[Federal Register Volume 62, Number 180 (Wednesday, September 17, 1997)]
[Notices]
[Pages 48913-48914]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24588]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39048; File No. SR-PTC-97-03]


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

September 10, 1997.
    On May 1, 1997, the Participants Trust Company (``PTC'') filed with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change (File No. SR-PTC-97-03) pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal 
was published in the Federal Register on June 27, 1997.\2\ No comment 
letters were received. For the reasons discussed below, the Commission 
is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 38759 (June 23, 1997), 
62 FR 34725.
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I. Description

    The proposed rule change amends PTC's rules 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 their prefunding payments made to PTC earlier that 
day. Under the rule change, only prefunding payments which are no 
longer needed to support transaction processing are eligible for 
intraday return.
    PTC originally amended its rules in August 1996, to permit the 
intraday return of prefunding payments.\3\ Before the rule change, 
PTC's rules 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 intraday return of prefunding 
payments 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 return. 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 payments may be returned only if the 
participant will be within its net free equity and net debit 
monitoring level requirements after the prefunding payments are 
returned); (20 during the initial stage of the pilot program, only 
80% of qualifying prefunding payments are eligible for return; (3) 
participants are allowed only one request per day; and (4) the 
minimum amount eligible for return is $10 million. The proposed rule 
change does not amend these procedures.
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    When the Commission approved the Program, the Commission's order 
noted, ``Upon implementation of the Program, 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 
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\
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    \5\ Supra note 3, at n. 4.
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    In developing the Program, PTC expected that its participants would 
be able to determine their excess prefunding amounts by 11:00 a.m. in 
order to request a return by that time. After the Program's 
implementation, PTC monitored prefunding payments

[[Page 48914]]

and observed that participants with excess cash which could be 
withdrawn by 11:00 a.m. elected not to do so. PTC was advised by its 
participants that 1:00 p.m. would be a more appropriate cut-off time to 
request return of prefunding payments.

II. Discussion

    Section 17A(b)(3)(F) of the Act \6\ 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 PTC or for which it is 
responsible. By extending the time to request return of prefunding 
payments to 1:00 p.m., PTC's participants will be better able to 
determine whether prefunding payments on deposit with PTC will be 
required to support transactions at PTC. Furthermore, PTC is not 
changing the Program's requirement whereby PTC will not return any 
prefunding payments unless the requesting participant is within its net 
free equity and net debit monitoring level controls at the time the 
request is made. Therefore, the Commission believes that even with the 
later cut-off time for requesting return prefunding payments PTC should 
be able to continue to provide for the intraday return of prefunding 
payments while still assuring the safeguarding of securities and funds 
in its custody or control.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of 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-97-03) 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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-24588 Filed 9-16-97; 8:45 am]
BILLING CODE 8010-01-M