[Federal Register Volume 61, Number 134 (Thursday, July 11, 1996)]
[Notices]
[Pages 36601-36602]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17633]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37402; File No. SR-PTC-96-03]


Self-Regulatory Organizations; The Participants Trust Company; 
Notice of Filing of Proposed Rule Change Relating to the Intraday 
Return of Participants' Prefunding Payments

July 2, 1996.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 3, 1996, the 
Participants Trust Company (``PTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-PTC-96-03) as described in Items I, II, and III below, which Items 
have been prepared primarily by PTC. 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 amend Article V, Rule 2, Section 5 of 
PTC's rules and will establish initial procedures to permit the 
intraday return of participants' prefunding payments.

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. PTC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of such 
statements.\2\
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    \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 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to amend Article V, Rule 
2, Section 5 of PTC's rules and to establish initial procedures to 
enable PTC to implement a program to permit the intraday return of 
participants' prefunding payments received early in the day that are no 
longer needed to support transaction processing at PTC. Currently, 
prefunding must be applied to that day's settlement or withdrawn on the 
next business day or thereafter. The proposed program is intended to 
make these funds available to participants intraday to enable them to 
reduce daylight overdraft exposures or to ease liquidity pressures in 
other financial markets thereby promoting the more efficient 
functioning of the financial markets in general.
    ``Optional deposits,'' which include prefunding, are defined in 
PTC's rules as ``a participant's voluntary deposits to the participants 
fund with respect to any master account pursuant to Section 3 of Rule 2 
of Article V.'' Article V, Rule 2, Section 3 states that participants 
may elect or be required to make optional deposits to the participants 
fund to (i) provide supplemental processing collateral to increase a 
participant's net free equity (``NFE''); (ii) prefund a debit balance 
in a participant's account; or (iii) permit free retransfers of 
securities from a transfer account.
    PTC believes that the return to its participants of prefunding 
payments which are no longer needed to support transaction processing 
will increase the amount of funds available to participants during the 
day. PTC also believes that by providing its participants with the 
opportunity to manage their overall funding requirements, participant 
liquidity will be enhanced and costs will be reduced.
    In many circumstances, the amounts returned to participants under 
the proposed program could be required to fund PTC net debits later in 
the day. Participants will be required to make such payments to PTC 
which otherwise could have been covered by the prefunding payments. 
However, PTC believes that the benefits derived from providing 
participants with increased intraday liquidity outweigh PTC's advantage 
in retaining the prefunding after the situation requiring such deposit 
has been remedied.
    PTC proposes to implement the intraday return of prefunding 
payments to participants as a pilot program with initial procedures 
that will be incorporated into PTC's Participant's Operating Guide upon 
approval of the proposed rule change.\3\ The initial procedures will 
provide that (i) all prefunding return transactions will be subject to 
PTC's standard credit controls (i.e., prefunding may be returned only 
if the participant will be within its NFE and net debit monitoring 
level

[[Page 36602]]

requirements after such prefunding is returned); (ii) only prefunding 
payments received by PTC between 8:30 a.m. and 11:00 a.m. E.S.T. will 
be eligible for intraday return; (iii) during the initial stage of the 
pilot program, only eighty percent of qualifying prefunding payments 
will be eligible for intraday return to minimize the risk that 
subsequent transactions will fail PTC's credit controls later in the 
processing day; (iv) participants will be allowed only one intraday 
return per day; (v) the minimum amount eligible for intraday return is 
$10 million; and (vi) all intraday returns are expected to be made by 
PTC between 11:00 a.m. and 12:00 p.m. E.S.T.
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    \3\ Upon implementation of the program, PTC plans to evaluate 
the initial procedures on a quarterly basis and will make changes to 
such procedures as necessary based upon PTC's experience with the 
program. PTC will be required to file with the Commission a proposed 
rule change prior to any change or modification of the initial 
procedures.
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    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 because it will facilitate the prompt and accurate clearance 
and 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 Statement on Burden on Competition

    PTC does not perceive 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 not solicited and does not intent to solicit comments on 
the proposed rule change. PTC has not received any unsolicited written 
comments from its participants or other interested parties.

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 PTC 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 submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549. 
Copies of the submissions, 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 Room, 450 Fifth Street, N.W., 
Washington, D.C. 20549. Copies of such filings will also be available 
for inspection and copying at the principal office of PTC. All 
submissions should refer to the file number. SR-PTC-96-03 and should be 
submitted by August 1, 1996.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12) (1995).
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Jonathan G. Katz,
Secretary.
[FR Doc. 96-17633 Filed 7-10-96; 8:45 am]
BILLING CODE 8010-01-M