Clearstream Banking, S.A.; Notice of Filing of Application To Continue an Existing Exemption From Clearing Agency Registration, 30969-30971 [E6-8320]
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jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 71, No. 104 / Wednesday, May 31, 2006 / Notices
request that the Office of Management
and Budget (‘‘OMB’’) extend approval,
under the Paperwork Reduction Act, of
the collection of information under its
regulation on Disclosure to Participants,
29 CFR part 4011 (OMB control number
1212–0050; expires December 31, 2006).
This notice informs the public of the
PBGC’s intent and solicits public
comment on the collection of
information.
DATES: Comments should be submitted
by July 31, 2006.
ADDRESSES: Comments may be mailed to
the Legislative and Regulatory
Department, Pension Benefit Guaranty
Corporation, 1200 K Street, NW.,
Washington, DC 20005–4026, or
delivered to that address during normal
business hours. Comments also may be
submitted by e-mail to
paperwork.comments@pbgc.gov, or by
fax to 202–326–4224. The PBGC will
make all comments available on its Web
site at https://www.pbgc.gov.
Copies of the collection of
information may also be obtained
without charge by writing to the
Disclosure Division of the Office of the
General Counsel of PBGC at the above
address or by visiting the Disclosure
Division or calling 202–326–4040
during normal business hours. (TTY and
TDD users may call the Federal relay
service toll-free at 1–800–877–8339 and
ask to be connected to 202–326–4040.)
The Disclosure to Participants
regulation may be accessed on the
PBGC’s Web site at https://
www.pbgc.gov.
FOR FURTHER INFORMATION CONTACT:
Catherine B. Klion, Attorney, Legislative
and Regulatory Department, Pension
Benefit Guaranty Corporation, 1200 K
Street, NW., Washington, DC 20005–
4026, 202–326–4024. (For TTY and
TDD, call 800–877–8339 and request
connection to 202–326–4024).
SUPPLEMENTARY INFORMATION: Section
4011 of the Employee Retirement
Income Security Act of 1974 requires
plan administrators of certain
underfunded single-employer pension
plans to provide an annual notice to
plan participants and beneficiaries of
the plan’s funding status and the limits
on the PBGC’s guarantee.
The PBGC’s regulation implementing
this provision (29 CFR part 4011)
prescribes which plans are subject to the
notice requirement, who is entitled to
receive the notice, and the time, form,
and manner of issuance of the notice.
The notice provides recipients with
meaningful, understandable, and timely
information that will help them become
better informed about their plans and
assist them in their financial planning.
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The collection of information under
the regulation has been approved by
OMB under control number 1212–0050
through December 31, 2006. The PBGC
intends to request that OMB extend its
approval for another three years. An
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless it
displays a currently valid OMB control
number.
The PBGC estimates that an average of
4,702 plans per year will respond to this
collection of information. The PBGC
further estimates that the average annual
burden of this collection of information
is 2.51 hours and $690 per plan, with an
average total annual burden of 11,800
hours and $3,244,863.
The PBGC is soliciting public
comments to—
Evaluate whether the collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
Evaluate the accuracy of the agency’s
estimate of the burden of the collection
of information, including the validity of
the methodology and assumptions used;
enhance the quality, utility, and clarity
of the information to be collected; and
minimize the burden of the collection of
information on those who are to
respond, including through the use of
appropriate automated, electronic,
mechanical, or other technological
collection techniques or other forms of
information technology, e.g., permitting
electronic submission of responses.
Issued in Washington, DC, this 24th day of
May 2006.
Cris Birch,
Acting Chief Technology Officer, Pension
Benefit Guaranty Corporation.
[FR Doc. E6–8316 Filed 5–30–06; 8:45 am]
BILLING CODE 7708–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53851; International Series
Release No. 1296; File No. 600–29]
Clearstream Banking, S.A.; Notice of
Filing of Application To Continue an
Existing Exemption From Clearing
Agency Registration
May 23, 2006.
I. Introduction
On April 12, 2005, Clearstream
Banking, S.A. (‘‘Clearstream’’),
successor in name to Cedel Bank,
societe anonyme, Luxembourg
(‘‘Cedel’’), filed with the Securities and
Exchange Commission (‘‘Commission’’)
PO 00000
Frm 00113
Fmt 4703
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30969
pursuant to section 17A of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 17Ab2–1
thereunder 2 and on March 15, 2006
amended, an amendment to its Form
CA–1 to reflect changes in its ownership
structure that resulted from the
acquisition of Clearstream’s parent
company, Cedel International, S.A.
