[Federal Register Volume 62, Number 180 (Wednesday, September 17, 1997)]
[Notices]
[Pages 48913-48914]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24588]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39048; File No. SR-PTC-97-03]
Self-Regulatory Organizations; Participants Trust Company; Order
Approving a Proposed Rule Change Relating to a Change in the Cut-off
Time for Intraday Return of Prefunding Payments
September 10, 1997.
On May 1, 1997, the Participants Trust Company (``PTC'') filed with
the Securities and Exchange Commission (``Commission'') a proposed rule
change (File No. SR-PTC-97-03) pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal
was published in the Federal Register on June 27, 1997.\2\ No comment
letters were received. For the reasons discussed below, the Commission
is approving the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 38759 (June 23, 1997),
62 FR 34725.
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I. Description
The proposed rule change amends PTC's rules 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 their prefunding payments made to PTC earlier that
day. Under the rule change, only prefunding payments which are no
longer needed to support transaction processing are eligible for
intraday return.
PTC originally amended its rules in August 1996, to permit the
intraday return of prefunding payments.\3\ Before the rule change,
PTC's rules 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 intraday return of prefunding
payments 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 return. 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 payments may be returned only if the
participant will be within its net free equity and net debit
monitoring level requirements after the prefunding payments are
returned); (20 during the initial stage of the pilot program, only
80% of qualifying prefunding payments are eligible for return; (3)
participants are allowed only one request per day; and (4) the
minimum amount eligible for return is $10 million. The proposed rule
change does not amend these procedures.
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When the Commission approved the Program, the Commission's order
noted, ``Upon implementation of the Program, 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
Program. 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 its participants would
be able to determine their excess prefunding amounts by 11:00 a.m. in
order to request a return by that time. After the Program's
implementation, PTC monitored prefunding payments
[[Page 48914]]
and observed that participants with excess cash which could be
withdrawn by 11:00 a.m. elected not to do so. PTC was advised by its
participants that 1:00 p.m. would be a more appropriate cut-off time to
request return of prefunding payments.
II. Discussion
Section 17A(b)(3)(F) of the Act \6\ requires that the rules of a
clearing agency be designed to assure the safeguarding of securities
and funds which are in the custody or control of PTC or for which it is
responsible. By extending the time to request return of prefunding
payments to 1:00 p.m., PTC's participants will be better able to
determine whether prefunding payments on deposit with PTC will be
required to support transactions at PTC. Furthermore, PTC is not
changing the Program's requirement whereby PTC will not return any
prefunding payments unless the requesting participant is within its net
free equity and net debit monitoring level controls at the time the
request is made. Therefore, the Commission believes that even with the
later cut-off time for requesting return prefunding payments PTC should
be able to continue to provide for the intraday return of prefunding
payments while still assuring the safeguarding of securities and funds
in its custody or control.
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\6\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A of the Act and the
rules and regulations thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-PTC-97-03) be, and hereby
is, approved.
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. 97-24588 Filed 9-16-97; 8:45 am]
BILLING CODE 8010-01-M
