Definition of OTC Derivatives Dealer ----

[hundredtoone]

Rule 3b-12 -- Definition of OTC Derivatives Dealer
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The term OTC derivatives dealer means any dealer that is affiliated with a registered broker or dealer (other than an OTC derivatives dealer), and whose securities activities:
Are limited to:


Engaging in dealer activities in eligible OTC derivative instruments that are securities;


Issuing and reacquiring securities that are issued by the dealer, including warrants on securities, hybrid securities, and structured notes;


Engaging in cash management securities activities;


Engaging in ancillary portfolio management securities activities; and


Engaging in such other securities activities that the Commission designates by order pursuant to Rule 15a-1(b)(1); and


Consist primarily of the activities described in paragraphs (a)(1), (a)(2), and (a)(3) of this section; and


Do not consist of any other securities activities, including engaging in any transaction in any security that is not an eligible OTC derivative instrument, except as permitted under paragraphs (a)(3), (a)(4), and (a)(5) of this section.


For purposes of this section, the term hybrid security means a security that incorporates payment features economically similar to options, forwards, futures, swap agreements, or collars involving currencies, interest or other rates, commodities, securities, indices, quantitative measures, or other financial or economic interests or property of any kind, or any payment or delivery that is dependent on the occurrence or nonoccurrence of any event associated with a potential financial, economic, or commercial consequence (or any combination, permutation, or derivative of such contract or underlying interest).


www.law.uc.edu/CCL/34ActRls/rule3b-12.html

...Flying Moose(cmkxunofficial)

[hundredtoone]

It is impossible to explain Grandfathering as anything but a hall pass for the worst violators of delivery rules - there is no investor protection in that, unless one defines "investor" as "Wall Street stock manipulator" and "protection" as "safeguarding illegally generated profit at shareholder expense." It is impossible to interpret Section 17A's mandate for the prompt clearance and delivery of shares in the manner that the Commission has, unless one is deliberately trying to ignore the delivery part of the requirement, and pave the way for the industry to institutionalize fraud. It is impossible to frame the options market maker exemption as consistent with investor protection, unless one is trying to claim that derivatives speculators are the investors the 1934 Act was intended to protect, and stock investors are their intended prey, to be abused in whatever manner is required for the options market to have the most lucrative trade. It is impossible to hear the SEC's now well-established lie about how "Reg SHO is working" and be even passingly familiar with the actual numbers of FTDs via the FOIA data, without comprehending that our securities regulator is lying, regularly, to the public, in order to cover its ass, and to protect Wall Street's lucrative business of defrauding the American public - taking money, and failing to deliver the goods.

www.thesanitycheck.com/BobsSanityCheckBlog/tabid/56/EntryID/495/Default.aspx

Enjoy cmkx Longs,


About DTCC

The Depository Trust & Clearing Corporation (DTCC), through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives.

In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with financial firms and third parties who market these products. DTCC's depository provides custody and asset servicing for 2.8 million securities issues from the United States and 100 other countries and territories, valued at $39 trillion. Last year, DTCC settled more than $1.5 quadrillion in securities transactions. DTCC has operating facilities in multiple locations in the United States and overseas. For more information on DTCC, visit www.dtcc.com.

Note to editors: High resolution photos of Diana Chan and Trevor Spanner are available for download on DTCC?s web site at www.dtcc.com at www.dtcc.com/about/dianachan.php and www.dtcc.com/about/trevorspanner.php..

reposted from Catdaddy

www.stockhouse.ca/bullboards/viewmessage.asp?no=17802577

...Flying Moose(cmkxunofficial)

[hundredtoone]

Topic: 14 WALL STREET CROOKS(BANKS) - UNCONFIRMED TRADES (Read 659 times)
cmkxpayoutdue
Diamond Miner

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Joined: Dec 2005
Posts: 212
14 WALL STREET CROOKS(BANKS) - UNCONFIRMED TRADES
« Thread Started on Feb 16, 2006, 9:46pm »

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ARE these crooks lying to FED?

quote.bloomberg.com/apps/news?pid=10000006&sid=aO.Ek0E2iqpI

Fed Says Banks Meet Target on Derivatives Backlog (Update3)
Feb. 16 (Bloomberg) -- Fourteen of Wall Street's biggest banks told federal regulators today they met a January goal of reducing unconfirmed trades in the $12.4 trillion credit derivatives market, easing concern that sloppy bookkeeping may set off a financial debacle.

The market has grown fivefold in the past two years, according to the International Swaps and Derivatives Association, leading to a failure by banks to keep up with the paperwork.

The banks reached their target to reduce by 30 percent the number of debt insurance contracts that remained unsigned by 30 days or longer, the Fed said in an e-mailed statement after a meeting at its office in Manhattan.

``It shows that the major dealers are committed to working on the major issues that the industry faces,'' said Sunil Hirani, chief executive officer of Creditex, a New York-based online market for credit derivatives.

Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and 10 other banks had outlined in a Dec. 16 letter to the Fed that they would halve the number of unconfirmed transactions by May, compared with the amount outstanding in September.

