Federal Register / Vol. 62, No. 4 / Tuesday, January 7, 1997 / Notices 1015

2Securities Exchange Act release No. 37793

(October 7, 1996), 61 FR 53477.

3 17 CFR 240.11Aa2–1.

4 15 U.S.C. 78q–1(b)(3)(F).

5 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2Securities Exchange Act Release Nos. 36781

(January 26, 1996), 61 FR 3958 [Files Nos. SR–

SCCP–96–01 and SR–Philadep–96–01] and 37382

(June 28, 1996), 61 FR 35291 [File Nos. SR–

Philadep–96–08 and SR–SCCP–96–04] (orders

granting accelerated approval on a temporary basis

of proposed rule changes to provide for the

application of Article 8 of the New York UCC).

on October 11, 1996.2 No comment

letters were received. For the reasons

discussed below, the Commission is

granting approval of the proposed rule

change.

I. Description

The proposed rule change adds

subparagraph (4) to Rule 604(d) to

permit clearing members to deposit as

margin with OCC publicly traded units

of beneficial interest (‘‘trust units’’) in

unit investment trusts that hold

portfolios or baskets of common stocks.

These classes of trust units are traded

and cleared like shares of common stock

and are typically held in book entry

form at a securities depository. The trust

units must met the requirements

applicable to stocks under Rule 604(d).

Rule 604(d) requires that to be eligible

as margin deposits, stock must have a

market value greater than $10 per share

and must either (a) be traded on a

national securities exchange and have

last sale reports collected and

disseminated pursuant to a consolidated

transaction reporting plan or (b) be

traded in the over-the-counter market

and designated as a national market

system security pursuant to the

Commission’s Rule 11Aa2–1.3 Pursuant

to Rule 604(d)(1), trust units will be

valued on a daily basis at 60% of

currently market value.

In order to be eligible for deposit, the

trust units must be of a class approved

by OCC’s Membership/Margin

Committee (‘‘Committee’’) for deposit as

margin. At the present time, the

Committee has approved Standard &

Poor’s (‘‘S&P’’) depository receipts on

the S&P 500 Index and S&P MidCap 400

Index as being classes approved for

deposit as margin.

In addition, the proposed rule change

replaces the term ‘‘stocks’’ with the term

‘‘securities’’ in subparagraphs (2) and (3)

to Rule 604(d). Subparagraphs (2) and

(3) of Rule 604(d) limit the use of

customer securities as margin and

prescribe the method of depositing

margin securities. The amendment

clarifies that such sections apply not

only to stocks but also corporate bonds

eligible as margin deposits under rule

604(d)(1).

II. Discussion

Section 17A(b)(3)(F) 4 of the Act

requires that the rules of a clearing

agency be designed to safeguard

securities and funds in its custody or

control. Because the trust units must be

either traded on a national securities

exchange or designated as a national

market system security to be eligible as

collateral, the proposal ensures that

only very liquid securities will be

accepted. Furthermore, by initially

limiting eligibility to S&P depository

receipts on the S&P 500 Index and the

S&P MidCap 400 Index, OCC will be

able to gain experience in accepting

trust units before expanding the types of

trust units it will accept. Therefore, the

Commission believes that OCC’s

acceptance of these classes of trusts

units is consistent with OCC’s

obligation to safeguard securities and

funds.

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–

OCC–96–13) be and hereby is approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–232 Filed 1–6–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38099; File Nos. SRPhiladep–96–20 and SR–SCCP–96–09]

Self-Regulatory Organizations;

Philadelphia Depository Trust

Company and Stock Clearing

Corporation of Philadelphia; Notice of

Filing and Order Granting Permanent

Approval on an Accelerated Basis of

Proposed Rule Changes Concerning

the Adoption of Article 8 of the New

York Uniform Commercial Code to

Govern Certain Transactions

December 30, 1996.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

November 15, 1996, the Philadelphia

Depository Trust Company (‘‘Philadep’’)

and the Stock Clearing Corporation of

Philadelphia (‘‘SCCP’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

changes (File Nos. SR-Philadep–96–20

and SR–SCCP–96–09) as described in

Items I and II below, which Items have

been prepared primarily by Philadep

and SCCP. The Commission is

publishing this notice and order to

solicit comments from interested

persons and to grant permanent

approval of the proposed rule changes

on an accelerated basis.

I. Self-Regulatory Organizations’

Statement of the Terms of Substance of

the Proposed Rule Changes

Philadep and SCCP request

permanent approval for their respective

adoption of Article 8 of the State of New

York’s Uniform Commercial Code

(‘‘UCC’’) to govern certain transactions

involving Philadep, SCCP, their

participants, and pledgees. On June 28,

1996, the Commission temporarily

approved through December 31, 1996,

Philadep’s and SCCP’s adoption of New

York’s U.C.C. Article 8.2

II. Self-Regulatory Organizations’

Statements of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

In their filings with the Commission,

Philadep and SCCP included statements

concerning the purpose of and the basis

for the proposed rule changes and

discussed any comments received on

the proposed rule changes. The text of

these statements may be examined at

the places specified in Item IV below.

Philadep and SCCP have prepared

summaries, as set forth in sections (A),

(B), and (C) below, of the most

significant aspects of these statements.

(A) Self-Regulatory Organizations’

Statements of the Purpose of, and the

Statutory Basis for, the Proposed Rule

Changes

Philadep and SCCP propose to

permanently adopt Rule 32 and Rule 41,

respectively, and to permanently amend

Rule 1 of their rules. The proposed rule

change codifies Philadep’s and SCCP’s

decision to elect Article 8 of the New

York UCC to govern certain transactions

for the purpose of providing a uniform,

consistent, and predictable body of law.

