[Federal Register Volume 65, Number 171 (Friday, September 1, 2000)]
[Notices]
[Pages 53259-53260]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-22485]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43210; File No. SR-SCCP-00-01]


Self-Regulatory Organizations; Stock Clearing Corporation of 
Philadelphia; Notice of Filing of Proposed Rule Change Relating to the 
Eligibility of Holders of Equity Trading Permits Issued by the 
Philadelphia Stock Exchange, Inc. to be Participants of the Stock 
Clearing Corporation of Philadelphia

    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\notice is hereby given that on January 12, 2000, the Stock 
Clearing Corporation of Philadelphia (``SCCP'') filed with the 
Securities and Exchange Commission (``Commission'') and on May 31, 
2000, amended the proposed rule change as described in Items I, II, and 
III below, which items have been prepared primarily by SCCP. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested parties.
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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 allows holders of Equity Trading Permits 
(``ETPs'') issued by the Philadelphia Stock Exchange, Inc. (``PHLX'') 
to be eligible to become SCCP participants.

II. Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filings with the Commission, SCCP included statements 
concerning the purpose of and basis for 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. SCCP has prepared summaries, set forth in sections (A), 
(B), and(C) below, of the most significant aspects of these 
statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by SCCP.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    SCCP Rule 3 currently provides that, subject to certain conditions, 
any person who is a broker-dealer registered under the Act and a member 
in good standing of PHLX is eligible to be a SCCP participant.\3\ The 
proposed rule change would amend SCCP Rule 3 to permit holders of PHLX 
EPTs to be considered ``members'' of PHLX for purposes of SCCP's 
Certificate of Incorporation, By-laws, and Rules.\4\ ETP holders would 
thus be eligible to apply to be participants in SCCP.\5\
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    \3\ Concurrently with SCCP's filing PHLX has filed with the 
Commission two proposed rule changes. PHLX 00-02 will add new 
Article Twenty-First to PHLX's Certificate of Incorporation which 
will enable PHLX to issue ETPs. PHLX 00-03 will implement PHLX Rule 
23 which would set forth the terms and conditions of the proposed 
FTPs. Under PHLX Rule 23, holders of ETPs would generally have the 
same rights under PHLX rules as PHLX members without options 
privileges except that ETP holders would not have the right to vote. 
ETPs would not be transferable and their holders would not be 
entitled to any residual interests in PHLX assets upon a liquidation 
of PHLX. Holders of ETPs would generally be subject to the same 
obligations as PHLX members, except with respect to certain fees. 
Securities Exchange Act Release Nos. 43211 (August 25, 2000) and 
43212 (August 25, 2000).
    \4\ Accordingly, SCCP would treat ETP holders just like PHLX 
members both in terms of SCCP participant qualification requirements 
and privileges of SCCP participant status.
    \5\ SCCP approves applicants for participant status only upon a 
determination that the applicant meets certain standards of 
financial condition, operational capability, and character set forth 
in SCCP's rules. Each participant is required to make a contribution 
to the SCCP's By-laws and Rules as well as with a participant's 
agreement. ETP holders must apply for SCCP membership and will be 
subject to the same admission criteria as PHXL members.
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    The proposed rule change would make a corresponding change to 
Article 2 of SCCP's; Articles of Incorporation. Article 2 currently 
includes as one of SCCP's corporate purposes the carrying of securities 
``for members, member firms and/or member corporations of the 
Philadelphia Stock Exchange * * *.'' The proposal would amend Article 2 
to add a statement that SCCP's Board of Directors may determine by rule 
the identity of PHLX ``members, member firms and/or member 
corporations.'' The purpose of the proposed language is to make the 
providing of clearing services to PHLX ETP holders fall within SCCP's 
corporate purposes. The proposed rule change will also provide a clear 
basis upon which the SCCP board of directors can determine by rule, as 
and when future circumstances may warrant, the identify of such 
``members, member firms and/or member corporations.''
    All trades on the PHLX in equity securities are processed through 
SCCP and require a SCCP participant to be involved. ETP holders will 
not be required to be SCCP participants themselves. Like PHLX members, 
ETP holders may elect instead to enter into a correspondent arrangement 
with another SCCP participant whereby the SCCP participant assumes 
responsibility for the clearance and settlement of the EIP holder's 
trades. The proposed

[[Page 53260]]

amendments to SCCP Rule 3 and to SCCP's Articles of Incorporation would 
simply assure that those ETP holders wishing to become SCCP 
participants themselves will be treated by SCCP in the same fashion as 
SCCP participants who are PHLX members.
    SCCP believes the proposed rule change is consistent with the 
requirements of section 17A(b)(3)(F) of the Act and the rules and 
regulations thereunder.\6\That provision requires that a clearing 
agency be organized and its rules be designed, among other things, to 
promote the prompt and accurate clearance and settlement of securities 
transactions, to safeguard funds and securities in its possession and 
control, and to remove impediments to and perfect the mechanism of a 
national system for the prompt and accurate clearance and settlement of 
securities transactions, and that such rules not be designed to permit 
unfair discrimination in the admission of participants.
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    \6\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    SCCP 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 were either solicited or received by SCCP. 
However, PHLX has received a number of written comments on its proposal 
to implement an equity trading permit program.\7\
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    \7\ Copies of those comments have been provided to the 
Commission as part of SR-PHLX-00-03.
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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 the self-regulatory organization 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, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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 Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of SCCP.
    All submissions should refer to File No. SR-SCCP-00-01 and should 
be submitted by September 22, 2000.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-22485 Filed 8-31-00; 8:45 am]
BILLING CODE 8010-01-M