing and related reporting requirements that may be imposed on members by GSCC from time to time to ensure the continuing operational capability of each member. The scope of such Year 2000 testing and reporting requirements have been determined by GSCC in its sole discretion and have been conveyed to members through Important Notices. GSCC believes that the rule change is broad enough to cover Year 2000 testing without specifically referring to Year 2000 in order to alleviate the need to rescind the rule when Year 2000 testing is no longer relevant and also to enable GSCC to apply it to other contexts in which testing might be required.

GSCC expressly reserves the right to take remedial action against members that do not fulfill the testing and related reporting requirements referred to above within the time frames established by GSCC. The proposed rule change provides generally that GSCC may take the remedial actions already available to it in its rules (i.e., increased clearing fund deposit and termination of membership) in the event a member does not fulfill the operational testing and related reporting requirements within the time frames specified by GSCC. GSCC has specified these time frames in an Important Notice to members.

GSCC believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder. In particular, the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act3 which requires that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions and, in general, to protect investors and the public interest.

(B) Self-Regulatory Organization's Statement on Burden on Competition

GSCC does not believe that the proposed rule change will have an impact, or impose a burden, on competition.

(C) Self-Regulatory Organization's Statement on Comments on
the Proposed Rule Change Received from Members,
Participants, 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

Section 17A(b)(3)(F) of the Act4 requires that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions. The Commission believes that the proposed rule change is consistent with this obligation because the required Year 2000 testing should allow GSCC to address potential problems associated with its members' Year 2000 readiness. As a result, GSCC should be able to continue to provide prompt and accurate clearance and settlement of securities transactions before, on, and after Year 2000 without interruption.

GSCC requested that the Commission find good cause for approving the proposed rule change prior to the thirtieth day after the publication of notice of the filing. The Commission finds good cause for approving the proposed rule change prior to the thirtieth day after the publication of notice of the filing because such approval will allow GSCC to implement its mandatory Year 2000 testing program in a timely manner.

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, N.W., Washington, D.C. 20549. 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, N.W., Washington, D.C. 20549. Copies of such filing will also be available for inspection and copying at the principal office of GSCC. All submissions should refer to the File No. SR-GSCC-99-02 and should be submitted by [insert date 21 days from the date of publication in the Federal Register].

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,5 that the proposed rule change (File No. SR-GSCC-99-02) be and hereby is approved.

For the Commission by the Division of Market Regulation, pursuant to delegated authority.6

Jonathan G. Katz
Secretary


Footnotes

115 U.S.C. 78s(b)(1).

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

315 U.S.C. 78q-1(b)(3)(F).

415 U.S.C. 78q-1(b)(3)(F).

515 U.S.C. 78s(b)(2).

617 CFR 200.30-3(a)(12).

http://www.sec.gov/rules/sro/gs9902o.htm


Modified:03/15/1999