[Federal Register Volume 62, Number 124 (Friday, June 27, 1997)]
[Notices]
[Pages 34725-34726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16917]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38759; File No. SR-PTC-97-03]
Self-Regulatory Organizations; Participants Trust Company; Notice
of Filing of a Proposed Rule Change Relating to a Change in the Cut-off
Time for Intraday Return of Prefunding Payments
June 23, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on May 1, 1997, the
Participants Trusts Company (``PTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change (File No.
SR-PTC-97-03) as described in Items I, II, and III below, which items
have been prepared primarily by PTC. 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change extends from 11:00 a.m. to 1:00 p.m. the
cut-off time for a participant to request that PTC return to them
intraday their prefunding payments made to PTC earlier in the day.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, PTC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on 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. PTC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such
statements.\2\
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\2\ The Commission has modified the text of the summaries
prepared by PTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to extend from 11:00
a.m. to 1:00 p.m. the cut-off time for a participant to request that
PTC return to them intraday a portion of their prefunding payments made
to PTC earlier in the day. Only prefunding payments which are no longer
needed to support transaction processing are eligible for intraday
return.
In August 1996, PTC amended Article V, Rule 2, Section 5 of its
rules to permit the intraday return of prefunding payments.\3\ Before
the rule change, PTC's rule required that prefunding payments be
applied to end-of-day settlement or be made available for withdrawal on
the next business day or thereafter.
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\3\ Securities Exchange Act Release No. 37515 (August 2, 1996),
61 FR 41677.
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On September 9, 1996, PTC implemented the intraday return of
prefunding as a pilot program (``Program''). The procedures established
for the Program included, among other things,\4\ that only prefunding
payments received by PTC between 8:30 a.m. and 11:00 a.m. were eligible
for early return and that PTC expected to make all returns between
11:00 a.m. and 12:00 p.m. These initial procedures were incorporated in
PTC's Participant Operating Guide.
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\4\ The Program's procedures also included the following: (1)
all prefunding return transactions are subject to PTC's standard
credit checks (i.e., prefunding may be returned only if the
participant will be within its Net Free Equity and Net Debit
Monitoring Level requirements after the prefunding in returned); (2)
during the initial stage of the pilot program, only 80% of
qualifying prefunding payments will be eligible for return; (3)
participants are allowed only one request per day; and (4) the
minimum amount eligible for return is $10 million.
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When the Commission approved the Program, the Commission's order
noted, ``Upon implementation of the [P]rogram, PTC plans to evaluate
the initial procedures on a quarterly basis and will make changes based
on such procedures as necessary based upon PTC's experience with the
[P]rogram. PTC will be required to file with the Commission a proposed
rule change prior to any change or modification of the initial
procedures.'' \5\
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\5\ Supra note 3, at n. 4.
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In developing the Program, PTC expected that participants would be
able to determine their excess prefunding amounts by 11:00 a.m. in
order to request a return by that time. PTC has monitored prefunding
payments during the period in which the Program has been in place and
has observed that participants with excess cash which could be
withdrawn by 11:00 a.m. have elected not to do so. In discussions with
PTC, participants have stated that they are reluctant to withdraw
excess cash at 11:00 a.m. due to the risk of potential credit fails at
PTC thereafter in the event that their day's processing is not
substantially complete by this time. Participants have advised PTC that
they are better able to assess their cash positions at PTC by
approximately 1:00 p.m. when processing activity is generally
substantially completed.
PTC believes that the return of prefunding payments that are no
longer needed to support transaction processing at PTC may enhance
participants' liquidity during the day, which enhancement can be
extremely beneficial in a same-day funds environment. By extending the
request deadline from 11:00 a.m. to 1:00 p.m., participants should be
able to determine better whether prefunding payments on deposit with
PTC are still required to support transactions processing at PTC are
still required to support transactions processing at PTC or whether
they are of greater economic benefit being withdrawn. As a result of
the 1:00 p.m. cutoff time, PTC anticipates that the returns of such
funds would occur between 1:00 p.m. and 1:45 p.m.\6\
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\6\ The proposed rule change will not amend the Program's other
procedures. See supra note 4.
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PTC believes that the proposed rule change is consistent with
Section 17A(b)(3)(F) of the Act \7\ and the rules and regulations
thereunder in that it will facilitate the prompt and accurate clearance
and settlement of securities transactions.
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\7\ 15 U.S.C. 78q-1(b)(3)(F).
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[[Page 34726]]
(B) Self-Regulatory Organization's Statement on Burden on Competition
PTC does not believe that the proposed rule change imposes any
burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
PTC has not solicited and does not intend to solicit comments on
this proposed rule change. PTC has not received any unsolicited written
comments from participants or other interested parties.
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 PTC 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. Sec. 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 PTC. All
submissions should refer to the file number SR-PTC-97-03 and should be
submitted by July 18, 1997.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-16917 Filed 6-26-97; 8:45 am]
BILLING CODE 8010-01-M
