[Federal Register Volume 63, Number 60 (Monday, March 30, 1998)]
[Notices]
[Pages 15247-15248]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8199]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39788; File No. 600-25]


Self-Regulatory Organizations; Participants Trust Company; Notice 
of Filing and Order Approving Application for Extension of Temporary 
Registration as a Clearing Agency

March 24, 1998.
    On February 9, 1998, the Participants Trust Company (``PTC'') filed 
\1\ with the Securities and Exchange Commission (``Commission'') a 
request pursuant to Section 19(a) of the Securities Exchange Act of 
1934 (``Act'') \2\ for extension of its temporary registration as a 
clearing agency under Section 17A of the Act \3\ while the Commission 
completes its review of PTC's request for permanent registration.\4\ 
The Commission is publishing this notice and order to solicit comments 
from interested persons and to grant PTC's request for an extension of 
its temporary registration as a clearing agency through March 31, 1999.
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    \1\ Letter from John J. Sceppa, President and Chief Executive 
Officer, PTC (February 9, 1998).
    \2\ 15 U.S.C. 78s(a).
    \3\ 15 U.S.C. 78q-1.
    \4\ On February 7, 1997, PTC filed an amended Form CA-1 with the 
Commission requesting permanent registration as a clearing agency 
under Section 17A of the Act. PTC's request is currently under 
review by the Commission.
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    On March 28, 1989, the Commission granted PTC's application for 
registration as a clearing agency pursuant to Sections 17A(b)(2) and 
19(a) of the Act \5\ on a temporary basis for a period of one year.\6\ 
Subsequently, the Commission issued orders that extended PTC's 
temporary registration as a clearing agency with the last extending 
PTC's registration through March 31, 1998.\7\
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    \5\ 15 U.S.C. 78q-1(b)(2) and 78s(a).
    \6\ Securities Exchange Act Release No. 26671 (March 28, 1989), 
54 FR 13266.
    \7\ Securities Exchange Act Release Nos. 27858 (March 28, 1990), 
55 FR 12614; 29024 (March 28, 1991), 56 FR 13848; 30537 (April 9, 
1992), 57 FR 12351; 32040 (March 23, 1993), 58 FR 16902; 33734 
(March 8, 1994), 59 FR 11815; 35482 (March 13, 1995), 60 FR 14806; 
37024 (March 26, 1996), 61 FR 14357; and 38452 (March 28, 1997), 62 
FR 16638.
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    As discussed in detail in the initial order granting PTC's 
temporary registration,\8\ one of the primary reasons for PTC's 
registration was to allow it to develop depository facilities for 
mortgage-backed securities, particularly securities guaranteed by the 
Government National Mortgage Association. PTC's services include 
certificate safekeeping, book-entry deliveries, and other services 
related to the immobilization of securities certificates. Its 
participants include twenty-seven banks, twenty-three broker-dealers, 
two government-sponsored enterprises, and the Federal Reserve Bank of 
New York.
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    \8\ Supra note 6.
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    PTC continues to make significant progress in the areas of 
financial performance, regulatory commitments, and operational 
capabilities. For example, the original face value of securities on 
deposit at PTC as of December 31, 1997, totaled $1.3 trillion, an 
increase of approximately $130 billion over the amount on deposit as of 
December 31, 1996. Total pools on deposit, which were held at PTC in a 
total of 1.3 million participant positions, rose from 350,000 as of 
December 31, 1996, to more than 374,383 as of December 31, 1997. PTC 
declared a dividend of $1.05 per share to stockholders of record on 
December 31, 1998.\9\
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    \9\ Securities Exchange Act Release No. 39509 (December 31, 
1997), 63 FR 1523.
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    In connection with PTC's original temporary registration, PTC 
committed to the Commission and to the Federal Reserve Bank of New York 
(``FRBNY'') to make a number of operational and procedural changes.\10\ 
During the past year, the FRBNY relieved PTC of the only commitment 
remaining outstanding, the commitment to make principal and interest 
advances

[[Page 15248]]

optional.\11\ The FRBNY noted that although PTC has not changed its 
rules as specifically required by its commitment, it has addressed the 
issue that was the subject of that commitment by eliminating the pro 
rata charge to participants. In addition, the FRBNY stated that PTC has 
significantly improved its procedures for collection of principal and 
interest payments by encouraging issuers to use electronic means of 
payment and by making other operational improvements to accelerate the 
collection of principal and interest payments made by check.
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    \10\ The operational and procedural changes PTC committed to 
make were:
    (1) eliminating trade reversals from PTC's procedures to cover a 
participant default;
    (2) phasing out the aggregate excess net debit limitation for 
extensions under the net debit monitoring level procedures;
    (3) making principal and interest advances, now mandatory, 
optional;
    (4) allowing participants to retrieve securities in the abeyance 
account and not allowing participants to reverse transfers because 
customers may not be able to fulfill financial obligations to the 
participants;
    (5) eliminating the deliverer's security interest and replacing 
it with a substitute;
    (6) reexamining PTC's account structure rules to make them 
consistent with PTC's lien procedures;
    (7) expanding and diversifying PTC's lines of credit;
    (8) assuring operational integrity by developing and 
constructing a back-up facility; and
    (9) reviewing PTC rules and procedures for consistency with 
current operations.
    \11\ Letter from William Wiles, Secretary of the Board, Board of 
Governors of the Federal Reserve System, to John Sceppa, President 
and Chief Executive Officer, PTC dated (July 30, 1997).
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    PTC has functioned effectively as a registered clearing agency for 
over 8 years. Accordingly, in light of PTC's past performance and the 
need for continuity of the services PTC provides to its participants, 
the Commission believes that it is necessary and appropriate in the 
public interest and for the prompt and accurate clearance and 
settlement of securities transactions to extend PTC's temporary 
registration through March 31, 1999. Any comments received during PTC's 
temporary registration will be considered in conjunction with the 
Commission's review of PTC's request for permanent registration as a 
clearing agency under Section 17A\12\ of the Act.
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    \12\ 15 U.S.C. 78q-1.
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    Intrerested 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 request for extension of temporary 
registration as a clearing agency that are filed with the Commission, 
and all written communications relating to the requested extension 
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 Section, 450 Fifth Street, N.W., Washington, D.C. 
20549. Copes of such filing also will be available for inspection and 
copying at the principal office of PTC. All submissions should refer to 
File No. 600-25.
    On the basis of the foregoing, the Commission finds that PTC's 
request for extension of temporary registration as a clearing agency is 
consistent with the Act and in particular with Section 17A of the Act.
    It is Therefore Ordered, that PTC's registration as a clearing 
agency be and hereby is approved on a temporary basis through March 31, 
1999.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(50).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-8199 Filed 3-27-98; 8:45 am]
BILLING CODE 8010-01-M