[Federal Register Volume 59, Number 125 (Thursday, June 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15847]


[[Page Unknown]]

[Federal Register: June 30, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34250; File No. SR-PHILADEP-93-02]

 

Self-Regulatory Organizations; Philadelphia Depository Trust 
Company; Notice of Filing and Order Granting Accelerated Approval of a 
Proposed Rule Change Concerning the PHILANET Terminal Communication 
System, the Voluntary Offer Instruction Service, and the Defender 
Security System

June 23, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ (``Act'') notice is hereby given that on August 17, 1993 the 
Philadelphia Depository Trust Company (``PHILADEP'') filed with the 
Securities and Exchange Commission (``Commission'') 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.
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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 purpose of the proposed rule change is to obtain permanent 
approval for PHILADEP's PHILANET Terminal Communication System 
(``PHILANET'') and for PHILADEP's Voluntary Offer Instruction (``VOI'') 
service. PHILANET is an electronic communication system linking 
PHILADEP to its participants. The VOI service allows participants to 
electronically submit to PHILADEP's Reorganization Department through 
PHILANET instructions relating to voluntary corporate actions. PHILANET 
and the VOI service currently are being operated as temporarily 
approved pilot programs. The proposal also seeks approval of the 
installation of the Defender security system to PHILANET.

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.

A. Self-Regulatory Organization's Statements of the Purpose of and 
Statutory Basis for the Proposed Rule Change

    On December 30, 1983, the Commission approved File No. SR-PHILADEP-
83-03 which approved PHILANET on a pilot basis.\2\ The Commission has 
extended its approval of the pilot program several times.\3\ On March 
8, 1993, the VOI service was approved on a pilot basis as part of the 
PHILANET System.\4\
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    \2\Securities Exchange Act Release No. 20519 (December 30, 
1983), 49 FR 966. (order granting temporary approval).
    \3\Securities Exchange Act Release Nos. 27491 (November 30, 
1989), 54 FR 50556, [SR-PHILADEP-89-02] (order granting temporary 
approval until March 31, 1990); 27863 (April 29, 1990), 55 FR 12762, 
[SR-PHILADEP-89-02] (order granting temporary approval until June 
30, 1990); 28172 (July 3, 1990), 55 FR 28493, [SR-PHILADEP-89-02] 
(order granting temporary approval until July 31, 1990); 30362 
(February 10, 1992), 57 FR 5921, [SR-PHILADEP-90-04] (order granting 
temporary approval until February 28, 1993); and 31959 (March 8, 
1993), 58 FR 13658, [SR-PHILADEP-93-01] (order granting temporary 
approval until February 28, 1994).
    \4\Securities Exchange Act Release No. 31959 (March 8, 1993), 58 
FR 13658 [SR-PHILADEP-93-01] (order granting temporary approval 
until February 28, 1994).
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    PHILADEP states it has operated PHILANET for ten years without 
experiencing any instances of unauthorized system access. PHILADEP 
continues to monitor the adequacy of current safeguards and to 
implement additional safeguards as necessary to minimize the risk of 
unauthorized access. PHILADEP has recently installed the Defender 
access management system, a dial-back data communications security 
program. Defender protects against unauthorized dial-up access to 
PHILANET and the VOI service by verifying that only authorized users 
from authorized locations have access. To access PHILANET, a 
participant must dial the Defender system and enter an assigned 
identification number. Defender then verifies the identification number 
and the time-of-day restrictions and dials the authorized location for 
that participant. Defender secures all dial-up lines (synchronous and 
asynchronous) of the PHILANET system. Audit records are generated for 
all accesses and configuration changes, and Defender incorporates the 
audit information into reports and graphs which assist in operating and 
maintaining proper security.

B. Self-Regulatory Organization's Statement on Burden on Competition

    PHILADEP does not believe that PHILANET, the VOI service, or 
Defender will impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    No comments on the proposal have been solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Sections 17A(b)(3) (A) and (F) of the Act require that a clearing 
agency be organized and its rules designed to promote the prompt and 
accurate clearance and settlement of securities transactions and 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.\5\ The proposal enhances PHILADEP's capacity to facilitate 
the prompt and accurate clearance and settlement of securities 
transactions by providing participants with the ability to 
electronically communicate with PHILADEP. PHILANET along with the VOI 
service has enhanced securities processing, has reduced paper 
processing, and has reduced the use of tape transmissions. As a result, 
PHILADEP has been able to reduce the risk of data loss and delays in 
receiving and transmitting data. The Defender security system program 
should help prevent unauthorized access to PHILANET and VOI.
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    \5\15 U.S.C. 78q-1(b)(3) (A) and (F) (1988).
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    PHILADEP has requested and the Commission finds good cause for 
approving the proposed rule change prior to the thirtieth day after the 
date of publication of notice of the filing. PHILADEP has informed the 
Commission that PHILANET and the VOI service have been operating 
satisfactorily during the pilot phase.\6\ The Defender system, which 
has been implemented and is already operating, appears to be an 
appropriate security measure for PHILADEP's data communication systems. 
In light of the above reasons for approving the proposal, the fact that 
PHILANET, VOI, and the Defender system have been operating 
satisfactorily for some time, and the fact that the Commission does not 
expect any adverse comments, the Commission believes it is appropriate 
to grant accelerated approval.
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    \6\Supra note 4.
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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, 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 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 PHILADEP. All submissions should refer to File No. 
SR-PHILADEP-93-02 and should be submitted by July 21, 1994.

V. Conclusion

    On the basis of the foregoing, the Commission finds that PHILADEP's 
proposed rule change is consistent with the Act and in particular with 
Section 17A of the Act.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (File No. SR-PHILADEP-93-02) be, 
and hereby is, approved.
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    \7\15 U.S.C. 78s(b)(2) (1988).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-15847 Filed 6-29-94; 8:45 am]
BILLING CODE 8010-01-M