(‘‘Cedel International’’), by Deutsche
Brse AG (‘‘DBAG’’). The purpose of the
amendment is to seek Commission
approval to continue Clearstream’s
current exemption from clearing agency
registration pursuant to which
Clearstream provides, subject to certain
conditions, clearance and settlement
services for U.S. government securities
for its U.S. participants. The
Commission is publishing this notice to
solicit comment from interested persons
as to whether Clearstream continues to
satisfy the requirements of its
exemption from clearing agency
registration.
II. Background
A. The 1997 Exemptive Order
On February 24, 1997, the
Commission granted Cedel a conditional
exemption from registration as a
clearing agency to enable Cedel to
perform certain functions of a clearing
agency with respect to transactions
involving U.S. government securities
and its U.S. participants (‘‘1997
Exemptive Order’’).3 Specifically, the
1997 Exemptive Order permitted Cedel
to provide clearance, settlement, and
collateral management services to U.S.
and non-U.S. entities for transactions in
the following U.S. government
securities: 4 (1) Fedwire-eligible U.S.
government securities 5 and (2)
mortgage-backed pass-through securities
that are guaranteed by the Government
National Mortgage Association
(collectively, ‘‘Eligible U.S. Government
Securities’’).6
The 1997 Exemptive Order also
imposed two conditions on Cedel’s
ability to provide clearance and
settlement services for Eligible U.S.
1 15
U.S.C. 78q–1.
CFR 240.17Ab2–1.
3 Securities Exchange Act Release No. 38328
(February 24, 1997), 62 FR 9225 (February 28,
1997).
4 ‘‘Government securities’’ is defined in section
3(a)(42) of the Act, 15 U.S.C. 78c(a)(42).
5 Fedwire is a large-value transfer system
operated by the Board of Governors of the Federal
Reserve System that supports the electronic transfer
of funds and the electronic transfer of book-entry
securities. 1997 Exemptive Order at 62 FR 9231
n.58.
6 1997 Exemptive Order at 62 FR 9231.
2 17
E:\FR\FM\31MYN1.SGM
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30970
Federal Register / Vol. 71, No. 104 / Wednesday, May 31, 2006 / Notices
Government Securities.7 First, the
average daily volume of Eligible U.S.
Government Securities processed at
Cedel for U.S. participants was limited
to five percent of the total average daily
dollar value of the aggregate volume in
eligible U.S. government securities.8
Second, the 1997 Exemptive Order
required Cedel to provide the
Commission access to a variety of
information related to Cedel’s clearance
and settlement operations.9
B. Acquisition by DBAG
When the Commission issued the
1997 Exemptive Order, Cedel was a
wholly-owned subsidiary of Cedel
International, a privately owned entity.
Between 1999 and 2002, Clearstream
International was created,10 Cedel was
renamed to Clearstream,11 and DBAG
acquired Cedel International.12 As a
result of this acquisition, DBAG
indirectly owns Clearstream through its
ownership of Clearstream
International.13 Throughout all these
mergers, acquisitions, and name
changes, Clearstream has remained
functionally and legally the same entity
as was Cedel.14
jlentini on PROD1PC65 with NOTICES
III. Continued Compliance With the
Exemptive Order
The 1997 Exemptive Order provides
that the Commission may modify by
order the terms, scope, or conditions of
the exemption from registration as a
7 The conditions in the 1997 Exemptive Order
reflected the Commission’s determination to take a
gradual approach toward permitting an
international non-registered clearing agency such as
Clearsteam to provide securities processing services
in U.S. government securities to U.S. market
participants. 1997 Exemptive Order at 62 FR 9231.
8 The scope of the 1997 Exemptive Order is
limited to Eligible U.S. Government Securities and
does not apply to other debt or equity securities.
For a more complete description of the volume
limit, refer to Section III.C.2. of the 1997 Exemptive
Order at 62 FR 9232.
9 For a more complete description of the
Commission’s access to information, refer to
Section III.C.3. of the 1997 Exemptive Order at 62
FR 9232.
10 Clearstream International is the successor to
New Cedel International, a company formed in
1999 in connection with DBAG’s initial investment
in Cedel International.
11 Clearstream is a wholly owned subsidiary of
Clearstream International.
