[Federal Register Volume 60, Number 157 (Tuesday, August 15, 1995)]
[Notices]
[Pages 42202-42203]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20153]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36075; File No. SR-PTC-95-05]


Self-Regulatory Organizations; Participants Trust Company; Notice 
of Filing and Order Granting Accelerated Approval of Proposed Rule 
Change Establishing a New Category for Participant Eligibility

August 9, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 1, 1995, the 
Participants Trust Company (``PTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-PTC-95-05) as described in Items I and II below, which Items have 
been prepared primarily by PTC. The Commission is publishing this 
notice and order to solicit comments from interested persons and to 
grant accelerated approval of the proposed rule change.

    \1\ 15 U.S.C. Sec. 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 establishes a new category for participant 
eligibility for federally chartered corporations engaged in the 
purchase and/or securitization of mortgage-related assets.

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

    In its filing with the Commission, PTC 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. Summaries of the most significant aspects of such 
statements are set forth in sections A, B, and C below.\2\

    \2\ The Commission has modified the text of the summaries 
prepared by PTC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

Background
    PTC was established as a depository to facilitate the prompt and 
accurate clearance and settlement of transactions in mortgage-backed 
securities. Participation criteria was established in accordance with 
the requirements of the Act and to allow appropriate eligible 
institutions to become participants. Article IV, Rule 1, Section 1 of 
PTC's rules lists the entities that are eligible to become participants 
and includes ``firms in such other categories as the Corporation [PTC] 
from time to time may determine.'' These entities must satisfy the 
financial criteria set forth in Article IV, Rule 1, Section 3 which 
states that entities in categories established by PTC ``shall maintain 
equity capital or regulatory capital in at least equivalent amounts * * 
*'' as other established categories of participants.
Proposed Category of Eligibility
    The Federal National Mortgage Association (``FNMA'') is currently a 
limited purpose participant and holds a face amount of $100 billion of 
securities in its limited purpose account at PTC. A limited purpose 
participant, however, cannot receive deliveries against payment through 
PTC. FNMA therefore has sought to become a full purpose participant in 
PTC.
    To facilitate the addition of FNMA and similar entities, such as 
the Federal Home Loan Mortgage Corporation (``FHLMC'') and the Federal 
Agricultural Mortgage Corporation (``Farmer Mac''), as full purpose 
participants, PTC is seeking to establish a new category of 
participants.\3\ The new category designation would be ``federally 
chartered corporations engaged in the purchase and/or securitization of 
mortgage-related assets.''

    \3\ FHLMC and Farmer Mac are not currently seeking to become 
full purpose participants in PTC.
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    PTC proposes that applicants in the new category be required to 
have equity capital of at least $100 million. This amount is equivalent 
to the most stringent equity and regulatory capital standards required 
by PTC in other established participant categories.\4\

    \4\ Article IV, Rule 1, Section 3 of PTC's rules requires that 
bank applicants for full purpose participation shall maintain equity 
capital, determined in accordance with generally acceptable 
accounting principles, of at least $100 million.
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    PTC believes that the proposed rule change is consistent with 
Section 17A(b)(3)(F) of the Act \5\ and the rules and regulations 
thereunder in that it 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 PTC is 
responsible.

    \5\ 15 U.S.C. Sec. 78q-1(b)(3)(F) (1988).
B. Self-Regulatory Organization's Statement on Burden on Competition

    PTC does not believe that the proposed rule change imposes 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 this proposed 
rule change.

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

    Section 17A(b)(3)(F) of the Act \6\ requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions and to assure the 
safeguarding of securities and funds in the custody or control of the 
clearing agency or for which it is responsible. The Commission believes 
that the addition of FNMA and similar entities as full purpose 
participants is consistent with these obligations. As full purpose 
participants these entities will be able to receive deliveries against 
payment through PTC, which as limited purpose participants they cannot 
do. This should allow entities such as FNMA and other federally 
chartered corporations whose transactions represent a substantial 
portion of the mortgage-backed securities market to conduct their 
purchase and 

[[Page 42203]]
securitization processes more efficiently.

    \6\ 15 U.S.C. Sec. 78q-1(b)(3)(F) (1988).
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    In addition, applicants in the new category must satisfy financial 
criteria equivalent to the most stringent equity and regulatory capital 
standards required by PTC in other established participant categories. 
By requiring substantial capitalization, PTC protects itself and other 
participants from additional risk.
    PTC 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 such good 
cause because FNMA and other similar entities are substantially similar 
to other PTC full purpose participants. They are financial institutions 
engaged in activities which are similar or comparable to the activities 
of other participants. Because FNMA and similar entities are 
institutions whose transactions represent a substantial portion of the 
mortgage-backed securities market, it is in the public interest to 
provide the most efficient method of processing for these products as 
expediently as possible. The staff of the Board of Governors of the 
Federal Reserve System has concurred with the Commission's granting of 
accelerated approval.\7\

    \7\ Telephone conversation between William R. Stanley, Board of 
Governors of the Federal Reserve System, and Ari Burstein, Division 
of market Regulation, Commission (August 7, 1995).
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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 with the provisions 
of 5 U.S.C. Sec. 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-95-05 and should be submitted by 
September 5, 1995.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-PTC-95-05) be and hereby is 
approved on an accelerated basis.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\

    \8\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-20153 Filed 8-14-95; 8:45 am]
BILLING CODE 8010-01-M