[Federal Register Volume 67, Number 11 (Wednesday, January 16, 2002)]
[Notices]
[Pages 2268-2269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-1106]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45265; File No. SR-SCCP-2001-06]


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

January 10, 2002.
    On April 30, 2001, the Stock Clearing Corporation of Philadelphia 
(``SCCP'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-SCCP-00-06) 
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 July 26, 2001.\2\ On July 26, 2001, SCCP amended the 
proposed rule change.\3\ 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. 44582 (July 20, 2001), 
66 FR 39071.
    \3\ The amendment was technical in nature and did not require 
republication of the notice.
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I. Description

    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 have a margin financing 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 alternative specialist have 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 exceeds the account equity.
    The rule change amends SCCP's providers to specify a margin 
financing threshold rate of 25 percent for members registered as 
specialists and alternate specialists in Nasdaq NM securities. It 
should be noted that the Philadelphia Stock Exchange, Inc. (``Phlx'') 
has recently reinstated its over the counter/

[[Page 2269]]

unlisted trading privileges (``OTC/UTP'') pilot program for trading 
activity during regular trading hours.\4\ SCCP expects that some of its 
margin members will be registered in certain of the eligible Nasdaq NM 
securities once the Phlx begins trading Nasdaq NM securities again.
    It also should be noted that no other aspects of the SCCP 
procedures respecting Rule 9 are being modified. The rule change 
establishes a margin financing threshold rate of 25 percent for margin 
members registered as specialists or alternative specialists in certain 
Nasdaq NM securities.
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    \4\ Securities Exchange Act Release No. 45182 (December 20, 
2001), 66 FR 67609 (December 31, 2001) [File No. SR-Phlx-00-20]
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II. Discussion

    Section 17A(b)(3)(F) \5\ of the Act 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 the clearing agency or 
for which the clearing agency is responsible. Once the Phlx begins 
trading Nasdaq NM securities again, it will be prudent for SCCP to 
require a higher margin financing threshold rate (25 percent ) for 
Nasdaq NM securities than for exchange listed securities (15 
percent).\6\ Accordingly, the Commission finds that the higher margin 
financing threshold rate for Nasdaq NM securities should help SCCP meet 
its statutory safeguarding obligations.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ SCCP recently reviewed 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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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(b)(3)(F) 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-2001-06) 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. 02-1106 Filed 1-15-02; 8:45 am]
BILLING CODE 8010-01-M