12 The regulatory bodies in Germany,
Luxembourg, and the United Kingdom did not
object to the acquisition of Cedel International by
DBAG.
13 Although DBAG exercises voting control over
Clearstream International and Clearstream, certain
protections have been implemented in order to
allow Clearstream’s participants to maintain
influence over Clearstream’s policies and
procedures.
14 For example, Clearstream’s clearance and
settlement activities are the same as those provided
by Cedel, and Clearstream’s regulator, the Institut
Monetaire Luxembourgeois, is the same as it was for
Cedel.
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17:52 May 30, 2006
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clearing agency if the Commission
determines that such modification is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.15 The Commission
may also limit, suspend, or revoke this
exemption if the Commission finds that
Clearstream has violated or is unable to
comply with any of the provisions set
forth in the 1997 Exemptive Order if
such action is necessary or appropriate
in the public interest, for the protection
of investors, or otherwise in furtherance
of the purposes of the Act for the
protection of investors and the public
interest.
The 1997 Exemptive Order was based
upon representations and facts
contained in Cedel’s Form CA–1 and
other information known to the
Commission regarding the substantive
aspects of Cedel’s application, including
the ownership structure and corporate
governance. As a result, changes in the
representations and facts as then existed
and were presented to the Commission
require a modification to the 1997
Exemptive Order. Specifically, where
Cedel was user-owned and its
participants had direct representation
on the board of directors, Clearstream is
essentially owned by a single entity (i.e.,
DBAG) that facilitates user participation
through board advisory committees. The
Commission believes that it is now
appropriate to seek comment on
whether continuation of Clearstream’s
existing exemption from clearing agency
registration is appropriate.16
Clearstream’s operating structure is
the same as Cedel’s. Clearstream has
represented that it uses substantially the
same personnel, operating systems,
procedures, and risk management as did
Cedel.17 Clearstream has represented
15 1997
Exemptive Order at 62 FR 9233.
to DBAG’s acquisition of Cedel
International, Clearstream notified the Commission
as required by the terms of the 1997 Exemptive
Order. Because Clearstream was the same legal
entity with Cedel with just a change of name, the
1997 Exemptive Order was not amended prior to
changes in ownership structure. In contrast, when
Euroclear Bank replaced Morgan Guaranty Trust
Company as the operator of the Euroclear System
a new legal entity was formed. In that situation,
Euroclear’s order granting it an exemption from
clearing agency registration was modified prior to
the change in ownership structure. Securities
Exchange Act Release No. 39643 (February 11,
1998), 63 FR 8232 (February 18, 1998), modified in
Securities Exchange Act Release No. 43775
(December 28, 2000), 66 FR 819 (January 4, 2001)
(‘‘Modified Euroclear Exemptive Order’’).
17 For example, the collateral management service
discussed in the 1997 Exemptive Order was known
as Global Credit Support Service (‘‘GCSS’’). GCSS
was updated in 1998 and was renamed Tripartite
Collateral Management Service (‘‘TCMS’’). Like
GCSS, TCMS is a book-entry, real-time collateral
management service for cross-border securities
collateralization.
16 Prior
PO 00000
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Fmt 4703
Sfmt 4703
that it will continue to substantially
satisfy, as Cedel represented, each of the
conditions for registration set forth in
section 17A(b)(3) of the Act that relate
to the ‘‘safe and sound clearance and
settlement’’ in the U.S., which the
Commission identified in the 1997
Exemptive Order as the fundamental
goal of Section 17A.18 Accordingly,
Clearstream requests the Commission
continue the terms and conditions
granted to Cedel in the 1997 Exemptive
Order. Clearstream does not seek to
have any changes made to the ‘‘Scope of
the Exemption,’’ as set forth in Section
III.C. of the 1997 Exemptive Order with
respect to the conditions and limitations
of the 1997 Exemptive Order.
Clearstream’s governance and
management structures have been
revised to reflect the acquisition by
DBAG.19 Prior to DBAG’s acquisition,
Cedel and Cedel International were
privately owned by their shareholders
and shared the same boards of directors.
As structured today, Clearstream’s four
directors are also directors of
Clearstream International, which has
twenty-one directors on its board. DBAG
nominates and elects all directors.
Clearstream’s governance structure
includes two advisory groups. The User
Advisory Group and Credit Advisory
Group are both populated by
participants, financial institutions, and
service providers and provide
Clearstream users with a forum to
discuss changes to Clearstream’s
products, services, credit standards, and
controls.20 These two groups are
designed to ensure that a broad range of
Clearstream’s users are given a voice in
the governance of Clearstream.
