[Federal Register Volume 62, Number 4 (Tuesday, January 7, 1997)]
[Notices]
[Pages 1015-1016]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-241]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38099; File Nos. SR-Philadep-96-20 and SR-SCCP-96-09]
Self-Regulatory Organizations; Philadelphia Depository Trust
Company and Stock Clearing Corporation of Philadelphia; Notice of
Filing and Order Granting Permanent Approval on an Accelerated Basis of
Proposed Rule Changes Concerning the Adoption of Article 8 of the New
York Uniform Commercial Code to Govern Certain Transactions
December 30, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on November 15, 1996, the
Philadelphia Depository Trust Company (``Philadep'') and the Stock
Clearing Corporation of Philadelphia (``SCCP'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
changes (File Nos. SR-Philadep-96-20 and SR-SCCP-96-09) as described in
Items I and II below, which Items have been prepared primarily by
Philadep and SCCP. The Commission is publishing this notice and order
to solicit comments from interested persons and to grant permanent
approval of the proposed rule changes on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organizations' Statement of the Terms of
Substance of the Proposed Rule Changes
Philadep and SCCP request permanent approval for their respective
adoption of Article 8 of the State of New York's Uniform Commercial
Code (``UCC'') to govern certain transactions involving Philadep, SCCP,
their participants, and pledgees. On June 28, 1996, the Commission
temporarily approved through December 31, 1996, Philadep's and SCCP's
adoption of New York's U.C.C. Article 8.\2\
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\2\ Securities Exchange Act Release Nos. 36781 (January 26,
1996), 61 FR 3958 [Files Nos. SR-SCCP-96-01 and SR-Philadep-96-01]
and 37382 (June 28, 1996), 61 FR 35291 [File Nos. SR-Philadep-96-08
and SR-SCCP-96-04] (orders granting accelerated approval on a
temporary basis of proposed rule changes to provide for the
application of Article 8 of the New York UCC).
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II. Self-Regulatory Organizations' Statements of the Purpose of,
and Statutory Basis for, the Proposed Rule Changes
In their filings with the Commission, Philadep and SCCP included
statements concerning the purpose of and the basis for the proposed
rule changes and discussed any comments received on the proposed rule
changes. The text of these statements may be examined at the places
specified in Item IV below. Philadep and SCCP have prepared summaries,
as set forth in sections (A), (B), and (C) below, of the most
significant aspects of these statements.
(A) Self-Regulatory Organizations' Statements of the Purpose of, and
the Statutory Basis for, the Proposed Rule Changes
Philadep and SCCP propose to permanently adopt Rule 32 and Rule 41,
respectively, and to permanently amend Rule 1 of their rules. The
proposed rule change codifies Philadep's and SCCP's decision to elect
Article 8 of the New York UCC to govern certain transactions for the
purpose of providing a uniform, consistent, and predictable body of
law. Specifically, Rule 32 and Rule 41 will assure that the rights and
obligations of Philadep and SCCP, their participants, and their
pledgees with respect to transfers and pledges of securities, to the
extent Article 8 of the UCC applies thereto, will be governed by and
construed in accordance with Article 8 of the UCC of New York in effect
from
[[Page 1016]]
time to time. Rule 1 will define the term ``security'' by citing the
definition of security in Article 8 of New York's UCC.
Philadep and SCCP note that uncertainty exists as to whether New
York law or Pennsylvania law applies to particular transfers and as to
whether some transfers within Philadep's or SCCP's systems may be
governed by Pennsylvania's UCC Article 8 while other transaction within
such systems may be governed by New York's UCC Article 8. With so many
of the transactions for which Philadep and SCCP provide depository,
clearance, and settlement services potentially being affected [e.g.,
those transactions effected through interface with broker-dealers,
banks, and other institutions which are participants in The Depository
Trust Company (``DTC'') and National Securities Clearing Corporation
(``NSCC'')], it is problematic that different rules of law under
Article 8 of the UCC may govern the rights and obligations of parties
to such transfers. Therefore, Philadep and SCCP have chosen to elect
the application of New York's UCC Article 8 rather than Pennsylvania's
UCC Article 8. The choice of New York law also assures that DTC, NSCC,
and their respective participants and pledgees will find harmonious
commercial code provisions governing their extensive dealings with
Philadep and SCCP, their participants, and pledgees in this area as the
New York based groups already are subject to New York law.
