[Federal Register Volume 59, Number 203 (Friday, October 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26168]


[[Page Unknown]]

[Federal Register: October 21, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34846; File No. SR-PTC-94-05]

 

Self-Regulatory Organizations; Participants Trust Company; Notice 
of Filing of Proposed Rule Change Establishing Early Principal and 
Interest Distribution on Government National Mortgage Association II 
Securities

October 14, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 11, 1994, the 
Participants Trust Company (``PTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-PTC-94-05) 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 will establish early principal and 
interest (``P&I'') distribution on Government National Mortgage 
Association (``GNMA'') II securities.

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 the 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to extend the program 
for the early distribution of P&I to GNMA II P&I distributions. Under 
the proposal, all of the P&I on GNMA II securities will be distributed 
by PTC to its participants by Fedwire early in the day of distribution 
rather than by credit to the participants' cash balances payable at end 
of day settlement.\2\
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    \2\PTC's present program for the early distribution of P&I 
permits the distribution of up to 50% of P&I payable on GNMA I 
securities by intraday Fedwire transfer of funds on the distribution 
date, the 15th day of the month, with the balance distributed by 
credit to the participants' cash balances payable at end of day 
settlement. PTC intends to continue the intraday distribution of 
GNMA I P&I as currently constituted subject to its discretion to 
suspend the program if it is deemed necessary or advisable at any 
time in the future.
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Background
    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 the 
participant's applicable account cash balance. This resulted in the 
participant's receipt of 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 process. In November 1993, PTC's rules were amended to 
eliminate the requirement that P&I be disbursed by means of a credit to 
a participant's cash balance and to permit PTC to make payment of P&I 
either by intraday Fedwire transfer of immediately available funds or 
by means of a credit to the applicable cash balance, as PTC deems 
advisable from time to time.
    At that time, the Commission required PTC to limit intraday 
disbursement of P&I to the amount of collected and available P&I 
payments without recourse to funds available to PTC from other sources 
for P&I disbursement such as PTC's own funds, the cash portion of the 
mandatory deposits to the participant's fund, and borrowed funds 
secured by the P&I receipts.\3\ PTC then began a pilot program to 
distribute up to 50% of the P&I payable with respect to GNMA I 
securities subject to the requirement that the intraday distribution be 
made from collected and available GNMA I P&I only.
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    \3\Refer to Securities Exchange Act Release Nos. 33132 (November 
9, 1993), 58 FR 59501 and 33586 (April 12, 1994), 59 FR 59501.
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    PTC now seeks to expand its intraday P&I disbursement program to 
permit intraday disbursement of all GNMA II P&I to participants who 
elect to receive the intraday distribution subject to retaining 
discretion to suspend the program if it is deemed necessary or 
advisable in the future.
GNMA II P&I Proposal
    Currently, Chemical Bank as central paying and transfer agent for 
the GNMA II program credits PTC's account on Chemical Bank's books in 
the amount of the GNMA II payment. PTC transfers the funds via Fedwire 
transfer into PTC's account at the Federal Reserve Bank of New York on 
the GNMA II distribution date.\4\ PTC credits the GNMA II P&I to its 
participants' accounts at PTC on the day of receipt and disburses the 
payment in same-day funds net of any intraday account debits and 
credits as part of the end-of-day settlement. PTC does not use its 
uncommitted line of credit to fund the GNMA II P&I disbursement.\5\ 
Under the proposal, PTC anticipates passing-through all GNMA II P&I 
upon its receipt from Chemical Bank. This will result in the intraday 
disbursement of all payable GNMA II P&I by Fedwire transfer at or 
before approximately 12 noon to all participants who elect to receive 
it intraday.
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    \4\The GNMA II distribution date is generally the 20th day of 
the month. If the 19th day of the month is not a business day but 
the 20th day of the month is a business day, then the distribution 
date is the first business day after the 20th day of the month. If 
both the 19th and 20th days of the month are not business days, the 
first business day thereafter is the distribution date.
    \5\During the period from January 1994 through August 1994, the 
amount of the GNMA II monthly P&I has averaged just under $1 
billion. The largest monthly P&I amount was in April 1994 in the 
amount of $1.2 billion, and the lowest monthly P&I amount was in 
August 1994 in the amount of $800 million.
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    PTC believes that because the proposed rule change facilitates the 
prompt and accurate clearance and settlement of securities transactions 
and provides for the safeguarding of securities and funds in PTC's 
custody or control or for which it is responsible, it is consistent 
with Section 17A of the Act and the rules and regulations thereunder 
applicable to PTC.

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

    PTC does not believe that the proposed rule change will impose any 
burden on competition.

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

    PTC has neither solicited nor received comments on the proposed 
rule change.

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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (A) by order approve such proposed rule change or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 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 PTC. All submissions 
should refer to file number SR-PTC-94-05 and should be submitted by 
November 14, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-26168 Filed 10-20-94; 8:45 am]
BILLING CODE 8010-01-M