Section 17A(b)(3)(C) of the Act
requires that the rules of a clearing
agency provide for fair representation of
the clearing agency’s shareholders or
members and participants in the
selection of the clearing agency’s
directors and administration of the
clearing agency’s affairs.21 That section
contemplates that users of a clearing
agency will have a significant voice in
the direction of the affairs of the
clearing agency. Clearstream believes
that the current governance and
management structure, though different
18 1997
Exemptive Order at 62 FR 9231.
International and Clearstream have
delegated management to a single management
group known as Group Executive Management
(‘‘GEM’’). The GEM is composed of four individuals
who currently serve as Clearstream’s board of
directors, as well as one additional person.
20 The interests represented in these groups
include issuers, securities information providers,
trading firms, financial institutions, and entities
providing clearing, settlement, and custody
services.
21 15 U.S.C. 78q–1(b)(3)(C).
19 Clearstream
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31MYN1
Federal Register / Vol. 71, No. 104 / Wednesday, May 31, 2006 / Notices
from Cedel’s, satisfies the requirements
of section 17A(b)(3)(C) because
Clearstream provides for participant
participation in management through
the two advisory groups.
Section 17A(b)(1) of the Act
authorizes the Commission to exempt
applicants from some or all of the
requirements of section 17A if it finds
such exemptions are consistent with the
public interest, the protection of
investors, and the purposes of section
17A, including the prompt and accurate
clearance and settlement of securities
transactions and the safeguarding of
securities and funds.22 Therefore, the
Commission invites commenters to
address whether continuing the 1997
Exemptive Order as requested by
Clearstream and as described above,
subject to the continuation of the
conditions and limitations set forth in
that order, would further the goals of
and would remain consistent with
section 17A. In particular, the
Commission seeks comment on whether
the revised governance structure,
including the addition of advisory
committees, such as the User Advisory
Group and the Credit Advisory Group,
in lieu of directors elected by system
participants, continues to meet the
requirements of fair representation
under section 17A(b)(3)(C) of the Act.
Additionally, the Commission invites
comments on amending the 1997
Exemptive Order to permit Clearstream
to file volume information on a
quarterly basis with the Commission
rather than on a monthly basis.23
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the application is
consistent with the Act. Comments may
be submitted by any of the following
methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml) or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number 600–29 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
jlentini on PROD1PC65 with NOTICES
22 15
U.S.C. 78q–1(b)(1).
23 The 1997 Exemptive Order directs Clearstream
to file monthly volume information with the
Commission. The Commission is considering
amending the 1997 Exemptive Order to permit
Clearstream to file volume reports on a quarterly
basis. See Modified Euroclear Exemptive Order
(directing Euroclear Bank to file quarterly volume
reports with the Commission).
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17:52 May 30, 2006
Jkt 208001
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number 600–29. This file number
should be included on the subject line
if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the application that are
filed with the Commission, and all
written communications relating to the
application 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,
100 F Street, NE., Washington, DC
20549. All comments received will be
posted without change; the Commission
does not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number 600–29 and should be
submitted on or before June 21, 2006.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.24
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–8320 Filed 5–30–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53853; File No. SR–Amex–
2006–46]
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing and Order Granting
Accelerated Approval to a Proposed
Rule Change and Amendment No. 1
Thereto Relating to the Elimination of
the Prohibition on Computer
Generated Orders
May 23, 2006.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 9,
2006, the American Stock Exchange LLC
CFR 200.30–3(a)(16).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
30971
(‘‘Amex’’ or ‘‘Exchange’’) 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
by Amex. On May 11, 2006, Amex filed
Amendment No. 1 to the proposed rule
change.3 The Commission is publishing
this notice to solicit comments on the
proposed rule change, as amended, from
interested persons, and is approving the
proposal on an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to eliminate
Amex Rules 934(b) and 934–ANTE(b)
relating to the prohibition of computer
generated orders.
The text of the proposed rule change
is available on the Amex’s Web site
(https://www.amex.com), at the Amex’s
Office of the Secretary, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Amex included statements concerning
the purpose of, and basis for, the
proposed rule change, as amended, and
discussed any comments it received on
the proposed rule change, as amended.
The text of these statements may be
examined at the places specified in Item
III below. The Amex has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes that the
amendment to the Amex Rules pursuant
to this proposal be effective on May 8,
2006.
