[Federal Register Volume 67, Number 11 (Wednesday, January 16, 2002)]
[Notices]
[Pages 2267-2268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-1102]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45255; File No. SR-SCCP-00-01]


Self-Regulatory Organizations; Stock Clearing Corporation of 
Philadelphia; Order Approving a 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

January 9, 2002.
    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 a proposed rule change 
(File No. SR-SCCP-00-01) 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 September 1, 2000.\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. 43210 (August 25, 2000), 
64 FR 53259.
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I. Description

    The rule change amends SCCP's rules to permit holders of Equity 
Trading Permits (``ETPs'') issued by the

[[Page 2268]]

Philadelphia Stock Exchange, Inc. (``PHLX'') to be eligible to become 
SCCP participants. SCCP Rule 3 provides that, subject to certain 
conditions,\3\ 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.\4\ The rule change amends SCCP Rule 3 to permit holders of 
PHLX ETPs to be considered ``members'' of PHLX for purposes of SCCP's 
participant qualification requirements.\5\ ETP holders would thus be 
eligible to apply to be participants in SCCP.
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    \3\ 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 Participant's Fund and to comply with 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 PHLX members.
    \4\ The Commission has approved two rule changes proposed by 
PHLX. PHLX 00-02 adds new Article Twenty-First to PHLX's Certificate 
of Incorporation which enables PHLX to issue ETPs. PHLX 00-03 
implements PHLX Rule 23 which sets forth the terms and conditions of 
the ETPs. Under PHLX Rule 23, holders of ETPs generally have the 
same rights under PHLX rules as PHLX members without options 
privileges except that ETP holders do not have the right to vote. 
ETPs are not transferable and their holders are not entitled to any 
residual interest in PHLX assets upon a liquidation of PHLX. Holders 
of ETPs are generally subject to the same obligations as PHLX 
members, except with respect to certain fees. Securities Exchange 
Act Release No. 45254 (January 9, 2002).
    \5\ The amendment to SCCP Rule 3 states, ``For purposes of this 
Rule 3 as well as all provisions of the Corporation's Certificate of 
Incorporation, By-laws, rules, regulations, requirements, orders, 
directions and decisions adopted or made in accordance therewith, 
holders of Equity Trading Permits (``ETPs'') issued pursuant to PHLX 
Rule 23 shall be deemed to be members of PHLX, and holders of 
Regular ETPs issued pursuant to PHLX Rule 23 who transact business 
from a location on the PHLX's equity floor shall be deemed to be 
PHLX floor members.'' Off-Floor ETPs, the other class of ETPs, 
allows holders electronic and telephone access, but not physical 
access, to the Exchange floor. Accordingly, SCCP would treat ETP 
holders, regardless of class, just like PHLX members both in terms 
of SCCP participant qualification requirements and privileges of 
SCCP participant status.
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    The rule change also makes a corresponding amendment to Article 2 
of SCCP's Articles of Incorporation. Article 2 currently includes as 
one of SCCP's corporate purpose the carrying of securities ``for 
members, member firms and/or member corporation of the Philadelphia 
Stock Exchange. * * *'' The rule change amends 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.''

II. Discussion

    PHLX has proposed the creation of ETPs in order to reduce the cost 
of access to the exchange's equity trading floor as well as to provide 
an opportunity to attract additional order flow and new business and 
services. 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 ETP 
holder's trades. The herein approved amendments to SCCP Rule 3 and 
SCCP's Articles of Incorporation simply assure that those ETP holders 
wishing to become SCCP participants themselves will be treated by SCCP 
in he same fashion as SCCP participants who are PHLX members. In doing 
so, the amendments also provide a clear basis upon which the SCCP board 
of directors can determine by rule, as and when future circumstances 
may warrant, the identity of such ``members, member firms and/or member 
corporations.''
    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions.\6\ The Commission 
believes that the approval of SCCP's Rule 3 change and Article 2 
amendment is consistent with this section because these changes allow 
holders of ETPs issued by the PHLX to be eligible to become SCCP 
participants just as PHLX members are. As a result, more broker-dealers 
will have access to and be able to utilize SCCP.
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    \6\ 15 U.S.C. 8q-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-SCCP-00-01) be and hereby is 
approved.\7\
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    \7\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to the delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-1102 Filed 1-15-02; 8:45 am]
BILLING CODE 8010-01-M