Federal Register / Vol. 62, No. 199 / Wednesday, October 15, 1997 / Notices 53681

4SCCP has submitted a rule filing [File No. SR–

SCCP–97–04] describing the revisions and

limitations of its clearing services.

5 15 U.S.C. 78f(b)(5).

6 15 U.S.C. 78q–1.

7 17 CFR 200.30–3(a)(12).

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

to close its securities depository

business offered through its wholly

owned subsidiaries, SCCP and Philadep,

respectively, in order to focus its

resources on the operations of the

exchange itself.4 The purpose of the

proposed arrangement is to enable

PHLX, SCCP, and Philadep to achieve

this objective while affording

participants of these clearing agencies

the opportunity to become participants

of NSCC or DTC, as the case may be, or

to utilize the services of other clearing

or depository service providers.

PHLX, SCCP, and Philadep will

cooperate with NSCC and DTC to assure

an orderly transition with respect to the

wind down of Philadep’s business. In

this regard, PHLX and Philadep will

assist DTC and sole Philadep

participants in having the participants

become DTC participants to the extent

that they meet DTC qualifications and

desire to become DTC participants. The

parties will cooperate to carry out the

orderly transfer of securities from the

custody of Philadep to the custody of

DTC for sole Philadep participants that

qualify and authorize such transfers.

Philadep believes that the proposed

rule change is consistent with Section

6(b)(5) 5 of the Act because it will enable

PHLX to concentrate its efforts on its

core business, the exchange itself. This

strategic initiative will, in turn, remove

impediments and perfect the

mechanism of a free and open market

and a national market system.

Philadelp also believes that the

proposal is consistent with Section 17A

of the Act 6 and the rules and regulations

thereunder because it (i) will remove

impediments to and perfect the

mechanism of a national system for the

prompt and accurate clearance and

settlement of securities transactions and

(ii) will reduce the fragmented nature of

the securities custody business to more

closely integrate the industry which

may thereby help in the safeguarding of

funds which are in the custody and

control of a clearing agency or for which

it is responsible. Specifically, the

proposed arrangements will help reduce

the risk associated with having

interfaces, will provide for more

efficient and less expensive clearing and

depository services, and thereby will

facilitate the prompt and accurate

clearance and settlement of such

transactions.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

Philadelp believes that the proposed

rule change will not impose any burden

on competition not necessary or

appropriate in furtherance of the

purposes of the Act. Securities

depositories registered under Section

17A of the Act are not conventional

businesses but utilities created to serve

members of the securities industry for

the purpose of providing certain

services that are ancillary to the

businesses in which industry members

compete with one another. Operating a

securities depository requires a

substantial and continuing investment

in infrastructure, including securities

vaults, telecommunications links with

users, data centers, and disaster

recovery facilities, in order to meet the

increasing needs of participants and to

respond to regulatory requirements. As

such, several exchanges, including the

Boston Stock Exchange, the Pacific

Exchange, and the Chicago Stock

Exchange have terminated the operation

of their securities depositories.

After consummation of the proposed

arrangements, securities industry

members will continue to have access to

high quality, low cost depository

services provided under the mandate of

the Act. The overall cost to the industry

of having such services available should

be reduced thereby permitting a more

efficient and productive allocation of

industry resources. Furthermore,

because most of a depository’s interface

costs must be mutualized, thereby

requiring some participants to subsidize

costs incurred by others, Philadep’s

withdrawal from maintaining

depository facilities should reduce costs

to participants and thereby should

remove impediments to competition.

Finally, PHLX’s ability to focus its

resources on the operations of the

Exchange should help enhance

competition among securities markets.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

Written comments were neither

solicited nor received with respect to

the proposed rule change.

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 finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which Philadep consents, the

Commission will:

(A) By order approve such 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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of Philadep. All submissions

should refer to File No. SR–Philadep–

97–94 and should be submitted by

November 5, 1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27279 Filed 10–14–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39223; File No. SR–SCCP–

97–07]

Self-Regulatory Organizations; Stock

Clearing Corporation of Philadelphia;

Notice of Filing of Proposed Rule

Change Relating to Revision and

Limitation of Clearing Services

October 8, 1997.

