[Federal Register Volume 59, Number 70 (Tuesday, April 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8627]
[[Page Unknown]]
[Federal Register: April 12, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33856; File No. SR-PTC-93-05]
Self-Regulatory Organizations; Participants Trust Company; Order
Approving and Filing and Order Granting Accelerated Approval to
Amendment to Proposed Rule Change Relating to Restrictions in the
Intraday Payment of Principal and Interest
April 4, 1994.
On November 12, 1993, the Participants Trust Company (``PTC'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed rule change (File No. SR-PTC-93-05) pursuant to section
19(b)(1) of the Securities Exchange Act of 1934 (``Act'')\1\ amending
PTC's rules regarding intraday payments of principal and interest
(``P&I''). Notice of the proposal appeared in the Federal Register on
January 20, 1994.\2\ On February 14, 1994, PTC filed Amendment No. 1 to
the proposed rule change,\3\ requesting permanent approval of its pilot
program of intraday payment of collected and available P&I.\4\ No
comments were received on the proposed rule change set forth in the
notice. For the reasons discussed below, the Commission is approving
the proposed rule change.
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\1\15 U.S.C. 78s(b)(1).
\2\Securities Exchange Act Release No. 33462 (January 12, 1994),
59 FR 3146.
\3\Letter from Leopold S. Rassnick, Vice President, General
Counsel and Secretary, PTC, to Francois Mazur, Staff Attorney,
Division of Market Regulation, Commission (February 14, 1994).
\4\See Securities Exchange Act Release No. 33132 (November 2,
1993), 58 FR 59501.
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I. Description
The proposal would establish, on a permanent basis, PTC's authority
to offer participants the opportunity to receive, on an intraday basis,
payment of principal and interest PTC has received on their behalf. PTC
first offered this service on a pilot basis in November 1993.\5\ In
addition to making this service permanent, the proposal would codify
the requirement that intraday distribution of P&I shall be made only
from P&I payments collected and in immediately available funds at such
time, without recourse to borrowed funds or to alternate sources of
funds.
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\5\Id.
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Under this service, participants are able to receive 50% of the P&I
payments made with respect to GNMA I securities by means of an intraday
Fedwire transfer of immediately available funds at approximately 12
noon on the distribution date, with the balance distributed by means of
a credit to such participants at end-of-day.\6\ Before November 1993,
PTC's rules and procedures provided that PTC disburse P&I on securities
deposited at PTC by means of a credit to a participant's applicable
account cash balance. As a result, a participant would receive
available funds in the amount of the P&I, net of any account debits
and/or credits, at the end of the day as part of the settlement payment
process.
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\6\Id. These percentages, and the ability of participants to
select the method of payment, may change upon future Commission
approval, taking into account P&I collection and disbursement
experience, the impact on PTC's settlement cycle of intraday
disbursement of P&I by Fedwire transfer, and participant response to
the pilot program.
On November 16, 1993, PTC implemented its early P&I pilot
program. A total of 44 participants chose to receive the early cash
disbursement of 50% of their P&I allotment, while 10 chose to
receive their total allotment at net settlement. Letter from John J.
Sceppa, President and Chief Executive Officer, PTC, to Judith
Poppalardo, Assistant Director, Division of Market Regulation,
Commission (November 23, 1993). Each month since then, PTC has
affected a successful intraday distributions of P&I. Letter from
Leopold S. Rassnick, Vice President, General Counsel and Secretary,
PTC, to Francois Mazur, Staff Attorney, Division of Market
Regulation, Commission (March 17, 1994).
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II. Discussion
The Commission believes that PTC's proposed rule change is
consistent with section 17A of the Act and, specifically, with sections
17A(b)(3) (A) and (F).\7\ Those sections require that the rules of a
clearing agency be designed to facilitate the prompt and accurate
clearance and settlement of securities transactions and to protect
investors and the public interest.
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\7\15 U.S.C. 78q-1(b)(3)(A) & (F).
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The Commission believes that PTC's proposal will allow participants
to get P&I funds faster consistent with systemic concerns. Limiting
intra-day payments to immediately available funds held by PTC will
ensure that PTC's other funds are available if required to achieve end-
of-day settlement.\8\
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\8\Such funds include, but are not limited to, PTC's own funds,
funds obtained from PTC's uncommitted P&I line of credit, as well as
other borrowings which may be used to fund P&I distribution when
affected as part of the end-of-day settlement.
Participants are limited to receiving up to 50% of their P&I
allotment disbursement early. Any increase in percentage would
require that PTC file a proposed rule change pursuant to section
19(b)(1) of the Act.
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The Commission believes good cause exists for approving Amendment
No. 1 to the proposed rule change prior to the thirtieth day after the
date of publication of notice of filing thereof in the Federal
Register. Amendment No. 1\9\ requires that the Commission grant PTC
permanent approval of its pilot program for intraday P&I payments.\10\
Because PTC's proposal incorporates into its rules the requirement that
intraday disbursement of P&I be limited to the amount of P&I collected
and available, PTC has fulfilled the Commission's requirement for
permanent approval of the pilot program. In addition, the staff of the
Board of Governors of the Federal Reserve System (``Board of
Governors'') has stated that it believes that the proposed rule change
is consistent with the safeguarding of securities and funds in the
custody or control of the clearing agency or for which it is
responsible, and therefore agrees with the accelerated approval.\11\
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\9\Supra note 3.
\10\Securities Exchange Act Release No. 33132, supra note 4.
\11\Telephone conversation between William R. Stanley, Senior
Trust Analyst, Board of Governors, and Francois Mazur, Staff
Attorney, Division of Market Regulation, Commission (March 7, 1994).
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III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 1. Persons making written
submissions should file six copies thereof with the Secretary,
Securities and Exchange Commission, 450 Fifth Street, NW., Washington,
DC 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 Section, 450 Fifth Street,
NW., Washington, DC 20549. Copies of such filing will also be available
for inspection and copying at the principal office of the Amex. All
submissions should refer to File No. SR-PTC-93-05 and should be
submitted by May 3, 1994.
IV. Conclusion
For the reasons stated above, the Commission finds that PTC's
proposal is consistent with section 17A of the Act.
It is therefore ordered, pursuant to section 19(b)(2) of the Act,
\12\ that PTC's proposed rule change (SR-PTC-93-05), as amended, be,
and hereby is, approved.
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\12\15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-8627 Filed 4-11-94; 8:45 am]
BILLING CODE 8010-01-M
