[Federal Register Volume 60, Number 103 (Tuesday, May 30, 1995)]
[Notices]
[Pages 28192-28193]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13074]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35739; File No. SR-PHILADEP-95-02]


Self-Regulatory Organizations; Philadelphia Depository Trust 
Company; Notice of Filing and Order Granting Accelerated Approval of A 
Proposed Rule Change to Modify the Philadelphia Depository Trust 
Company's Interface With The Depository Trust Company's Institutional 
Delivery System

May 19, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 24, 1995, the 
Philadelphia Depository Trust Company (``PHILADEP'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change (File No. SR-PHILADEP-95-02) as described in Items I and II 
below, which Items have been prepared primarily by PHILADEP. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons and to grant accelerated 
approval of the proposed rule change.

    \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

    PHILADEP proposes to modify its interface with The Depository Trust 
Company's (``DTC'') Institutional Delivery (``ID'') system to provide 
PHILADEP participants with the ability to send and receive trade 
confirmations and affirmations on an interactive basis and to provide 
participants greater control over certain risks resulting from 
incorrectly inputted trade data.\2\ PHILADEP also proposes to modify 
the interface to facilitate the interactive transmission of certain 
trade reports between DTC and PHILADEP.

    \2\ Some participants may continue to transmit to PHILADEP in 
batch mode; however, PHILADEP will process interactively with DTC.
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II. Self-Regulatory Organization's Statements 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 the 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, as set forth in 
sections (A), (B), and (C) below, of the most significant aspects of 
these statements.\3\

    \3\ The Commission has modified the text of the summaries 
submitted by PHILADEP.
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A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

    DTC's ID system allows the parties involved in an institutional 
trade (e.g., broker-dealer, institution, and custodian bank) to 
confirm, affirm, and settle the trade. The confirmation and affirmation 
process helps to reduce the circumstances where trades will not settle 
because a party ``does not know'' (``DKs'') the trade. PHILADEP has 
been operating an interface with DTC for the settlement of 
institutional trades for several years, and its interface with DTC's ID 
system provides PHILADEP participants a single channel to 
electronically coordinate all post-trade activity among broker-dealers, 
institutions, and custodians from trade confirmation through final 
settlement. DTC recently implemented enhancements to its ID system to 
provide users with the capability of accomplishing all ID system 
processing on an interactive basis throughout a business day while also 
providing participants with the option to continue transmissions in 
batch mode.\4\

    \4\ For a description of DTC's enhancements to its ID system to 
provide for interactive processing capabilities, refer to Securities 
Exchange Act Release No. 34199 (June 10, 1994), 59 FR 31660 [File 
No. SR-DTC-94-04] (granting accelerated approval of a proposed rule 
change).
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    The purpose of PHILADEP's proposed rule change is to modify its 
interface with DTC's ID system to provide PHILADEP participants with 
the ability to send and receive trade confirmations and affirmations on 
an interactive basis and to provide participants greater control over 
certain risks resulting from incorrectly inputted trade data. When 
entering trade data into the ID system, PHILADEP broker-dealer 
participants will have to assign and enter a unique broker-dealer 
confirm number corresponding to each ID trade that the broker-dealer 
submits. The ID system will not accept duplicate broker-dealer confirm 
numbers, and it will reject the trade if (i) the PHILADEP participant 
omits the confirmation number or (ii) the confirmation number matches 
an existing ID trade. ID system users that are participants of both DTC 
and PHILADEP will continue to have the ability to initially submit the 
trade details to PHILADEP and to affirm directly with DTC or with 
PHILADEP.
    PHILADEP participants also will be required to comply with the 
modified procedures for cancelling a trade previously entered into the 
ID system. The ID system does not allow participants to ``back-out'' a 
trade; therefore, participants must cancel it by providing the 
confirmation number of the existing ID trade being cancelled and by 
entering the appropriate reason code for cancelling the trade. PHILADEP 
participants can no longer enter a numerical value of all nines in the 
``Other Charges'' data field to signify a trade cancellation.
    Finally, PHILADEP also proposes to modify the interface to 
facilitate the interactive transmission of certain trade reports 
between DTC and PHILADEP. PHILADEP will be able to receive reports of 
affirmed and unaffirmed trades as often as needed from DTC and will 
provide such reports to its participants.
    PHILADEP believes the proposed rule change is consistent with 
Section 17A of the Act and the rules and regulations thereunder because 
modifying PHILADEP's interface with DTC's ID system to allow for the 
interactive receipt and delivery of trade confirmations and 
affirmations and for [[Page 28193]] the interactive receipt and 
distribution of certain trade reports will facilitate the prompt and 
accurate clearance and settlement of securities transactions.

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

    PHILADEP does not believe that the proposed rule change will impact 
or impose a burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    No written comments have been solicited or received. PHILADEP will 
notify the Commission of any written comments received.

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

    Section 17A(b)(3)(F) \5\ of the Act requires the rules of a 
clearing agency be designed to foster cooperation and coordination with 
persons engaged in the clearance and settlement of securities 
transactions and to provide for the prompt and accurate clearance and 
settlement of securities transactions. The Commission believes that 
PHILADEP's proposal to modify its interface with DTC's ID System to 
enable interactive communication should help cooperation and 
coordination among PHILADEP and DTC and the parties involved in 
institutional trades. The Commission further believes that the proposed 
interactive capability is consistent with PHILADEP's obligation to 
provide for the prompt and accurate clearance and settlement of 
securities transactions because it should help PHILADEP participants to 
settle institutional trades in a T+3 settlement cycle, which will be 
the standard settlement time for most broker dealer trades beginning 
June 7, 1995.\6\ Currently, institutional trades settle on a T+5 cycle.

    \5\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
    \6\ For a detailed description and discussion of the conversion 
to a three business day settlement cycle, refer to Securities 
Exchange Act Release Nos. 33023 (October 13, 1993) 58 FR 52891 [File 
No. S7-5-93] (adoption of Commission Rule 15c6-1) and 34952 
(November 9, 1994), 59 FR 59137 (changing effective date from June 
1, 1995, to June 7, 1995).
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    PHILADEP has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after the 
date of publication of notice of the filing. The Commission finds good 
cause for so approving the proposed rule change because timely 
settlement of institutional trades is critical to the successful 
conversion to T+3 and accelerated approval of the proposed rule change 
will allow PHILADEP participants to utilize and become familiar with 
the interactive capabilities available through PHILADEP's modified 
interface with DTC's ID system prior to the implementation of T+3 
settlement.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making such 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 filings will also be available for 
inspection and copying at the principal office of PHILADEP. All 
submissions should refer to File No. SR-PHILADEP-95-02 and should be 
submitted by June 20, 1995.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-PHILADEP-95-02) be, and 
hereby is, approved.

    For the Commission by the Division of Market Regulation pursuant 
to delegated authority.\7\

    \7\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-13074 Filed 5-26-95; 8:45 am]
BILLING CODE 8010-01-M