[Federal Register Volume 61, Number 130 (Friday, July 5, 1996)]
[Notices]
[Pages 35291-35292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17147]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37382; File Nos. SR-Philadep-96-08 and SR-SCCP-96-04]
Self-Regulatory Organizations; Philadelphia Depository Trust
Company and Stock Clearing Corporation of Philadelphia; Notice of
Filing and Order Granting Accelerated Approval on a Temporary Basis of
Proposed Rule Changes Requesting Permanent Approval of the Adoption of
Article 8 of the New York Uniform Commercial Code To Govern Certain
Transactions
June 28, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on May 30, 1996, the
Philadelphia Depository Trust Company (``Philadep'') and the Stock
Clearing Corporation of Philadelphia (``SCCP'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
changes (File Nos. SR-Philadep-96-08 and SR-SCCP-96-04) as described in
Items I and II below, which Items have been prepared primarily by
Philadep and SCCP. The Commission is publishing this notice to solicit
comments from interested persons and to grant accelerated approval of
the proposed rule changes on a temporary basis through December 31,
1996.
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\1\ 15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organizations' Statement of the Terms of Substance
of the Proposed Rule Changes
Philadep requests permanent approval of the adoption of Rule 32 and
the amendment of Rule 1 of its rules, and SCCP requests permanent
approval of the adoption of Rule 41 and the amendment of Rule 1 of its
rules governing the choice of law to be elected in certain transactions
effecting Philadep, SCCP, their participants, and pledged. On January
26, 1996, the Commission temporarily approved through June 30, 1996,
Philadep's and SCCP's proposed rule changes adopting Article 8 of the
New York Uniform Commercial Code (``UCC'') as their choice of law
governing certain transactions.\2\
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\2\ Securities Exchange Act Release No. 36781 (January 26,
1996), 61 FR 3958 [File Nos. SR-SCCP-96-01 and SR-Philadep-96-01]
(order granting accelerated approval on a temporary basis of
proposed rule changes to provide for the application of Article 8 of
the New York UCC).
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II. Self-Regulatory Organizations' Statements of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
In their filings with the Commission, Philadep and SCCP included
statements concerning the purpose of and the basis for the proposed
rule changes and discussed any comments received on the proposed rule
changes. The text of these statements may be examined at the places
specified in Item IV below. Philadep and SCCP have prepared summaries,
as set forth in sections A, B, and C below, of the most significant
aspects of these statements.
A. Self-Regulatory Organization's Statements of the Purpose of, and the
Statutory Basis for, the Proposed Rule Changes
Philadep and SCCP propose to permanently adopt Rules 32 and Rule
41, respectively, and to permanently amend Rule 1 of their rules to
codify their decision to elect certain New York commercial code
provisions to govern certain transactions for the purpose of providing
a uniform, consistent, and predictable body of law. Specifically, Rule
32 and Rule 41 will assure that the rights and obligations of Philadep
and SCCP, their participants, and their pledgees with respect to
transfers and pledges of securities, to the extent Article 8 of the UCC
applies thereto, will be governed by and construed in accordance with
Article 8 of the UCC of New York in effect from time to time. The
definition of ``security'' under Rule 1 of both Philadep's and SCCP's
rules was amended to cite to New York UCC Article 8 as opposed to
Pennsylvania UCC Article 8.
Philadep and SCCP note that uncertainty exists whether New York law
or Pennsylvania law may apply to any particular transfers and whether
some transfers within Philadep's or SCCP's systems may be governed by
Pennsylvania's UCC Article 8 while other transaction within such
systems may be governed by New York's UCC Article 8. With so many of
the transactions for which Philadep and SCCP provide depository,
clearance, and settlement services potentially being affected (e.g.,
those transactions effected through interface with broker-dealers,
banks, and other institutions which are participants in The Depository
Trust Company (``DTC'') and National Securities Clearing Corporation
(``NSCC'') systems), it is problematic that different rules of law
under Article 8 of the UCC may govern the rights and obligations of
parties to such transfers. Philadep and SCCP, therefore, have chosen to
elect the application of New York's UCC Article 8 rather than
Pennsylvania's UCC Article 8. The choice of New York law also assures
that DTC, NSCC, and their respective participants and pledgees will
find harmonious commercial code
[[Page 35292]]
provisions governing their extensive dealings with Philadep and SCCP,
their participants, and pledgees in this area as the former New York
based groups already are subject to New York law.