The New York Fed and the banks didn't set any new targets for eliminating the backlog, said a person who attended the meeting and who asked not to be identified.

Electronic Platform

Most of the major dealers have been added to an industry- accepted electronic confirmation platform, the Fed also said in the statement. ``This has facilitated an increase of total trade volume that is electronically confirmed from 46 percent in September to 62 percent in the month of January.''

Credit derivatives are the fastest growing part of the $270 trillion market for derivatives, financial obligations that derive their value from interest rates, the outcome of certain events, or the price of underlying assets such as bonds.

Investors use credit-default swaps to protect against non- payment on debt, or trade them as a way of betting on a company's credit quality. The buyer of the contract pays an annual fee and receives the full amount insured if the borrower defaults. In return, the swap seller gets the defaulted loans or bonds.

Results

When auto-parts maker Delphi Corp. filed for bankruptcy protection in October, investors probably held credit-default swaps insuring more than $20 billion of debt, or about 10 times the amount of outstanding bonds, according to Fitch Ratings.

The Fed, the U.S. Comptroller of the Currency and the U.K.'s Financial Services Authority have warned that banks aren't coping with the administration as trading in the contracts increases, with some credit-default swaps going unsigned for months.

Banks risk being overwhelmed by investors seeking settlement of contracts in a corporate default, an industry group led by E. Gerald Corrigan, managing director at Goldman Sachs and a former New York Fed president, said in a report in July.

New York Fed President Timothy Geithner requested that bankers at the Sept. 15 meeting come up with a plan to improve trade processing.

``A great amount of effort by the banks has produced positive results in clearing the backlog,'' Robert Pickel, chief executive officer of the New York-based International Swaps and Derivatives Association, representing 700 institutions in 50 countries, said in an interview yesterday.

Cash Settlement

The Depository Trust & Clearing Corp., a non-profit organization that processes securities trades and is collectively owned by banks, said Feb. 14 it will offer as early as June a service to record every credit-default swap transaction in an effort to cut processing delays.

At the same time, ISDA is proposing rules to allow credit- default swaps on individual companies to settle in cash after a bankruptcy, helping to avoid shortages of bonds to deliver on the debt-insurance contracts.

A scarcity of bonds to settle credit-default swap contracts after Delphi's bankruptcy drove the price of the Troy, Michigan- based company's notes to 70 cents on the dollar on Oct. 31 from 57 cents two weeks earlier.

The bond price returned to below 60 cents after ISDA held an auction that enabled investors who bought Delphi credit-default swaps as part of a benchmark debt insurance index to settle their contracts with cash instead of bonds.

`Erosion of Confidence'

More than $200 billion of credit derivatives are linked to General Motors Corp., which has about $30 billion in debt, the Wall Street Journal said today, citing traders it didn't name.

``The settlement issue is important to address because without an effective process there could be an erosion of confidence in the product itself,'' ISDA's Pickel said yesterday. Improving the settlement of contracts is likely to be a focus of today's discussion, he said.

Representatives from the U.S. Securities and Exchange Commission, the U.K.'s FSA, Germany's Federal Financial Supervisory Authority and the Swiss Federal Banking Commission are among regulators invited to today's meeting, Mitchell said.




To contact the reporter on this story:
John Dooley in New York at [e-mail].

Last Updated: February 16, 2006 19:05 EST

cmkxunitedforum.proboards70.com/index.cgi?board=general&action=display&thread=1140140818

...Flying Moose(cmkxunofficial)

[hundredtoone]