The Exchange proposes to eliminate
the prohibition on computer generated
orders set forth in Amex Rules 934(b)
and 934–ANTE(b). Originally, Amex
Rules 934(b) and 934–ANTE(b) were
adopted to protect registered options
traders (‘‘ROTs’’) because, at the time,
allowing electronic entry directly into
the Exchange’s order routing system
could give customers and broker-dealers
with order-generating systems a
significant advantage over Amex ROTs.
Since the adoption of Amex Rules
934(b) and 934–ANTE(b), the Exchange
24 17
1 15
PO 00000
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Fmt 4703
Sfmt 4703
3 Amendment No. 1 supersedes and replaces the
original rule filing in its entirety.
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]]>Agencies
[Federal Register Volume 71, Number 104 (Wednesday, May 31, 2006)]
[Notices]
[Pages 30969-30971]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-8320]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53851; International Series Release No. 1296; File No.
600-29]
Clearstream Banking, S.A.; Notice of Filing of Application To
Continue an Existing Exemption From Clearing Agency Registration
May 23, 2006.
I. Introduction
On April 12, 2005, Clearstream Banking, S.A. (``Clearstream''),
successor in name to Cedel Bank, societe anonyme, Luxembourg
(``Cedel''), filed with the Securities and Exchange Commission
(``Commission'') pursuant to section 17A of the Securities Exchange Act
of 1934 (``Act'') \1\ and Rule 17Ab2-1 thereunder \2\ and on March 15,
2006 amended, an amendment to its Form CA-1 to reflect changes in its
ownership structure that resulted from the acquisition of Clearstream's
parent company, Cedel International, S.A. (``Cedel International''), by
Deutsche Brse AG (``DBAG''). The purpose of the amendment is to seek
Commission approval to continue Clearstream's current exemption from
clearing agency registration pursuant to which Clearstream provides,
subject to certain conditions, clearance and settlement services for
U.S. government securities for its U.S. participants. The Commission is
publishing this notice to solicit comment from interested persons as to
whether Clearstream continues to satisfy the requirements of its
exemption from clearing agency registration.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78q-1.
\2\ 17 CFR 240.17Ab2-1.
---------------------------------------------------------------------------
II. Background
A. The 1997 Exemptive Order
On February 24, 1997, the Commission granted Cedel a conditional
exemption from registration as a clearing agency to enable Cedel to
perform certain functions of a clearing agency with respect to
transactions involving U.S. government securities and its U.S.
participants (``1997 Exemptive Order'').\3\ Specifically, the 1997
Exemptive Order permitted Cedel to provide clearance, settlement, and
collateral management services to U.S. and non-U.S. entities for
transactions in the following U.S. government securities: \4\ (1)
Fedwire-eligible U.S. government securities \5\ and (2) mortgage-backed
pass-through securities that are guaranteed by the Government National
Mortgage Association (collectively, ``Eligible U.S. Government
Securities'').\6\
---------------------------------------------------------------------------
\3\ Securities Exchange Act Release No. 38328 (February 24,
1997), 62 FR 9225 (February 28, 1997).
\4\ ``Government securities'' is defined in section 3(a)(42) of
the Act, 15 U.S.C. 78c(a)(42).
\5\ Fedwire is a large-value transfer system operated by the
Board of Governors of the Federal Reserve System that supports the
electronic transfer of funds and the electronic transfer of book-
entry securities. 1997 Exemptive Order at 62 FR 9231 n.58.
\6\ 1997 Exemptive Order at 62 FR 9231.
---------------------------------------------------------------------------
The 1997 Exemptive Order also imposed two conditions on Cedel's
ability to provide clearance and settlement services for Eligible U.S.
[[Page 30970]]
Government Securities.\7\ First, the average daily volume of Eligible
U.S. Government Securities processed at Cedel for U.S. participants was
limited to five percent of the total average daily dollar value of the
aggregate volume in eligible U.S. government securities.\8\ Second, the
1997 Exemptive Order required Cedel to provide the Commission access to
a variety of information related to Cedel's clearance and settlement
operations.\9\
---------------------------------------------------------------------------
\7\ The conditions in the 1997 Exemptive Order reflected the
Commission's determination to take a gradual approach toward
permitting an international non-registered clearing agency such as
Clearsteam to provide securities processing services in U.S.
government securities to U.S. market participants. 1997 Exemptive
Order at 62 FR 9231.