Specifically, Rule 32 and Rule 41 will

assure that the rights and obligations of

Philadep and SCCP, their participants,

and their pledgees with respect to

transfers and pledges of securities, to

the extent Article 8 of the UCC applies

thereto, will be governed by and

construed in accordance with Article 8

of the UCC of New York in effect from
1016 Federal Register / Vol. 62, No. 4 / Tuesday, January 7, 1997 / Notices

3 15 U.S.C. 78q-1(b)(3)(F).

4Securities Exchange Act Release Nos. 36781 and

37382, supra note 2.

5For a complete description of the clearance and

settlement activities among CDS, Philadep, and

SCCP, refer to Securities Exchange Act Release No.

37918 (November 8, 1996), 61 FR 57938 [File No.

SR–Philadep–96–17] (order granting accelerated

approval on a temporary basis of a proposed rule

change to appoint CDS as a correspondent

depository).

6The staff of the Board of Governors of the

Federal Reserve System has concurred with the

Commission’s granting of accelerated approval.

Telephone conversation between John Rudolph,

Board of Governors of the Federal Reserve System,

and Chris Concannon, Staff Attorney, Division of

Market Regulation, Commission (December 30,

1996).

7 17 CFR 200.30-3(a)(12).

time to time. Rule 1 will define the term

‘‘security’’ by citing the definition of

security in Article 8 of New York’s UCC.

Philadep and SCCP note that

uncertainty exists as to whether New

York law or Pennsylvania law applies to

particular transfers and as to whether

some transfers within Philadep’s or

SCCP’s systems may be governed by

Pennsylvania’s UCC Article 8 while

other transaction within such systems

may be governed by New York’s UCC

Article 8. With so many of the

transactions for which Philadep and

SCCP provide depository, clearance,

and settlement services potentially

being affected [e.g., those transactions

effected through interface with brokerdealers, banks, and other institutions

which are participants in The

Depository Trust Company (‘‘DTC’’) and

National Securities Clearing Corporation

(‘‘NSCC’’)], it is problematic that

different rules of law under Article 8 of

the UCC may govern the rights and

obligations of parties to such transfers.

Therefore, Philadep and SCCP have

chosen to elect the application of New

York’s UCC Article 8 rather than

Pennsylvania’s UCC Article 8. The

choice of New York law also assures

that DTC, NSCC, and their respective

participants and pledgees will find

harmonious commercial code

provisions governing their extensive

dealings with Philadep and SCCP, their

participants, and pledgees in this area as

the New York based groups already are

subject to New York law.

Philadep and SCCP state that they

believe the proposed rule changes are

consistent with Section 17A of the Act

and the rules and regulations

thereunder because the rules are

designed to promote the prompt and

accurate clearance and settlement of

securities transactions, 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, to foster cooperation and

coordination with persons engaged in

the clearance and settlement of

securities, to remove impediments to

and perfect the mechanism of a national

market system for the prompt and

accurate clearance and settlement of

securities transactions, and, in general,

to protect investors and the public

interest.

(B) Self-Regulatory Organizations’

Statements on Burden on Competition

Philadep and SCCP do not believe

that the proposed rule changes will

impact or impose a burden on

competition.

(C) Self-Regulatory Organizations’

Statements on Comments on the

Proposed Rule Changes Received From

Members, Participants or Others

No written comments have been

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Changes and Timing for

Commission Action

Section 17A(b)(3)(F) of the Act 3

requires the rules of a clearing agency be

designed to foster cooperation and

coordination with persons engaged in

the clearance and settlement of

securities. As stated in previous orders,4

the Commission believes the proposed

rule changes are consistent with this

requirement because the adoption of

Article 8 of the New York UCC should

help provide certainty with respect to

the substantive rights and obligations

under UCC Article 8 that are applicable

to Philadep and SCCP and their

participants particularly with respect to

transactions with broker-dealers, banks,

and other institutions that are

participants of other foreign or domestic

clearing entities.

Philadep and SCCP have requested

that the Commission find good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice of the filing.

Currently, the Canadian Depository for

Securities (‘‘CDS’’) acts as a

corresponding depository for Philadep

and is a participant of SCCP so that

transactions in certain Canadian and

U.S. brokers-dealers can be cleared and

settled through the facilities of Philadep

and SCCP.5 According the Philadep and

SCCP, their arrangement with CDS is

possible because Article 8 of New

York’s UCC, unlike Article 8 of

Pennsylvania’s UCC, provides for bookentry transfers of securities when the

certificated security is in the custody of

certain foreign clearing organizations.

Therefore, to enable Philadep and SCCP

to continue to provide without any

disruption clearance, settlement, and

depository services for certain securities

transactions between U.S. brokerdealers and Canadian broker-dealers,

the Commission finds good cause for so

approving the proposed rule change

prior to the thirtieth day after the date

of publication of the notice of the

filing.6 The Commission also notes that

during the previous temporary approval

periods neither SCCP, Philadep, nor the

Commission have received any adverse

comments regarding the adoption of

Article 8 of the New York UCC.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

Persons making such submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549. 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

Room, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filings will also be available for

inspection and copying at the principal

offices of Philadep and SCCP. All

submissions should refer to File Nos.

SR–Philadep–96–20 SR–SCCP–96–09

and should be submitted by January 28,

1997.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act, that the

proposed rule changes (File Nos. SR–

Philadep–96–20 and SR–SCCP–96–09)

be, and hereby are, approved on an

accelerated basis.

For the Commission by the Division of

Market Regulation pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–241 Filed 1–6–97; 8:45 am]

BILLING CODE 8010–01–M