[Federal Register Volume 61, Number 155 (Friday, August 9, 1996)]
[Notices]
[Pages 41677-41678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20312]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37515; File No. SR-PTC-96-03]


Self-Regulatory Organizations; Participants Trust Company; Order 
Granting Accelerated Approval of a Proposed Rule Change Relating to the 
Intraday Return of Participants' Prefunding Payments

August 2, 1996.
    On June 3, 1996, Participants Trust Company (``PTC'') filed with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change (File No. SR-PTC-96-03) pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ to permit the intraday 
return of prefunding payments to participants. Notice of the proposal 
was published in the Federal Register on July 7, 1996.\2\ No comment 
letters were received. For the reasons discussed below, the Commission 
is granting accelerated approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1) (1988).
    \2\ Securities Exchange Act Release No. 37402 (July 2, 1996), 61 
FR 36601.
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I. Description

    The rule change amends Article V, Rule 2, Section 5 of PTC's rules 
and establishes initial procedures to enable PTC to make intraday 
returns of participants' prefunding payments. Only prefunding payments 
which are received early in the day and which are no longer needed to 
support transaction processing at PTC will be eligible for intraday 
return. Previously, prefunding payments were applied to that day's 
settlement or withdrawn on the next business day or thereafter.\3\ The 
rule change is to allow PTC to make these funds available to 
participants on the same day they are deposited with PTC in order that 
the depositing participants may use the funds to reduce daylight 
overdraft exposures or to ease liquidity pressures in other financial 
markets.
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    \3\ ``Optional deposits,'' which include prefunding payments, 
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.
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    PTC will implement the intraday return of prefunding payments to 
participants with initial procedures to be incorporated into PTC's 
Participant's Operating Guide.\4\ The initial procedures will provide 
that (i) all prefunding return transactions will be subject to PTC's 
standard credit controls (i.e., a prefunding payment may be returned 
only if a participant will be within its NFE and net debit monitoring 
level requirements after such prefunding payment 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;\5\ (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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    \4\ 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.
    \5\ This limitation is to minimize the risk that subsequent 
transactions will fail PTC's credit controls.
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II. Discussion

    Section 17A(b)(3)(F) \6\ of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in the custody or control of the clearing agency or 
for which it is responsible. For the reasons set forth below, the 
Commission believes that PTC's proposed rule change is consistent with 
PTC's obligations under the Act.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
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    The return to participants of prefunding payments that are no 
longer needed to support transaction processing at PTC should enhance 
participants' liquidity during the day. Although the amounts returned 
to participants under the program could possibly be used to fund debits 
at PTC later in the day, the benefits derived from providing 
participants with increased intraday liquidity appear to outweigh PTC's 
interests in retaining the prefunding payments after situations 
necessitating such deposits have been remedied. PTC should be able to 
provide for the intraday return of prefunding payments while still 
assuring the safeguarding of securities and funds in its custody or 
control because PTC will not return any prefunding payments unless the 
requesting participant is in compliance with NFE and net debit 
monitoring level controls at the time the request is made.
    PTC has requested that the Commission find good cause for

[[Page 41678]]

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 accelerated 
approval will permit PTC participants to have the opportunity to obtain 
same-day value for prefunding payments no longer necessary to support 
transaction processing at PTC. This should be extremely beneficial in a 
same-day funds environment. Furthermore, the Commission has not 
received any comment letters and does not expect to receive any comment 
letters on the proposal.

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A of the Act and the rules and regulations 
thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-PTC-96-03) be and hereby is 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12) (1995).
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Jonathan G. Katz,
Secretary.
[FR Doc. 96-20312 Filed 8-8-96; 8:45 am]
BILLING CODE 8010-01-M