Philadep and SCCP believe the proposed rule changes are consistent
with Section 17A of the Act and the rules and regulations thereunder
because the rules are designed to promote the prompt and accurate
clearance and settlement of securities transactions, to assure the
safeguarding of securities and funds which are in the custody or
control of the clearing agency or for which it is responsible, to
foster cooperation and coordination with persons engaged in the
clearance and settlement of securities, to remove impediments to and
perfect the mechanism of a national market system for the prompt and
accurate clearance and settlement of securities transactions, and, in
general, to protect investors and the public interest.
B. Self-Regulatory Organizations' Statements on Burden on Competition
Philadep and SCCP do not believe that the proposed rule changes
will impact or impose a burden on competition.
C. Self-Regulatory Organizations' Statements on Comments on the
Proposed Rule Changes Received From Members, Participants or Others
No written comments have been solicited or received.
III. Date of Effectiveness of the Proposed Rule Changes and Timing for
Commission Action
Section 17A(b)(3)(F) \3\ of the Act requires the rules of a
clearing agency be designed to foster cooperation and coordination with
persons engaged in the clearance and settlement of securities. The
Commission believes the proposed rule changes are consistent with these
requirements because adoption of Article 8 of the New York UCC should
help provide certainty with respect to the substantive rights and
obligations under UCC Article 8 that are applicable to Philadep and
SCCP and their participants particularly with respect to transactions
with broker-dealers, banks, and other institutions that are
participants of other foreign or domestic clearing entities.
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\3\ 15 U.S.C. Sec. 78q-1(b)(3)(F) (1988).
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Philadep and SCCP have requested that the Commission find good
cause for approving the proposed rule change prior to the thirtieth day
after the date of publication of notice of the filing. The Commission
finds good cause for so approving the proposed rule change because
accelerated approval will enable Philadep and SCCP to continue to
choose Article 8 of the New York UCC as the governing law for certain
transactions, thus enabling Philadep and SCCP to continue to settle
without any disruption securities transactions between U.S. broker-
dealers and Canadian broker-dealers. Currently, the West Canada
Depository Trust Company (``WCDTC'') and the West Canada Clearing
Corporation (``WCCC'') act as a corresponding depository for and
conduct clearance and settlement with Philadep and SCCP, respectively.
With WCDTC and WCCC as participants of SCCP and Philadep, transactions
in certain Canadian and U.S. securities between Canadian and American
brokers will continue to be cleared and settled through the facilities
of Philadep and SCCP. The staff of the Board of Governors of the
Federal Reserve System has concurred with the Commission's granting of
accelerated approval.\4\
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\4\ Telephone conversation between John Rudolph, Board of
Governors of the Federal Reserve System, and Chris Concannon, Staff
Attorney, Division of Market Regulation, Commission (June 28, 1996).
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The Commission is granting temporary approval of the proposed rule
changes because the Commission believes the adoption of Article 8 of
the New York UCC should continue to be examined before the selection of
such governing law is permanently approved. The Commission will
continue to analyze the developments and the application of Article 8
of the New York UCC including the effect of the choice of law
provisions upon third parties. For these reasons, the Commission is
temporarily approving the proposed rule changes through December 31,
1996.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making such submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., 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. Sec. 552 will be available for inspection and copying in
the Commission's Public Reference Room, 450 Fifth Street, N.W.,
Washington, DC 20549. Copies of such filings will also be available for
inspection and copying at the principal offices of Philadep and SCCP.
All submissions should refer to File Nos. SR-Philadep-96-08-SR-SCCP-96-
04 and should be submitted by July 26, 1996.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule changes (File Nos. SR-Philadep-96-08 and SR-
SCCP-96-04) be, and hereby are, approved through December 31, 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. 96-17147 Filed 7-3-96; 8:45 am]
BILLING CODE 8010-01-M
