[Federal Register Volume 66, Number 144 (Thursday, July 26, 2001)]
[Notices]
[Pages 39071-39072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-18642]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44582; File No. SR-SCCP-2001-06]


Self-Regulatory Organizations; Stock Clearing Corporation of 
Philadelphia; Notice of Filing of Proposed Rule Change to Increase the 
Margin Threshold for Margin Members in Certain Nasdaq National Market 
Securities

July 20, 2001.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 30, 2001, the Stock 
Clearing Corporation of Philadelphia (``SCCP'') filed with the 
Securities and Exchange Commission (``Commission'') 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 
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 would implement a margin financing 
threshold rate of 25 percent for specialist and alternate specialist 
margin members for certain Nasdaq National Market (``NM'') securities.

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

    In its filing 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 such statements.\2\
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    \2\ The Commission has modified parts of these statements.
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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 implement a higher 
margin financing threshold rate for Nasdaq NM securities for SCCP 
margin members,. SCCP Rule 9 provides in part that SCCP will provide 
margin accounts for margin members that clear and settle their 
transactions through SCCP's omnibus clearance and settlement account. 
SCCP provides margin for such accounts based on SCCP's Rule 9 and other 
relevant SCCP rules, by-laws, and procedures and Regulation T of the 
Board of Governors of the Federal Reserve System. Currently, margin 
members who are designated as specialists or alternate specialists in 
an exchange listed security are extended margin financing at a 
threshold rate of 15 percent for positions in those securities held in 
their specialist accounts. Members holding positions for which they are 
not designated as specialist or alternate specialist are extended a 
non-specialist margin rate of 50 percent. Pursuant to Rule 9, SCCP may 
issue margin calls to any margin member when the margin requirement 
excess the account equity.
    SCCP proposed to amend its procedures to specify a margin financing 
threshold rate of 25 percent shall be extended to specialists and 
alternate specialists registered in Nasdaq NM securities. It should be 
noted that the Philadelphia Stock Exchange, Inc. (``Phlx'') has 
recently proposed to reinstate its over the counter/unlisted trading 
privileges (``OTC/UTP'') pilot program for trading activity during 
regular trading hours.\3\ Margin members are expected to be registered 
in certain of the eligible Nasdaq NM securities once the Phlx receives 
approval of that proposal and begins trading Nasdaq NM securities 
again.
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    \3\ Securities Exchange Act Release Nos. 43692 (December 8, 
2000), 65 FR 78240 (December 14, 2000) (notice of filing Phlx-00-20) 
and 44533 (July 10, 2001), 66 FR 37083 (July 16, 2001) (amendment to 
filing Phlx-00-20).
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    As a result, SCCP determined it would be prudent to require a 
higher margin financing threshold rate of 25 percent for Nasdaq NM 
securities because the levels of volatility for such securities are 
still higher than comparable exchange listed securities.\4\ It should 
be noted that no other aspects of the SCCP procedures respecting Rule 9 
are being modified; only the margin financing threshold rate for margin 
members registered as specialists or alternative specialists in certain 
Nasdaq NM securities is being established at 25 percent.
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    \4\ A recent review of volatility levels for the Nasdaq 100 
index and Nasdaq Composite index as compared to the Dow Jones 
Industrial average and the NYSE Composite index indicated 
significantly higher volatility levels over 10 day, 20 day, 50 day, 
and 90 day time periods.
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    SCCP believes that the proposed rule change will help to ensure 
compliance with SCCP's rules regarding margin and Regulation T. 
Therefore, SCCP believes that the proposed rule change is consistent 
with the requirements of Section 17A of the Act and the rules and 
regulations thereunder. In particular, SCCP believes that the proposed 
rule change is consistent with section 17A(b)(3)(F) of the Act \5\ 
because the proposed higher margin financing threshold rate for Nasdaq 
securities should serve to protect SCCP, its members, investors, and 
the public interest.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Self-Regulatory Organization 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.

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 find such 
longer period (i) the Commission may designate up to ninety days of 
such date if it finds such longer period to be appropriate and 
publishes its reason for

[[Page 39072]]

so finding or (ii) as to which SCCP consents, the Commission will:
    (a) By order approve the 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 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 will also be available for inspection and copying at the 
principal office of SCCP. All submissions should refer to File No. SR-
SCCP-2001-06 and should be submitted by August 16, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-18642 Filed 7-25-01; 8:45 am]
BILLING CODE 8010-01-M