Philadep and SCCP state that they believe the proposed rule changes
are consistent with Section 17A of the Act and the rules and
regulations thereunder because the rules are designed to promote the
prompt and accurate clearance and settlement of securities
transactions, 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, to foster cooperation and coordination with persons
engaged in the clearance and settlement of securities, to remove
impediments to and perfect the mechanism of a national market system
for the prompt and accurate clearance and settlement of securities
transactions, and, in general, to protect investors and the public
interest.
(B) Self-Regulatory Organizations' Statements on Burden on Competition
Philadep and SCCP do not believe that the proposed rule changes
will impact or impose a burden on competition.
(C) Self-Regulatory Organizations' Statements on Comments on the
Proposed Rule Changes Received From Members, Participants or Others
No written comments have been solicited or received.
III. Date of Effectiveness of the Proposed Rule Changes and Timing
for Commission Action
Section 17A(b)(3)(F) of the Act \3\ requires the rules of a
clearing agency be designed to foster cooperation and coordination with
persons engaged in the clearance and settlement of securities. As
stated in previous orders,\4\ the Commission believes the proposed rule
changes are consistent with this requirement because the adoption of
Article 8 of the New York UCC should help provide certainty with
respect to the substantive rights and obligations under UCC Article 8
that are applicable to Philadep and SCCP and their participants
particularly with respect to transactions with broker-dealers, banks,
and other institutions that are participants of other foreign or
domestic clearing entities.
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\3\ 15 U.S.C. 78q-1(b)(3)(F).
\4\ Securities Exchange Act Release Nos. 36781 and 37382, supra
note 2.
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Philadep and SCCP have 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. Currently, the
Canadian Depository for Securities (``CDS'') acts as a corresponding
depository for Philadep and is a participant of SCCP so that
transactions in certain Canadian and U.S. brokers-dealers can be
cleared and settled through the facilities of Philadep and SCCP.\5\
According the Philadep and SCCP, their arrangement with CDS is possible
because Article 8 of New York's UCC, unlike Article 8 of Pennsylvania's
UCC, provides for book-entry transfers of securities when the
certificated security is in the custody of certain foreign clearing
organizations. Therefore, to enable Philadep and SCCP to continue to
provide without any disruption clearance, settlement, and depository
services for certain securities transactions between U.S. broker-
dealers and Canadian broker-dealers, the Commission finds good cause
for so approving the proposed rule change prior to the thirtieth day
after the date of publication of the notice of the filing.\6\ The
Commission also notes that during the previous temporary approval
periods neither SCCP, Philadep, nor the Commission have received any
adverse comments regarding the adoption of Article 8 of the New York
UCC.
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\5\ For a complete description of the clearance and settlement
activities among CDS, Philadep, and SCCP, refer to Securities
Exchange Act Release No. 37918 (November 8, 1996), 61 FR 57938 [File
No. SR-Philadep-96-17] (order granting accelerated approval on a
temporary basis of a proposed rule change to appoint CDS as a
correspondent depository).
\6\ The staff of the Board of Governors of the Federal Reserve
System has concurred with the Commission's granting of accelerated
approval. Telephone conversation between John Rudolph, Board of
Governors of the Federal Reserve System, and Chris Concannon, Staff
Attorney, Division of Market Regulation, Commission (December 30,
1996).
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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. Sec. 552 will be available for inspection and copying in
the Commission's Public Reference Room, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filings will also be available for
inspection and copying at the principal offices of Philadep and SCCP.
All submissions should refer to File Nos. SR-Philadep-96-20 SR-SCCP-96-
09 and should be submitted by January 28, 1997.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule changes (File Nos. SR-Philadep-96-20 and SR-
SCCP-96-09) be, and hereby are, approved on an accelerated basis.
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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-241 Filed 1-6-97; 8:45 am]
BILLING CODE 8010-01-M