\8\ The scope of the 1997 Exemptive Order is limited to Eligible
U.S. Government Securities and does not apply to other debt or
equity securities. For a more complete description of the volume
limit, refer to Section III.C.2. of the 1997 Exemptive Order at 62
FR 9232.
\9\ For a more complete description of the Commission's access
to information, refer to Section III.C.3. of the 1997 Exemptive
Order at 62 FR 9232.
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B. Acquisition by DBAG
When the Commission issued the 1997 Exemptive Order, Cedel was a
wholly-owned subsidiary of Cedel International, a privately owned
entity. Between 1999 and 2002, Clearstream International was
created,\10\ Cedel was renamed to Clearstream,\11\ and DBAG acquired
Cedel International.\12\ As a result of this acquisition, DBAG
indirectly owns Clearstream through its ownership of Clearstream
International.\13\ Throughout all these mergers, acquisitions, and name
changes, Clearstream has remained functionally and legally the same
entity as was Cedel.\14\
---------------------------------------------------------------------------
\10\ Clearstream International is the successor to New Cedel
International, a company formed in 1999 in connection with DBAG's
initial investment in Cedel International.
\11\ Clearstream is a wholly owned subsidiary of Clearstream
International.
\12\ The regulatory bodies in Germany, Luxembourg, and the
United Kingdom did not object to the acquisition of Cedel
International by DBAG.
\13\ Although DBAG exercises voting control over Clearstream
International and Clearstream, certain protections have been
implemented in order to allow Clearstream's participants to maintain
influence over Clearstream's policies and procedures.
\14\ For example, Clearstream's clearance and settlement
activities are the same as those provided by Cedel, and
Clearstream's regulator, the Institut Monetaire Luxembourgeois, is
the same as it was for Cedel.
---------------------------------------------------------------------------
III. Continued Compliance With the Exemptive Order
The 1997 Exemptive Order provides that the Commission may modify by
order the terms, scope, or conditions of the exemption from
registration as a clearing agency if the Commission determines that
such modification is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act.\15\ The Commission may also limit, suspend, or
revoke this exemption if the Commission finds that Clearstream has
violated or is unable to comply with any of the provisions set forth in
the 1997 Exemptive Order if such action is necessary or appropriate in
the public interest, for the protection of investors, or otherwise in
furtherance of the purposes of the Act for the protection of investors
and the public interest.
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\15\ 1997 Exemptive Order at 62 FR 9233.
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The 1997 Exemptive Order was based upon representations and facts
contained in Cedel's Form CA-1 and other information known to the
Commission regarding the substantive aspects of Cedel's application,
including the ownership structure and corporate governance. As a
result, changes in the representations and facts as then existed and
were presented to the Commission require a modification to the 1997
Exemptive Order. Specifically, where Cedel was user-owned and its
participants had direct representation on the board of directors,
Clearstream is essentially owned by a single entity (i.e., DBAG) that
facilitates user participation through board advisory committees. The
Commission believes that it is now appropriate to seek comment on
whether continuation of Clearstream's existing exemption from clearing
agency registration is appropriate.\16\
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\16\ Prior to DBAG's acquisition of Cedel International,
Clearstream notified the Commission as required by the terms of the
1997 Exemptive Order. Because Clearstream was the same legal entity
with Cedel with just a change of name, the 1997 Exemptive Order was
not amended prior to changes in ownership structure. In contrast,
when Euroclear Bank replaced Morgan Guaranty Trust Company as the
operator of the Euroclear System a new legal entity was formed. In
that situation, Euroclear's order granting it an exemption from
clearing agency registration was modified prior to the change in
ownership structure. Securities Exchange Act Release No. 39643
(February 11, 1998), 63 FR 8232 (February 18, 1998), modified in
Securities Exchange Act Release No. 43775 (December 28, 2000), 66 FR
819 (January 4, 2001) (``Modified Euroclear Exemptive Order'').
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Clearstream's operating structure is the same as Cedel's.
Clearstream has represented that it uses substantially the same
personnel, operating systems, procedures, and risk management as did
Cedel.\17\ Clearstream has represented that it will continue to
substantially satisfy, as Cedel represented, each of the conditions for
registration set forth in section 17A(b)(3) of the Act that relate to
the ``safe and sound clearance and settlement'' in the U.S., which the
Commission identified in the 1997 Exemptive Order as the fundamental
goal of Section 17A.\18\ Accordingly, Clearstream requests the
Commission continue the terms and conditions granted to Cedel in the
1997 Exemptive Order. Clearstream does not seek to have any changes
made to the ``Scope of the Exemption,'' as set forth in Section III.C.
of the 1997 Exemptive Order with respect to the conditions and
limitations of the 1997 Exemptive Order.