d) finality of settlement?
Payments:
DTC utilizes the central bank payment systems operated by the Reserve Banks to effect
end-of-day cash settlement. In addition to completing settlement of transactions in DTC,
DTC serves as the Settlement Agent for securities transactions cleared by Fund
Settlement obligation for its affiliated registered clearing agencies, Fixed Income
Clearing Corporation (FICC) and National Securities Clearing Corporation (NSCC). On
each settlement day, net debits are collected from settling members and net credits are
distributed to settling members (via designated settling banks) over the National
Settlement Service.
The National Settlement Service (NSS) is governed by Reserve Bank Operating Circular
12 “Multilateral Settlement” (“OC 12”). At the end of each settlement day, DTC, as
“Settlement Agent,” sends an NSS file to the Federal Reserve Bank of New York.2 This
file list debit entries for particular depository institutions (referred to as “settlers” in OC
12) that are acting as settling banks under DTC’s rules. The Reserve Bank will debit
each settling bank’s master account at the Federal Reserve and credit the same amount to
DTC’s settlement account at the Federal Reserve. Each credit to DTC’s settlement
account is final under the Operating Circular when made.
Funds transfers through the Fedwire® Funds Service are governed by Subpart B of
Regulation J which incorporates the provisions of Article 4A of the Uniform Commercial
Code, and Reserve Bank Operating Circular 6 “Funds Transfer Through the Fedwire®
Funds Service.” Regulation J provides the legal foundation for settlement finality:
Payment to the receiving participant over Fedwire Funds is final and irrevocable upon the
crediting of the receiving participant's account, or when the payment order is sent to the
receiving participant, whichever is earlier. Payment orders generally are processed
immediately following the Reserve Bank's receipt of a transfer message.
Securities:
Under DTC’s rules, a delivery versus payment (“DVP”) transaction becomes final or
“effective” as to the receiving party at the earliest of the following events: (i) when DTC
2 The “Settlement Agent” is the entity authorized to act on behalf of the Settlers under OC 12. For further
information on NSS, please see
wpo.ny.frb.org:8080/National_Settlement_Service/settlement_service_menu.cfm.
5
makes a final determination that the balance in the settlement account of the receiving
party for the business day is not negative; or (ii) when the receiving party pays the
amount of the negative balance in its settlement accounts, as determined by DTC for that
business day. Once the transaction becomes “effective,” the delivery is final and
irrevocable.
Finality of settlement for a DVP transaction can also occur during the business day when:
(i) the receiving party instructs DTC to effect a delivery, pledge, or withdrawal of the
securities received; (ii) in the case of a pledge versus payment, the receiving party
instructs DTC to effect a delivery, release, or withdrawal of securities; or (iii) in the case
of a release versus payment, the receiving party instructs DTC to effect a delivery,
pledge, or withdrawal of securities. See DTC Rule 9(B) (Transactions in Eligible
Securities) for additional information.
DTC Rule 10, Section 2 provides that DTC may not at any time cease to deliver to a
participant the participant’s deposited securities, which include: (i) securities delivered
into the Participant’s account on a given day upon the effectiveness of the delivery as
provided in DTC Rule 9; and (ii) securities deposited by a Participant, when the deposit
complies with the Rules.

www.dtcc.com/legal/compliance/DTC%20Info%20-%20CPSS-IOSOC%20RSSS%20-%20Oct%2010.pdf

...Flying Moose(cmkxunofficial)

[hundredtoone]

The Federal Reserve System May Not Provide Sufficient Intraday Financing as a Clearance and Settlement Entity.

One of our main concerns with this approach is that it is unclear if it would provide sufficient intraday financing to maintain the level of liquidity currently present in the government securities market. Given the Agencies' recognition that the Federal Reserve System is not subject to financial difficulties, the limitations currently imposed on the Clearing Banks (and other depository institutions) on the maximum amount of DOD that may be extended could potentially be significantly expanded.

However, in all likelihood, the Federal Reserve System would limit the amount of intraday financing compared to the current system, by, for example, restricting the unsecured provision of DOD,2 or eliminating subjective determinations to expand such forms of intraday credit. As mentioned above in Section 1, the Federal Reserve System would likely wish to limit credit risk to itself and to reduce the potential for moral hazard. In addition, unlike the Clearing Banks, the Federal Reserve System does not have any profit "reward" that it would reap in connection with the risks involved in their provision of intraday financing, further making the reduction of such intraday financing under this approach more likely. If the Federal Reserve System would not be as flexible as the Clearing Banks in the manner in which it would extend intraday credit, dealers may have insufficient access to needed funds, adversely impacting liquidity in the government securities markets.

The provision of additional forms of intraday credit - particularly "discretionary" forms of intraday credit - raises the related issue of whether the Federal Reserve System is an appropriate provider of additional forms of financing, particularly given their role as a regulator and their responsibility to avoid losses by the Federal Reserve System. In particular, many firms may be reluctant to access or request such additional forms of intraday credit, fearing that such request may raise increased scrutiny of a dealer's trading strategies and positions. Such reluctance may also apply to the Federal Reserve having direct knowledge of the positions in a dealer's securities and cash accounts; such direct access may adversely influence a dealer's trading strategy, causing such dealer to adopt overly conservative positions in the management of its portfolio, even if a more aggressive strategy may have been completely appropriate. Such adverse influence may adversely impact liquidity, leading to market distorting effects.

As discussed in detail under Appendix B, Section 2, the Association believes that the unbundling of triparty repo services from any clearance and settlement facility raises substantial issues with regards to risk management, as well as added operational concerns. As such, the Association believes that, were this approach to be implemented, the enhancement of the Federal Reserve System should include the provision of triparty repo services. As the White Paper acknowledges, however, were the Federal Reserve System to provide triparty repo facilities, this would necessitate the creation and maintenance of a large number of accounts for non-depository institutions.3 This would entail the provision of intraday (and potentially overnight) financing from the Federal Reserve System to these institutions, certain of which are not otherwise regulated. Given that some of these institutions are not as creditworthy as the dealers, the extensions of intraday or overnight credit to these institutions would likely entail increased credit risk to the Federal Reserve System and may in turn, require changes to the Federal Reserve Act itself. While such risk could be mitigated by requiring a pledge of liquid collateral, such risk mitigation controls raise the potential of reducing liquidity in the government securities markets by requiring financial institutions to utilize government securities as collateral, thereby limiting the amount of such securities available in the market.

www.sec.gov/rules/concept/s71502/tcconnor1.htm

...Flying Moose(cmkxunofficial)