[Federal Register Volume 62, Number 124 (Friday, June 27, 1997)]
[Notices]
[Pages 34725-34726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16917]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38759; File No. SR-PTC-97-03]


Self-Regulatory Organizations; Participants Trust Company; Notice 
of Filing of a Proposed Rule Change Relating to a Change in the Cut-off 
Time for Intraday Return of Prefunding Payments

June 23, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 1, 1997, the 
Participants Trusts Company (``PTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-PTC-97-03) 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change extends from 11:00 a.m. to 1:00 p.m. the 
cut-off time for a participant to request that PTC return to them 
intraday their prefunding payments made to PTC earlier in the day.

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 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 extend from 11:00 
a.m. to 1:00 p.m. the cut-off time for a participant to request that 
PTC return to them intraday a portion of their prefunding payments made 
to PTC earlier in the day. Only prefunding payments which are no longer 
needed to support transaction processing are eligible for intraday 
return.
    In August 1996, PTC amended Article V, Rule 2, Section 5 of its 
rules to permit the intraday return of prefunding payments.\3\ Before 
the rule change, PTC's rule required that prefunding payments be 
applied to end-of-day settlement or be made available for withdrawal on 
the next business day or thereafter.
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    \3\ Securities Exchange Act Release No. 37515 (August 2, 1996), 
61 FR 41677.
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    On September 9, 1996, PTC implemented the intraday return of 
prefunding as a pilot program (``Program''). The procedures established 
for the Program included, among other things,\4\ that only prefunding 
payments received by PTC between 8:30 a.m. and 11:00 a.m. were eligible 
for early return and that PTC expected to make all returns between 
11:00 a.m. and 12:00 p.m. These initial procedures were incorporated in 
PTC's Participant Operating Guide.
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    \4\ The Program's procedures also included the following: (1) 
all prefunding return transactions are subject to PTC's standard 
credit checks (i.e., prefunding may be returned only if the 
participant will be within its Net Free Equity and Net Debit 
Monitoring Level requirements after the prefunding in returned); (2) 
during the initial stage of the pilot program, only 80% of 
qualifying prefunding payments will be eligible for return; (3) 
participants are allowed only one request per day; and (4) the 
minimum amount eligible for return is $10 million.
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    When the Commission approved the Program, the Commission's order 
noted, ``Upon implementation of the [P]rogram, PTC plans to evaluate 
the initial procedures on a quarterly basis and will make changes based 
on such procedures as necessary based upon PTC's experience with the 
[P]rogram. PTC will be required to file with the Commission a proposed 
rule change prior to any change or modification of the initial 
procedures.'' \5\
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    \5\ Supra note 3, at n. 4.
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    In developing the Program, PTC expected that participants would be 
able to determine their excess prefunding amounts by 11:00 a.m. in 
order to request a return by that time. PTC has monitored prefunding 
payments during the period in which the Program has been in place and 
has observed that participants with excess cash which could be 
withdrawn by 11:00 a.m. have elected not to do so. In discussions with 
PTC, participants have stated that they are reluctant to withdraw 
excess cash at 11:00 a.m. due to the risk of potential credit fails at 
PTC thereafter in the event that their day's processing is not 
substantially complete by this time. Participants have advised PTC that 
they are better able to assess their cash positions at PTC by 
approximately 1:00 p.m. when processing activity is generally 
substantially completed.
    PTC believes that the return of prefunding payments that are no 
longer needed to support transaction processing at PTC may enhance 
participants' liquidity during the day, which enhancement can be 
extremely beneficial in a same-day funds environment. By extending the 
request deadline from 11:00 a.m. to 1:00 p.m., participants should be 
able to determine better whether prefunding payments on deposit with 
PTC are still required to support transactions processing at PTC are 
still required to support transactions processing at PTC or whether 
they are of greater economic benefit being withdrawn. As a result of 
the 1:00 p.m. cutoff time, PTC anticipates that the returns of such 
funds would occur between 1:00 p.m. and 1:45 p.m.\6\
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    \6\ The proposed rule change will not amend the Program's other 
procedures. See supra note 4.
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    PTC believes that the proposed rule change is consistent with 
Section 17A(b)(3)(F) of the Act \7\ and the rules and regulations 
thereunder in that it will facilitate the prompt and accurate clearance 
and settlement of securities transactions.
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    \7\ 15 U.S.C. 78q-1(b)(3)(F).

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[[Page 34726]]

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

    PTC does not believe that the proposed rule change imposes 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 intend to solicit comments on 
this proposed rule change. PTC has not received any unsolicited written 
comments from 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 submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 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, N.W., 
Washington, D.C. 20549. Copies of such filing will also be available 
for inspection and copying at the principal office of PTC. All 
submissions should refer to the file number SR-PTC-97-03 and should be 
submitted by July 18, 1997.

    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. 97-16917 Filed 6-26-97; 8:45 am]
BILLING CODE 8010-01-M