[Federal Register Volume 61, Number 106 (Friday, May 31, 1996)]
[Notices]
[Pages 27379-27380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13695]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37245; File No. SR-SCCP-96-03]
Self-Regulatory Organizations; Stock Clearing Corporation of
Philadelphia; Notice of Filing of a Proposed Rule Change To Establish a
Separate Participant Category for Inactive Accounts
May 24, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on May 8, 1996, the Stock
Clearing Corporation of Philadelphia (``SCCP'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change (File No. SR-SCCP-96-03) as described in Items I, II, and III
below, which items have been prepared primarily by SCCP. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of the proposed rule change is to amend SCCP's rules of
establishment a separate participant category for inactive accounts and
to amend the participants fund formulas with respect to such inactive
accounts. Specifically, the proposed rule change will define the term
``Inactive Account'' and will set forth the mechanism for detecting a
change in a participant's status from inactive to active for the
immediate collection of the additional required participants fund
contribution at such time.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, SCCP included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments they received on the proposed rule changes. The
text of these statements may be examined at the places specified in
Item IV below. SCCP 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
SCCP proposes to amend its rules with respect to the minimum cash
deposit contribution of its inactive participants to be set at the
uniform rate of $5,000 instead of at the previously approved rate of
$10,000.\2\ ``Inactive Accounts'' are proposed to be defined as an
account which conducts de minimis activity, currently established to be
twenty or fewer trades per month.
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\2\ Securities Exchange Act Release No. 36875 (February 22,
1996), 61 FR 7846 [SR-SCCP-95-06] (order granting partial temporary
approval and partial permanent approval of a proposed rule change).
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SCCP proposes to adjust its Inactive Account contribution to the
participants fund from $10,000 to $5,000. In proposing this amendment,
SCCP recognizes that Inactive Accounts pose virtually no risk to the
clearing corporation so long as they remain in such inactive status. In
this regard, SCCP has established procedures to detect a change in a
participant's status from inactive to active and for the immediate
collection of the additional required participants fund contribution at
such time.
SCCP will monitor its participants' account activities to assure
that all participants post the requisite participants fund
contributions. SCCP evaluates the nature and financial integrity of all
participants of SCCP, even if they initially establish only Inactive
Accounts. SCCP evaluates prospective participants develops a customer
profile, assesses the firm's capital adequacy, determines the initial
participants fund contribution, contacts the firm's Designated
Examining Authority for a review of its regulatory history, and
presents any and all pertinent information collected to SCCP's
Admissions Committee. The Admissions Committee ultimately makes the
determination about whether to admit the participant and directs
management where appropriate to gather additional information so that
the Committee can make such a determination. After admission, SCCP
monitors participants' account activities to assure that the proper
participants fund contribution is being collected from each
participant.
Specifically with respect to Inactive Accounts, SCCP's Finance and
Administration (``F&A'') Department
[[Page 27380]]
will identify for SCCP's Operations Department which specific accounts
are currently inactive. Thereafter, the Operations Department will
monitor on a daily basis purchase and sale blotters for each Inactive
Account. Trade activity detected from Inactive Accounts will be
compiled on a separate report identifying cumulative activity in each
Inactive Account during a monthly billing cycle.\3\
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\3\ This report will be distributed on a daily basis to SCCP
management and SCCP's compliance officer.
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In the event that an Inactive Account exceeds ten trades, but fewer
than twenty-one trades, for a particular month, the Operations
Department will immediately notify the F&A Department and SCCP's
compliance officer. The F&A Department will verify this activity and
will immediately call and send letters to the affected participants
requiring the wiring of the additional participants fund contributions
associated with an active account by the next business day in order for
such participants to conduct further account activity during the month.
If a participant has exceeded 20 trades for any given month, the
participant must wire additional participants fund contributions
associated with an active account by the next business day. A
participant's failure to timely wire any additional participants fund
contributions due subjects the participant to a $500 fine for the first
offense and a $2,000 fine for the second offense during a calendar
year. If the participant does not wire the additional participants fund
contribution for SCCP by the next business day, SCCP will disallow any
further business in the account beginning on the next business day
after the additional contribution was due. Accordingly, an offense as
contemplated by the foregoing fine schedule refers to the number of
times that the account was inactivated from conducting any further
business for failure to furnish SCCP with the additional contribution
during the calendar year.
Once active, an account will be routinely subject to the normal
review and update process on a monthly basis, and the F&A Department
will recalculate each participant's participants fund deposit
requirement at the end of each month based upon the participant's
previous three months activity, prior to the most recent month.
SCCP believes the proposed rule change is consistent with Section
17A of the Act and the rules and regulations thereunder because the
proposal should help to safeguard securities and funds in their custody
or control or for which they are responsible and foster cooperation and
coordination with persons engaged in the clearance and settlement of
securities transactions.
(B) Self-Regulatory Organization's Statement on Burden on Competition
SCCP believes that the proposed rule change will not impose any
burden on competition not contemplated within the parameters of the
Act.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
No written comments relating to the proposed rule change have been
received. SCCP will notify the Commission of any written comments
received by SCCP.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which SCCP consents, the Commission will:
(a) By order approve such proposed rule change or
(b) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. 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 SCCP. All submissions should
refer to the file number SR-SCCP-96-03 and should be submitted by June
21, 1996.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\4\
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\4\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-13695 Filed 5-30-96; 8:45 am]
BILLING CODE 8010-01-M
