[Federal Register Volume 61, Number 40 (Wednesday, February 28, 1996)]
[Notices]
[Pages 7570-7571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4450]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36868; File No. SR-PCC-96-01]


Self-Regulatory Organizations; Pacific Clearing Corporation; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change Amending Certain Provisions of the Pacific Clearing 
Corporation Rules and Participant Agreement

February 21, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(Act),\1\ notice is hereby given that on February 14, 1996, the Pacific 
Clearing Corporation (``PCC'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change (File No. SR-PCC-
96-01) as described in Items I and II below, which Items have been 
prepared primarily by PCC. 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. 78s(b)(1) (1988).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    PCC proposes certain amendments to its rules and Participants 
Agreement to accommodate the securities industry's conversion to same-
day funds \2\ settlement (``SDFS'') scheduled for February 22, 1996. 
The proposal also seeks to make technical clarifications to certain of 
its rules unrelated to the conversion to SDFS.

    \2\ The term ``same-day funds'' refers to payment in funds that 
are immediately available and generally are transferred by 
electronic means.
---------------------------------------------------------------------------

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

    In its filing with the Commission, PCC included statements 
concerning the purpose of and basis for the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. PCC has prepared summaries, set forth in Section (A), 
(B), and (C) below, of the most significant aspects of such 
statements.\3\

    \3\ The Commission has modified the text of the summaries 
submitted by PCC.
---------------------------------------------------------------------------

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    On February 22, 1996, the securities industry is scheduled to 
convert money settlement of securities transactions (i.e., corporate 
and municipal securities) and principal and interest payments from 
next-day funds \4\ settlement (``NDFS'') to SDFS. In the SDFS 
environment, the daily trade settlement amounts must be paid in same-
day funds rather than next-day funds as is currently the standard. The 
conversion will affect payments for settlements among clearing 
corporations (e.g., PCC), depositories, and financial intermediaries 
and between financial intermediaries and their institutional clients. 
The conversion will not affect payments to and from retail investors.

    \4\ The term ``next-day funds'' refers to payment by means of 
certified checks passing between the clearing corporation and its 
members.
---------------------------------------------------------------------------

    The amendments to PCC Rules 2.2(d) and 3.4(e) are designed to 
ensure that PCC can effect daily money settlement with specialist firms 
and the National Securities Clearing Corporation (``NSCC'') in a timely 
manner. Specifically, Rule 2.2, governing the financial responsibility 
and operational capability of PCC members, is being amended to provide 
that PCC may collect additional deposits from members to assure 
adequate financial responsibility or operational capability. Rule 3.4, 
governing settlement of member accounts, is being amended to require 
that members provide funds to PCC for settlement in a manner and form 
acceptable to PCC. Rule 7.4 is also being amended to require, at PCC's 
discretion, that a portion of the funds shall be held in a form 
directly accessible by PCC. The proposal makes similar changes to PCC's 
participants agreement.\5\ The changes will allow PCC to modify its 
cash management system to minimize wire transfers between PCC and firm 
bank accounts.

    \5\ The amendments to the Participants agreement are to 
paragraphs 3.1(c)(ii) and (iii) regarding cashiering services, 
3.1(e)(i) and (ii) regarding back office services, and 4.6 regarding 
obligations of participants.
---------------------------------------------------------------------------

    The amendments to PCC Rule 2.1(b), governing membership, and to 
Rules 7.4 and 7.5(c)(i), governing the clearing fund, are 
clarifications of language and do not change the substance of these 
rules.\6\ The changes are not related to the conversion to SDFS.

    \6\ The specific changes being made to these rules are attached 
to PCC's proposed rule change as Exhibit A, which is available in 
the Commission's Public Reference Room or through PCC.
---------------------------------------------------------------------------

    PCC believes the proposed rule change is consistent with Section 

[[Page 7571]]
    17A(b)(3) because it is designed to promote the prompt and accurate 
clearance and settlement of securities transactions.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    PCC does not believe the proposed rule changes will 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 comments were received from members.

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

    Section 17A(b)(3)(F) of the Act \7\ requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions and to foster 
cooperation and coordination with persons engaged in the clearance and 
settlement of securities transactions. The Commission believes PCC's 
proposed rule change is consistent with PCC's obligations under Section 
17A(b)(3)(F) because the proposed rule change should facilitate PCC's 
conversion entirely to an SDFS system by including provisions in PCC's 
rules to enable PCC to settle with its participants and NSCC in same 
day funds. The amended rules and Participants Agreement should provide 
PCC with prompt receipt of or access to members' funds, which will be 
necessary to settle in a timely manner in an SDFS environment. The 
overall conversion to an SDFS system should help reduce systemic risk 
by, among other things, eliminating overnight credit risk. The SDFS 
system also should reduce risk by achieving closer conformity with the 
payment methods used in the derivatives markets, government securities 
markets, and other markets.

    \7\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
---------------------------------------------------------------------------

    PCC 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 filing. The Commission finds good cause for so 
approving the proposed rule change because the proposed rule change 
modifies PCC's rules in anticipation of PCC's and the securities 
industry's conversion to an SDFS system on February 22, 1996. 
Accelerated approval of the proposal will allow PCC to effect the 
conversion and to implement the safeguards provided under the rules and 
amended Participants Agreement.

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 changes 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. 522, will be available for inspection and 
copying in the Commission's Public Reference Room, 450 Fifth Street, 
NW., Washington, DC. Copies of such filing will also be available for 
inspection and copying at the principal office of PCC. All submissions 
should refer to SR-PCC-96-01 and should be submitted by March 20, 1996.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File Nos. SR-PCC-96-01) be, and hereby 
is, approved.

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

    \8\ 17 CFR 200.30-3(a)(12) (1995).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-4450 Filed 2-27-96; 8:45 am]
BILLING CODE 8010-01-M