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

Securities Exchange Act of 1934

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

September 25, 1997, Stock Clearing

Corporation of Philadelphia (‘‘SCCP’’)

filed with the Securities and Exchange
53682 Federal Register / Vol. 62, No. 199 / Wednesday, October 15, 1997 / Notices

2The term clearing agency is defined in section

3(a)(23) of the Act. 15 U.S.C. 78c(a)(23).

3The effective date of the proposed rule change

described is proposed to be the ‘‘closing date’’ as

defined in the Agreement. The parties to the

Agreement tentatively have scheduled the closing

date for November 14, 1997, but this date may be

adjusted by mutual consent of the parties.

4The text of the proposed rule change was

submitted with SCCP’s rule filing and is available

for inspection and copying at the Commission’s

Public Reference Room and through the principal

office of SCCP.

5The Commission has modified the text of the

summaries prepared by SCCP.

6Philadep has submitted a rule filing [File No.

SR–Philadep–97–04] describing the way in which

Philadep will exit the depository business.

7Under the proposed rule change, the term

‘‘margin member’’ will be defined to include

participants that are PHLX specialists, alternate

specialists, and other PHLX floor members

specifically approved by NSCC to effect trading in

a margin account.

8 12 CFR 220.

Commission (‘‘Commission’’) and on

September 30, 1997, amended 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

parties.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Philadelphia Stock Exchange,

Inc. (‘‘PHLX’’), SCCP, Philadelphia

Depository Trust Company

(‘‘Philadep’’), the National Securities

Clearing Corporation (‘‘NSCC’’) and The

Depository Trust Company (‘‘DTC’’)

have entered into an agreement dated as

of June 18, 1997 (‘‘Agreement’’) under

which SCCP has agreed (i) to cease

providing full securities clearing

services, (ii) to make available to SCCP

participants access to the facilities of

one or more other organizations

providing securities clearing services,

and (iii) to transfer to the books of such

other organizations the continuous net

settlement (‘‘CNS’’) system open

positions of SCCP participants that are

shown on SCCP’s books. In addition,

under the terms of the Agreement

Philadep has agreed (i) to cease

providing securities depository services,

(ii) to make available to its participants

access to the facilities of one or more

other organizations providing securities

depository services, and (iii) to transfer

to the custody of such other

organizations the securities that are held

in the custody of Philadep for the

accounts of such participants. Pursuant

to the Agreement, SCCP and Philadep

have agreed not to compete for a period

of five years with DTC and NSCC in

providing securities depository services

or securities clearing services.

The Agreement contemplates that

SCCP will continue to provide an

interface between certain of its floor

members and specialists and a

registered clearing agency.2 The

Agreement further contemplates that

SCCP will continue to provide margin

services to (i) PHLX equity specialists

for their specialists and alternate

specialists transactions and for their

proprietary transactions and for their

proprietary transactions in securities for

which they are not appointed as

specialists or alternate specialists and

(ii) two PHLX members listed on a

schedule that are not PHLX equity

specialists for their proprietary

transactions. The clearing services

contemplated to be conducted by SCCP

after the closing date of the Agreement 3

will be carried out through an omnibus

account that SCCP will maintain at

NSCC for such purpose and will not

include the maintenance or offering of

CNS accounts for its participants.

The proposed rule change

incorporates the Agreement as it relates

to SCCP into SCCP’s rules and

procedures. In addition, the proposed

rule change will amend SCCP’s rules in

a manner consistent with undertakings

agreed to by SCCP in settling a recent

administrative proceeding with the

Commission.4

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 these statements.5

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

PHLX has decided to limit the

clearance and settlement business

provided by SCCP and to close its

securities depository business offered

through Philadep.6 The Agreement

provides for an orderly process to

enable PHLX, SCCP, and Philadep to

achieve this objective, while affording

participants of SCCP or Philadep the

opportunity to become participants of

NSCC or DTC, respectively, or to utilize

the services of other providers of

clearing services or depository services.

After the closing date, SCCP no longer

will maintain its CNS system for

conducting settlements between SCCP

and its participants. As a result, SCCP

is proposing to cease providing the cash

settlement services attendant to

Philadep’s same-day funds settlement

services attendant to Philadep’s sameday funds settlement (‘‘SDFS’’) system

and the Philadep settlement process.

