[Federal Register Volume 59, Number 70 (Tuesday, April 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8627]


[[Page Unknown]]

[Federal Register: April 12, 1994]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33856; File No. SR-PTC-93-05]

 

Self-Regulatory Organizations; Participants Trust Company; Order 
Approving and Filing and Order Granting Accelerated Approval to 
Amendment to Proposed Rule Change Relating to Restrictions in the 
Intraday Payment of Principal and Interest

April 4, 1994.
    On November 12, 1993, the Participants Trust Company (``PTC'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change (File No. SR-PTC-93-05) pursuant to section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'')\1\ amending 
PTC's rules regarding intraday payments of principal and interest 
(``P&I''). Notice of the proposal appeared in the Federal Register on 
January 20, 1994.\2\ On February 14, 1994, PTC filed Amendment No. 1 to 
the proposed rule change,\3\ requesting permanent approval of its pilot 
program of intraday payment of collected and available P&I.\4\ No 
comments were received on the proposed rule change set forth in the 
notice. For the reasons discussed below, the Commission is approving 
the proposed rule change.
---------------------------------------------------------------------------

    \1\15 U.S.C. 78s(b)(1).
    \2\Securities Exchange Act Release No. 33462 (January 12, 1994), 
59 FR 3146.
    \3\Letter from Leopold S. Rassnick, Vice President, General 
Counsel and Secretary, PTC, to Francois Mazur, Staff Attorney, 
Division of Market Regulation, Commission (February 14, 1994).
    \4\See Securities Exchange Act Release No. 33132 (November 2, 
1993), 58 FR 59501.
---------------------------------------------------------------------------

I. Description

    The proposal would establish, on a permanent basis, PTC's authority 
to offer participants the opportunity to receive, on an intraday basis, 
payment of principal and interest PTC has received on their behalf. PTC 
first offered this service on a pilot basis in November 1993.\5\ In 
addition to making this service permanent, the proposal would codify 
the requirement that intraday distribution of P&I shall be made only 
from P&I payments collected and in immediately available funds at such 
time, without recourse to borrowed funds or to alternate sources of 
funds.
---------------------------------------------------------------------------

    \5\Id.
---------------------------------------------------------------------------

    Under this service, participants are able to receive 50% of the P&I 
payments made with respect to GNMA I securities by means of an intraday 
Fedwire transfer of immediately available funds at approximately 12 
noon on the distribution date, with the balance distributed by means of 
a credit to such participants at end-of-day.\6\ Before November 1993, 
PTC's rules and procedures provided that PTC disburse P&I on securities 
deposited at PTC by means of a credit to a participant's applicable 
account cash balance. As a result, a participant would receive 
available funds in the amount of the P&I, net of any account debits 
and/or credits, at the end of the day as part of the settlement payment 
process.
---------------------------------------------------------------------------

    \6\Id. These percentages, and the ability of participants to 
select the method of payment, may change upon future Commission 
approval, taking into account P&I collection and disbursement 
experience, the impact on PTC's settlement cycle of intraday 
disbursement of P&I by Fedwire transfer, and participant response to 
the pilot program.
    On November 16, 1993, PTC implemented its early P&I pilot 
program. A total of 44 participants chose to receive the early cash 
disbursement of 50% of their P&I allotment, while 10 chose to 
receive their total allotment at net settlement. Letter from John J. 
Sceppa, President and Chief Executive Officer, PTC, to Judith 
Poppalardo, Assistant Director, Division of Market Regulation, 
Commission (November 23, 1993). Each month since then, PTC has 
affected a successful intraday distributions of P&I. Letter from 
Leopold S. Rassnick, Vice President, General Counsel and Secretary, 
PTC, to Francois Mazur, Staff Attorney, Division of Market 
Regulation, Commission (March 17, 1994).
---------------------------------------------------------------------------

II. Discussion

    The Commission believes that PTC's proposed rule change is 
consistent with section 17A of the Act and, specifically, with sections 
17A(b)(3) (A) and (F).\7\ Those sections require that the rules of a 
clearing agency be designed to facilitate the prompt and accurate 
clearance and settlement of securities transactions and to protect 
investors and the public interest.
---------------------------------------------------------------------------

    \7\15 U.S.C. 78q-1(b)(3)(A) & (F).
---------------------------------------------------------------------------

    The Commission believes that PTC's proposal will allow participants 
to get P&I funds faster consistent with systemic concerns. Limiting 
intra-day payments to immediately available funds held by PTC will 
ensure that PTC's other funds are available if required to achieve end-
of-day settlement.\8\
---------------------------------------------------------------------------

    \8\Such funds include, but are not limited to, PTC's own funds, 
funds obtained from PTC's uncommitted P&I line of credit, as well as 
other borrowings which may be used to fund P&I distribution when 
affected as part of the end-of-day settlement.
    Participants are limited to receiving up to 50% of their P&I 
allotment disbursement early. Any increase in percentage would 
require that PTC file a proposed rule change pursuant to section 
19(b)(1) of the Act.
---------------------------------------------------------------------------

    The Commission believes good cause exists for approving Amendment 
No. 1 to the proposed rule change prior to the thirtieth day after the 
date of publication of notice of filing thereof in the Federal 
Register. Amendment No. 1\9\ requires that the Commission grant PTC 
permanent approval of its pilot program for intraday P&I payments.\10\ 
Because PTC's proposal incorporates into its rules the requirement that 
intraday disbursement of P&I be limited to the amount of P&I collected 
and available, PTC has fulfilled the Commission's requirement for 
permanent approval of the pilot program. In addition, the staff of the 
Board of Governors of the Federal Reserve System (``Board of 
Governors'') has stated that it believes that the proposed rule change 
is consistent with the safeguarding of securities and funds in the 
custody or control of the clearing agency or for which it is 
responsible, and therefore agrees with the accelerated approval.\11\
---------------------------------------------------------------------------

    \9\Supra note 3.
    \10\Securities Exchange Act Release No. 33132, supra note 4.
    \11\Telephone conversation between William R. Stanley, Senior 
Trust Analyst, Board of Governors, and Francois Mazur, Staff 
Attorney, Division of Market Regulation, Commission (March 7, 1994).
---------------------------------------------------------------------------

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW., 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. 552, will be available for inspection and 
copying in the Commission's Public Reference Section, 450 Fifth Street, 
NW., Washington, DC 20549. Copies of such filing will also be available 
for inspection and copying at the principal office of the Amex. All 
submissions should refer to File No. SR-PTC-93-05 and should be 
submitted by May 3, 1994.

IV. Conclusion

    For the reasons stated above, the Commission finds that PTC's 
proposal is consistent with section 17A of the Act.
    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
\12\ that PTC's proposed rule change (SR-PTC-93-05), as amended, be, 
and hereby is, approved.
---------------------------------------------------------------------------

    \12\15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-8627 Filed 4-11-94; 8:45 am]
BILLING CODE 8010-01-M