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\17\ For example, the collateral management service discussed in
the 1997 Exemptive Order was known as Global Credit Support Service
(``GCSS''). GCSS was updated in 1998 and was renamed Tripartite
Collateral Management Service (``TCMS''). Like GCSS, TCMS is a book-
entry, real-time collateral management service for cross-border
securities collateralization.
\18\ 1997 Exemptive Order at 62 FR 9231.
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Clearstream's governance and management structures have been
revised to reflect the acquisition by DBAG.\19\ Prior to DBAG's
acquisition, Cedel and Cedel International were privately owned by
their shareholders and shared the same boards of directors. As
structured today, Clearstream's four directors are also directors of
Clearstream International, which has twenty-one directors on its board.
DBAG nominates and elects all directors.
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\19\ Clearstream International and Clearstream have delegated
management to a single management group known as Group Executive
Management (``GEM''). The GEM is composed of four individuals who
currently serve as Clearstream's board of directors, as well as one
additional person.
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Clearstream's governance structure includes two advisory groups.
The User Advisory Group and Credit Advisory Group are both populated by
participants, financial institutions, and service providers and provide
Clearstream users with a forum to discuss changes to Clearstream's
products, services, credit standards, and controls.\20\ These two
groups are designed to ensure that a broad range of Clearstream's users
are given a voice in the governance of Clearstream.
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\20\ The interests represented in these groups include issuers,
securities information providers, trading firms, financial
institutions, and entities providing clearing, settlement, and
custody services.
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Section 17A(b)(3)(C) of the Act requires that the rules of a
clearing agency provide for fair representation of the clearing
agency's shareholders or members and participants in the selection of
the clearing agency's directors and administration of the clearing
agency's affairs.\21\ That section contemplates that users of a
clearing agency will have a significant voice in the direction of the
affairs of the clearing agency. Clearstream believes that the current
governance and management structure, though different
[[Page 30971]]
from Cedel's, satisfies the requirements of section 17A(b)(3)(C)
because Clearstream provides for participant participation in
management through the two advisory groups.
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\21\ 15 U.S.C. 78q-1(b)(3)(C).
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Section 17A(b)(1) of the Act authorizes the Commission to exempt
applicants from some or all of the requirements of section 17A if it
finds such exemptions are consistent with the public interest, the
protection of investors, and the purposes of section 17A, including the
prompt and accurate clearance and settlement of securities transactions
and the safeguarding of securities and funds.\22\ Therefore, the
Commission invites commenters to address whether continuing the 1997
Exemptive Order as requested by Clearstream and as described above,
subject to the continuation of the conditions and limitations set forth
in that order, would further the goals of and would remain consistent
with section 17A. In particular, the Commission seeks comment on
whether the revised governance structure, including the addition of
advisory committees, such as the User Advisory Group and the Credit
Advisory Group, in lieu of directors elected by system participants,
continues to meet the requirements of fair representation under section
17A(b)(3)(C) of the Act. Additionally, the Commission invites comments
on amending the 1997 Exemptive Order to permit Clearstream to file
volume information on a quarterly basis with the Commission rather than
on a monthly basis.\23\
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\22\ 15 U.S.C. 78q-1(b)(1).
\23\ The 1997 Exemptive Order directs Clearstream to file
monthly volume information with the Commission. The Commission is
considering amending the 1997 Exemptive Order to permit Clearstream
to file volume reports on a quarterly basis. See Modified Euroclear
Exemptive Order (directing Euroclear Bank to file quarterly volume
reports with the Commission).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the application
is consistent with the Act. Comments may be submitted by any of the
following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml) or
Send an e-mail to rule-comments@sec.gov. Please include
File Number 600-29 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number 600-29. This file number
should be included on the subject line if e-mail is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the application that are filed with the
Commission, and all written communications relating to the application
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, 100 F Street, NE., Washington, DC 20549. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number 600-29 and should be submitted
on or before June 21, 2006.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(16).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-8320 Filed 5-30-06; 8:45 am]
BILLING CODE 8010-01-P
