[Federal Register Volume 59, Number 151 (Monday, August 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19211]


[[Page Unknown]]

[Federal Register: August 8, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34472; File No. SR-PTC-94-04]

 

Self-Regulatory Organizations; Participants Trust Company; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change 
Designating Mortgage-Based Securities Guaranteed by the Federal Home 
Loan Mortgage Corporation as Depository Eligible Securities

August 1, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 15, 1994, the 
Participants Trust Company (``PTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-PTC-94-04) as described in Items I, II, and III below, which Items 
have been prepared primarily by the self-regulatory organization. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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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 proposed rule change allows PTC to designate mortgage-backed 
securities (``MBS'') guaranteed by the Federal Home Loan Mortgage 
Corporation (``FHLMC'') as depository eligible securities as permitted 
by Article I, Rule 2 of PTC's Rules.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
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. The self-regulatory organization 
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 Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    PTC currently acts as depository for single-class GNMA I and GNMA 
II MBS guaranteed by the Government National Mortgage Association 
(``GNMA'') and multiclass REMIC securities guaranteed by the Department 
of Veterans Affairs (``VA'') and GNMA.\2\ The proposed rule change now 
allows PTC to designate mortgage-backed securities guaranteed by FHLMC 
as depository eligible securities.
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    \2\As of July 1, 1994, PTC had approximately 271,000 pools of 
GNMA singe-class securities on deposit, representing $921 billion in 
original par value, and approximately $7 billion in par value of VA 
and GNMA REMIC securities.
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Background
    FHLMC is a federally chartered corporation under Title III of the 
Emergency Home Finance Act of 1970, as amended. Through its security 
programs, FHLMC guarantees the timely payment of interest and the 
ultimate payment of principal on FHLMC securities.\3\ FHLMC currently 
creates and guarantees mortgage-backed securities through several 
existing programs.
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    \3\The FHLMC guarantee is an obligation of FHLMC only and is not 
a debt or an obligation of the United States or any agency or 
instrumentality of the United States other than FHLMC.
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    The FHLMC multiclass securities to be issued will receive principal 
and interest and interest from the cash flows provided by GNMA 
guaranteed mortgage-backed securities, which will be held on deposit in 
limited purpose accounts at PTC. As is the case with the VA and GNMA 
REMICs currently on deposit at PTC, all classes of the FHLMC multiclass 
securities except the residual interests will be deposited in 
certificated form at PTC and will be maintained in book-entry form in 
PTC's book-entry system. It is anticipated that withdrawals of physical 
certificates will be prohibited. PTC's current custody agreement with 
Chemical Bank, its custodian, accommodates the deposit of the FHLMC 
multiclass securities without change.
PTC Processing of FHLMC Multiclass Securities
    PTC's current processing system accommodates the FHLMC multiclass 
securities, and no substantive changes to PTC's computer processing 
system are necessary for FHLMC multiclass securities transaction 
processing. While FHLMC has not yet determined the specific 
characteristics of the FHLMC multiclass securities tranches, for 
processing purposes it is anticipated that the FHLMC tranches will have 
the same basic processing requirements as the VA and GNMA REMICs.
    The volume of the FHLMC multiclass securities initially deposited 
at PTC will be modes compared to the total face amount of GNMA 
securities now on deposit at PTC and is expected to have a comparably 
small impact on PTC's overall transaction volume. GNMA MBS that 
collateralize the FHLMC multiclass securities will remain immobilized 
at PTC and therefore will be removed from PTC's transaction volume 
after the creation of the FHLMC multiclass securities. In addition, the 
FHLMC multiclass securities will have settlement days different from 
the PSA designated settlement days for GNMA Is and IIs that currently 
settle at PTC. Because PTC's computer installation and resources are 
geared to handle the peak transaction volumes that occur on the PSA 
designated GNMA settlement days, PTC will be able to process the FHLMC 
transaction volume on the FHLMC settlement days by utilizing its 
present resources. Also REMIC tranches historically have been less 
actively traded than single-class mortgage-backed securities. 
Accordingly, the FHLMC multiclass securities will initially have no 
meaningful impact on the capacity of PTC's transaction processing.
    It is expected that PTC will utilize the pricing sources and 
methodology employed for the VA and GNMA REMIC pricing for the FHLMC 
multiclass securities. PTC's end-of-day loan agreement also currently 
accommodates the pledge of the FHLMC multiclass securities as 
collateral to finance settlement without change.
Disbursement of Principal and Interest on FHLMC Multiclass Securities
    PTC will disburse the principal and interest on the GNMA securities 
to the limited purpose account holding the GNMA collateral on the GNMA 
disbursement day which is generally the 16th calendar day of the month. 
FHLMC or its agent then will be responsible for making payment of 
principal and interest on the FHLMC multiclass securities to PTC on the 
FHLMC security disbursement day which is generally the seventeenth 
calendar day of the month in immediately available funds early enough 
in the day to permit PTC to disburse principal and interest to the 
FHLMC security holders on the same day. PTC will not borrow to fund 
disbursement of principal and interest on the FHLMC multiclass 
securities. Accordingly, the disbursement of principal and interest on 
the FHLMC multiclass securities will have no meaningful impact on the 
current principal and interest disbursement facilities.
    PTC believes that the proposed rule change is consistent with 
Section 17A(b)(3)(F) of the Act,\4\ and the rules and regulations 
thereunder in that it is designed to promote the prompt and accurate 
settlement of securities transactions and to remove impediments to and 
perfect the mechanisms of a national system for the prompt and accurate 
settlement of securities transactions.
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    \4\15 U.S.C. 78q-1(b)(3)(F) (1988).
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(B) Self-Regulatory Organization's Statements on Burden on Competition

    PTC does not believe that the proposed rule change will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act.

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

    PTC has not solicited comments with respect to the propose rule 
change, and none have been received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act\5\ and subparagraph (e)(1) of Rule 19b-4\6\ 
thereunder because the proposed rule change constitutes a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the self-
regulatory organization. At any time within sixty days of the filing of 
such rule change, the Commission may summarily abrogate such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \5\15 U.S.C. 78s(b)(3)(A)(i) (1988).
    \6\17 CFR 240.19b-4(e)(1) (1993).
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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 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, N.W., 
Washington, D.C. 20549. Copies of such filing will also be available 
for inspection and copying at the principal office of PTC. All 
submissions should refer to File No. SR-PTC-94-04 and should be 
submitted by August 29, 1994.

    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) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-19211 Filed 8-5-94; 8:45 am]
BILLING CODE 8010-01-M