[Federal Register Volume 62, Number 152 (Thursday, August 7, 1997)]
[Notices]
[Pages 42614-42616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20749]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38890) ; File No. SR-Philadep-97-03]
Self-Regulatory Organizations; Philadelphia Depository Trust
Company; Notice of Filing and Order Granting Accelerated Approval on a
Temporary Basis of a Proposed Rule Change to Appoint the Canadian
Depository for Securities Limited as a Correspondent Depository
July 30, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on April 18, 1997, the
Philadelphia Depository Trust Company (``Philadep'') filed with the
Securities and Exchange Commission (``Commission'') and on April 24,
1997, filed an amendment to the proposed rule change as described in
Items I and II below, which Items have been prepared primarily by
Philadep. The Commission is publishing this notice and order to solicit
comments from interested persons and to grant accelerated approval of
the proposed rule change through October 31, 1997.
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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 purpose of the proposed rule change is to extend temporary
approval of the appointment of The Canadian
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Depository for Securities Limited (``CDS'') as Philadep's nonexclusive
agent and custodian in receiving securities deposited by CDS-sponsored
participants for delivery to Philadep and to eliminate the family of
accounts subaccounting designed for and pertaining to the individual
participants of CDS.\2\
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\2\ Letter from J. Keith Kessel, Compliance Officer, Philadep
(April 24, 1997).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, Philadep 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. Philadep has prepared summaries, set forth in sections
(A), (B), and (C) below, of the most significant aspects of such
statements.\3\
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\3\ The Commission has modified the text of the summaries
prepared by Philadep.
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Effective November 1, 1996, CDS became a Philadep participant and
has served as a non-exclusive agent and custodian for Philadep in
receiving securities deposited by certain CDS-sponsored participants
for credit to their respective subaccounts in CDS's account at
Philadep. Pursuant to Philadep's proposed rule change, the operational
arrangements will remain intact as represented in previous filings
submitted to the Commission;\4\ however, Philadep will no longer use
its subaccount feature for the CDS account. Philadep will now
administer CDS like other Philadep participants.\5\
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\4\ Securities Exchange Act Release No. 36782 (January 26,
1996), 61 FR 3956 (File No. SR-Philadep-96-01) (order granting
accelerated approval on a temporary basis of a proposed rule change
to appoint the WCDTC as a correspondent depository); Securities
Exchange Act Release No. 37383, (June 28, 1996), 61 FR 35292 (File
No. SR-Philadep-96-09) (order granting accelerated approval on a
temporary basis through December 31, 1996 of a proposed rule change
seeking permanent approval of the designation of the WCDTC as a
correspondent depository).
\5\ Philadep will eliminate the family of accounts subaccounting
function for the CDS account, and CDS activity will be processed in
an omnibus account.
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Philadep believes the proposed rule change is consistent with the
requirements of Section 17A of Act and the rules and regulations
thereunder because the rule proposal fosters cooperation and
coordination with persons engaged in the clearance and settlement of
securities transaction and further assures the safeguarding of
securities and funds which are in the custody or control of Philadep or
for which it is responsible.
(B) Self-Regulatory Organization's Statement on Burden on Competition
Philadep does not believe that the proposed rule change will impact
or impose a burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received with respect
to the proposed rule change. Philadep will notify the Commission of any
written comments received by Philadep.
III. Date of Effectiveness of the Proposed Rule Change and Timining for
Commission Action
Section 17A(b)(3)(F)\6\ of the Act requires that the rules of a
clearing agency by designed to foster cooperation and coordination with
persons engaged in the clearance and settlement of securities
transactions. The Commission believes that Philadep's designation of
CDS as Philadep's non-exclusive agent and custodian in receiving
securities deposited by CDS-sponsored participants for delivery to
Philadep is consistent with Philadep's obligations under Section
17A(b)(3)(F) because the proposed rule change should help foster
cooperation and coordination between the U.S. and Canada clearance and
settlement systems.
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\6\ 15 U.S.C. 78q-1(b)(3)(F).
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On January 26, 1996, the Commission granted approval to Philadep's
proposal that it be allowed to appoint WCDTC as its nonexclusive agent
and custodian in receiving certain securities deposits.\7\ On November
1, 1966, the Commission granted temporary approval to Philadep's
proposed rule change to allow Philadep to appoint CDS as its
nonexclusive agent and custodian because CDS had purchased WCDTC and
would continue the correspondent depository activities of WCDTC.\8\ In
connection with this proposed rule change, Philadep has requested that
the Commission grant Philadep the latitude to modify the extra
financial protections that are currently being applied to the CDS
account (i.e., $1 million participants fund deposit and $5 million
(Canadian) letter of credit). Philadep contends that a decrease in the
financial protections Philadep receives from CDS is justified given (1)
Philadep's belief that the short selling activity in the CDS account
may decrease; (2) that SCCP has filed a proposed rule change with the
Commission to modify the participant's fund formula to account for
short selling activity; (3) Philadep's belief that CDS has
comprehensive and formalized risk management controls. However,
Philadep has not provided the Commission with any supporting
documentation regarding these assertions regarding CDS. Therefore, it
is the Commission's position that the extra financial protections that
are currently being applied to the CDS account (i.e., $1 million
participants fund deposit and $5 million (Canadian) letter of credit)
should remain in place at the same levels.
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\7\ Supra note 4.
\8\ Securities Exchange Act Release No. 37918 (November 1,
1996), 61 FR 57938 (File No. SR-Philadep-96-17) (order granting
accelerated approval on a temporary basis of a proposed rule change
to appoint The Canadian Depository for Securities Limited as a
correspondent depository).
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On November 1, 1996, the Commission extended the temporary approval
of Philadep's custodial arrangement with CDS so that Philadep and the
Commission could further monitor, review, and analyze this custodial
arrangement. The Commission is again granting temporary approval of the
proposed rule change through October 31, 1997, so that CDS can continue
to act as Philadep's non-exclusive agent and custodian and can continue
its correspondence depository activities until similar arrangements can
be implemented between CDS and The Depository Trust Company in
connection with Philadep's ceasing to provide depository services.
During this temporary approval period, Philadep should continue to
monitor the nonexclusive agent and custodian arrangement between
Philadep and CDS to ensure that proper risk management procedures are
in place. In this regard, the Commission requests that Philadep
continue to file monthly reports analyzing activity in CDS's omnibus
account and subaccounts.
Philadep has 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 approving the proposed rule change prior to the thirtieth day
after the date of publication of notice of filing because accelerated
approval will allow Philadep to extend CDS's appointment as its non-
exclusive agent and custodian thus allowing CDS to continue its
correspondent depository activities. The staff of the Board of
Governors of the Federal Reserve System concurred with
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the Commission's granting of accelerated approval.\9\
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\9\ Telephone conversation with John Rudolph, Supervisory Trust
Analyst, Board of Governors of the Federal Reserve Board.
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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 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. 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 Philadep. All
submissions should refer to file number SR-Philadep-96-17 and should be
submitted by August 28, 1997.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-Philadep-97-03) be, and
hereby is, approved through October 31, 1997.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-20749 Filed 8-6-97; 8:45 am]
BILLING CODE 8010-01-M
