[Federal Register Volume 61, Number 134 (Thursday, July 11, 1996)]
[Notices]
[Pages 36601-36602]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17633]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37402; File No. SR-PTC-96-03]
Self-Regulatory Organizations; The Participants Trust Company;
Notice of Filing of Proposed Rule Change Relating to the Intraday
Return of Participants' Prefunding Payments
July 2, 1996.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on June 3, 1996, the
Participants Trust Company (``PTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change (File No.
SR-PTC-96-03) 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) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change will amend Article V, Rule 2, Section 5 of
PTC's rules and will establish initial procedures to permit the
intraday return of participants' prefunding payments.
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. 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 amend Article V, Rule
2, Section 5 of PTC's rules and to establish initial procedures to
enable PTC to implement a program to permit the intraday return of
participants' prefunding payments received early in the day that are no
longer needed to support transaction processing at PTC. Currently,
prefunding must be applied to that day's settlement or withdrawn on the
next business day or thereafter. The proposed program is intended to
make these funds available to participants intraday to enable them to
reduce daylight overdraft exposures or to ease liquidity pressures in
other financial markets thereby promoting the more efficient
functioning of the financial markets in general.
``Optional deposits,'' which include prefunding, are defined in
PTC's rules as ``a participant's voluntary deposits to the participants
fund with respect to any master account pursuant to Section 3 of Rule 2
of Article V.'' Article V, Rule 2, Section 3 states that participants
may elect or be required to make optional deposits to the participants
fund to (i) provide supplemental processing collateral to increase a
participant's net free equity (``NFE''); (ii) prefund a debit balance
in a participant's account; or (iii) permit free retransfers of
securities from a transfer account.
PTC believes that the return to its participants of prefunding
payments which are no longer needed to support transaction processing
will increase the amount of funds available to participants during the
day. PTC also believes that by providing its participants with the
opportunity to manage their overall funding requirements, participant
liquidity will be enhanced and costs will be reduced.
In many circumstances, the amounts returned to participants under
the proposed program could be required to fund PTC net debits later in
the day. Participants will be required to make such payments to PTC
which otherwise could have been covered by the prefunding payments.
However, PTC believes that the benefits derived from providing
participants with increased intraday liquidity outweigh PTC's advantage
in retaining the prefunding after the situation requiring such deposit
has been remedied.
PTC proposes to implement the intraday return of prefunding
payments to participants as a pilot program with initial procedures
that will be incorporated into PTC's Participant's Operating Guide upon
approval of the proposed rule change.\3\ The initial procedures will
provide that (i) all prefunding return transactions will be subject to
PTC's standard credit controls (i.e., prefunding may be returned only
if the participant will be within its NFE and net debit monitoring
level
[[Page 36602]]
requirements after such prefunding is returned); (ii) only prefunding
payments received by PTC between 8:30 a.m. and 11:00 a.m. E.S.T. will
be eligible for intraday return; (iii) during the initial stage of the
pilot program, only eighty percent of qualifying prefunding payments
will be eligible for intraday return to minimize the risk that
subsequent transactions will fail PTC's credit controls later in the
processing day; (iv) participants will be allowed only one intraday
return per day; (v) the minimum amount eligible for intraday return is
$10 million; and (vi) all intraday returns are expected to be made by
PTC between 11:00 a.m. and 12:00 p.m. E.S.T.
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\3\ Upon implementation of the program, PTC plans to evaluate
the initial procedures on a quarterly basis and will make changes to
such procedures as necessary based upon PTC's experience with the
program. PTC will be required to file with the Commission a proposed
rule change prior to any change or modification of the initial
procedures.
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PTC believes that the proposed rule change is consistent with
section 17A(b)(3)(F) of the Act \4\ and the rules and regulations
thereunder because it will facilitate the prompt and accurate clearance
and settlement of securities transactions.
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\4\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
PTC does not perceive that the proposed rule change will impose 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 intent to solicit comments on
the proposed rule change. PTC has not received any unsolicited written
comments from its 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 submission
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549.
Copies of the submissions, 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 filings will also be available
for inspection and copying at the principal office of PTC. All
submissions should refer to the file number. SR-PTC-96-03 and should be
submitted by August 1, 1996.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12) (1995).
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Jonathan G. Katz,
Secretary.
[FR Doc. 96-17633 Filed 7-10-96; 8:45 am]
BILLING CODE 8010-01-M
