[Federal Register Volume 62, Number 8 (Monday, January 13, 1997)]
[Notices]
[Pages 1790-1791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-689]
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SECURITIES AND EXCHANGE COMMISSION
[Release no. 34-38120; File No. SR-Philadep-96-22]
Self-Regulatory Organizations; Philadelphia Depository Trust
Company; Notice of Filing and Order Granting Accelerated Approval of a
Proposed Rule Change to Establish Family of Account Processing
Procedures
January 3, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 17, 1996, the
Philadelphia Depository Trust Company (``Philadep'') filed with the
Securities and Exchange Commission (``Commission'') that proposed rule
change (File No. SR-Philadep-96-22) as described in Items I and II
below, which items have been prepared primarily by Philadep. On
December 31, 1996, Philadep filed an amendment to the proposed rule
change to make certain technical corrections.\2\ The Commission is
publishing this notice and order to solicit comments from interested
persons and to grant accelerated approval of the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ Letter from J. Keith Kessel, Compliance Officer, Philadep
(December 31, 1996).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of the proposed rule change is to establish an
automated family of accounts risk review for omnibus settlement
accounts.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
It its filing with the Commission, Philadep included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the propose rule change. The text
of these statements may be examined at the places specified in Item IV
below. Philadep has prepared summaries, set forth in sections (A), (B),
and (C) below, of the most significant aspects of such statements.\3\
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\3\ The Commission has modified the text of the summaries
submitted by Philadep.
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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 establish an
automated family of accounts risk review for settlement activity in
omnibus accounts. Philadep currently monitors individual subaccount
activity underlying omnibus settling accounts and applies its risk
management controls (i.e., collateral monitor and net debit caps) to
such subaccounts in a manual fashion.\4\ Philadep proposes to automate
its risk management procedures in this area by incorporating an
automated family of accounts risk monitoring system. In accordance with
this proposal, Philadep will apply this family of accounts system to
its only omnibus account (Canadian Depository for Securities) and to
any future omnibus accounts.
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\4\ For a description of Philadep's risk management controls for
its same-day funds settlement (``SDFS'') system, refer to Securities
Exchange Act Release no. 36876 (February 22, 1996), 61 FR 7841 [SR-
Philadep-95-08] (order granting partial temporary approval and
partial permanent approval of a proposed rule change to convert the
settlement system to a same-day funds settlement systems).
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The family of accounts risk monitoring system will group together
the activity of subaccounts which underlie a participant's omnibus
settlement account. The delivery and receive activity of individual
subaccounts will be reviewed in connection with the omnibus account's
aggregate net debit cap and collateral monitor. For each receive or
delivery transaction, the system will update the omnibus account's
settlement balance and will automatically calculate the net debit
impact and the collateral monitor impact that the receive and/or
delivery have on a group basis. In this regard, it a subaccount's
receive or delivery, adjusted for the appropriate haircut and added or
subtracted to or from the omnibus account's collateral monitor, results
in the omnibus account's collateral monitor being less than the omnibus
account's accumulated net debit amount, the receive or delivery will
pend. As the settlement balance changes as a result of other activity,
the system will continuously determine whether pending items may be
processed. Receives and deliveries that are still pending by the
settlement cutoff time will be dropped from the system.
Philadep believes the proposed rule change is consistent with
Section 17A of the Act and the rules and regulations thereunder because
the proposal will promote the prompt and accurate clearance and
settlement of securities transactions and will assure the safeguarding
securities and funds which are in the custody or control of Philadep or
for which it is responsible.
(B) Self-Regulatory Organization's Statement on Burden on Competition
Philadep does not believe that the proposed rule change will impose
any inappropriate burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received from Members, Participants, or Others
No written comments relating to the proposed rule change have been
solicited or received. Philadep will notify the Commission of any
written comments received by Philadep.
[[Page 1791]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Section 17A(b) (3) (F) of the Act \5\ 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 which are in the custody or
control of the clearing agency or for which it is responsible. The
Commission believes that Philadep's proposal relating to its family of
accounts risk monitoring procedures are consistent with Philadep's
obligations under Section 17A(b) (3) (F) because the proposed rule
change will establish an automated risk review system to ensure that
risk management controls are properly applied to transactions in
omnibus accounts. Additionally, the Commission believes the proposal is
consistent with Philadep's obligations under Section 17A(b) (3) (F) to
promote the prompt and accurate clearance and settlement of securities
transactions because the proposed rule change will automate a risk
review procedure which is currently performed manually, therefore,
improving the efficiency of Philadep's SDFS system.
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\5\ 15 U.S.C. 78q-1(b) (3) (F).
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Philadep 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 approving the proposed rule change prior to the thirtieth day
after the date of publication of notice of filing because the proposed
rule change will allow Philadep to immediately implement the family of
account risk monitoring procedures. The Commission believes that the
automation of Philadep's manual risk review procedures for omnibus
accounts will reduce the risk of human error and will increase the
efficiency of Philadep's SDFS system with respect to omnibus
accounts.\6\
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\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 (January 3,
1997).
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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, N.W., 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. 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 filing will also be available for inspection
and copying at the principal office of Philadep. All submissions should
refer to the file number SR-Philadep-96-22 and should be submitted by
February 3, 1997.
It is therefore ordered, pursuant to Section 19(b) (2) of the Act,
that the proposed rule change (File No. SR-Philadep-96-22) 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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-689 Filed 1-10-97; 8:45 am]
BILLING CODE 8010-01-M