[Federal Register Volume 61, Number 155 (Friday, August 9, 1996)] [Notices] [Pages 41677-41678] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 96-20312] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-37515; File No. SR-PTC-96-03] Self-Regulatory Organizations; Participants Trust Company; Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Intraday Return of Participants' Prefunding Payments August 2, 1996. On June 3, 1996, Participants Trust Company (``PTC'') filed with the Securities and Exchange Commission (``Commission'') a proposed rule change (File No. SR-PTC-96-03) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ to permit the intraday return of prefunding payments to participants. Notice of the proposal was published in the Federal Register on July 7, 1996.\2\ No comment letters were received. For the reasons discussed below, the Commission is granting accelerated approval of the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1) (1988). \2\ Securities Exchange Act Release No. 37402 (July 2, 1996), 61 FR 36601. --------------------------------------------------------------------------- I. Description The rule change amends Article V, Rule 2, Section 5 of PTC's rules and establishes initial procedures to enable PTC to make intraday returns of participants' prefunding payments. Only prefunding payments which are received early in the day and which are no longer needed to support transaction processing at PTC will be eligible for intraday return. Previously, prefunding payments were applied to that day's settlement or withdrawn on the next business day or thereafter.\3\ The rule change is to allow PTC to make these funds available to participants on the same day they are deposited with PTC in order that the depositing participants may use the funds to reduce daylight overdraft exposures or to ease liquidity pressures in other financial markets. --------------------------------------------------------------------------- \3\ ``Optional deposits,'' which include prefunding payments, are defined in PTC's rules as ``a participant's voluntary deposits to the participants fund with respect to any master account pursuant to Section 3 of Rule 2 of Article V.'' Article V, Rule 2, Section 3 states that participants may elect or be required to make optional deposits to the participants fund to (i) provide supplemental processing collateral to increase a participant's net free equity (``NFE''), (ii) prefund a debit balance in a participant's account, or (iii) permit free retransfers of securities from a transfer account. --------------------------------------------------------------------------- PTC will implement the intraday return of prefunding payments to participants with initial procedures to be incorporated into PTC's Participant's Operating Guide.\4\ The initial procedures will provide that (i) all prefunding return transactions will be subject to PTC's standard credit controls (i.e., a prefunding payment may be returned only if a participant will be within its NFE and net debit monitoring level requirements after such prefunding payment is returned); (ii) only prefunding payments received by PTC between 8:30 a.m. and 11:00 a.m. E.S.T. will be eligible for intraday return; (iii) during the initial stage of the pilot program, only eighty percent of qualifying prefunding payments will be eligible for intraday return;\5\ (iv) participants will be allowed only one intraday return per day; (v) the minimum amount eligible for intraday return is $10 million; and (vi) all intraday returns are expected to be made by PTC between 11:00 a.m. and 12:00 p.m. E.S.T. --------------------------------------------------------------------------- \4\ Upon implementation of the program, PTC plans to evaluate the initial procedures on a quarterly basis and will make changes to such procedures as necessary based upon PTC's experience with the program. PTC will be required to file with the Commission a proposed rule change prior to any change or modification of the initial procedures. \5\ This limitation is to minimize the risk that subsequent transactions will fail PTC's credit controls. --------------------------------------------------------------------------- II. Discussion Section 17A(b)(3)(F) \6\ 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 it is responsible. For the reasons set forth below, the Commission believes that PTC's proposed rule change is consistent with PTC's obligations under the Act. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78q-1(b)(3)(F) (1988). --------------------------------------------------------------------------- The return to participants of prefunding payments that are no longer needed to support transaction processing at PTC should enhance participants' liquidity during the day. Although the amounts returned to participants under the program could possibly be used to fund debits at PTC later in the day, the benefits derived from providing participants with increased intraday liquidity appear to outweigh PTC's interests in retaining the prefunding payments after situations necessitating such deposits have been remedied. PTC should be able to provide for the intraday return of prefunding payments while still assuring the safeguarding of securities and funds in its custody or control because PTC will not return any prefunding payments unless the requesting participant is in compliance with NFE and net debit monitoring level controls at the time the request is made. PTC has requested that the Commission find good cause for [[Page 41678]] approving the proposed rule change prior to the thirtieth day after the date of publication of notice of the filing. The Commission finds good cause for so approving the proposed rule change because accelerated approval will permit PTC participants to have the opportunity to obtain same-day value for prefunding payments no longer necessary to support transaction processing at PTC. This should be extremely beneficial in a same-day funds environment. Furthermore, the Commission has not received any comment letters and does not expect to receive any comment letters on the proposal. III. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act and in particular 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-PTC-96-03) be and hereby is approved. For the Commission by the Division of Market Regulation, pursuant to delegated authority.\7\ --------------------------------------------------------------------------- \7\ 17 CFR 200.30-3(a)(12) (1995). --------------------------------------------------------------------------- Jonathan G. Katz, Secretary. [FR Doc. 96-20312 Filed 8-8-96; 8:45 am] BILLING CODE 8010-01-M