However, pursuant to the Agreement

SCCP may continue to offer limited

clearing and settlement services to

PHLX members. SCCP intends to

provide trade confirmation and

recording services for PHLX members

that carry out transactions through

regional interface operations (‘‘RIO’’)

accounts and ex-clearing accounts.

Under the amended versions of SCCP

Rules 10 and 11, SCCP will not provide

clearing guarantees to such transactions.

SCCP will continue to offer margin

accounts for certain participants in a

special account established by SCCP at

NSCC.

Pursuant to the Agreement, SCCP will

establish an omnibus clearance and

settlement account at NSCC and abide

by NSCC rules and procedures as a

participant of NSCC. Under the

Agreement, SCCP may offer margin

accounts only to: (i) PHLX equity

specialists for their specialists and

alternate specialists transactions, as well

as for their proprietary transactions in

securities for which they are not

appointed as specialists or alternate

specialists and (ii) two PHLX members

listed on a schedule who are not PHLX

equity specialists for their proprietary

transactions. Under the Agreement,

SCCP may add other PHLX members to

the schedule referred to in item (ii)

above subject to NSCC’s approval.

A new definition of ‘‘margin member’’

will be established in SCCP Rule 1 to

reflect those PHLX floor firms entitled

to clear through a SCCP margin

account.7 Pursuant to the amended

version of SCCP Rule 9, SCCP may

provide margin accounts for margin

members that clear and settle their

transactions through SCCP’s omnibus

clearance and settlement account. SCCP

will margin such accounts based on its

Procedures and on Regulation T of the

Board of Governors of the Federal

Reserve System.8

SCCP may demand at any time that a

margin member provide additional

margin based upon SCCP’s review of

such margin member’s security

positions held by SCCP. SCCP will

retain the margin thresholds currently

specified in its procedures and may

require adequate assurances or
Federal Register / Vol. 62, No. 199 / Wednesday, October 15, 1997 / Notices 53683

9Under the proposed rule change, SCCP Rule 1

will define the term ‘‘account equity’’ as the total

net current market value of security positions held

in the margin account plus or minus cash balances

in such account.

10As previously stated, SCCP is establishing

separate sources of funding, including bank LOCs,

to serve the operation of its margin members’

margin accounts.

additional margin in addition to the

minimum margin thresholds in order to

protect SCCP in issues deemed by SCCP

to warrant additional protection. SCCP

may demand any such margin payments

in federal funds in accordance with its

procedures.

SCCP may issue margin calls to any

margin member whose margin

requirement exceeds the account equity

of the margin member’s margin

account.9 SCCP may waive any amount

that would trigger a margin call not

exceeding $500. A margin member that

fails to meet a margin call will be

subject to SCCP Rule 22 (formerly SCCP

Rule 23) which governs disciplinary

proceedings and penalties. SCCP may

cease to act for delinquent margin

members and will retain a lien on all

delinquent margin members’ accounts

and securities therein.

SCCP will segregate and maintain

records on each individual margin

account and will maintain the omnibus

clearance and settlement account so as

to reflect all positions in SCCP’s margin

accounts. SCCP also will guarantee the

settlement obligations of the omnibus

clearance and settlement account to

NSCC. In turn, pursuant to the

Agreement, PHLX will guarantee SCCP’s

obligations to NSCC.

SCCP’s books and records for the

omnibus clearance and settlement

account will reflect all activity that

occurs in the account at NSCC and DTC.

At any time prior to midnight

(Philadelphia time) on the next business

day after SCCP receives a margin

member’s trade, SCCP will be entitled to

reverse such a trade from such

member’s account. SCCP will settle the

omnibus clearance and settlement

account with NSCC each business day

in accordance with NSCC’s rules and

procedures. Accordingly, SCCP will be

subject to NSCC’s rules including but

not limited to the following: (i) Daily

mark-to-market requirements, (ii)

allocations of long and short securities

positions, (iii) dividend and

reorganization settlement activities, and

(iv) pledging of collateral and stock

loans. Dividends, reorganizations,

adjustments, and buy-ins, will be passed

through to margin members in

accordance with SCCP’s procedures.

SCCP will continue to provide margin

members with purchase and sales

reports, bookkeeping reports, dividend

and reorganization reports, and

preliminary equity reports in

accordance with SCCP’s procedures.

Through the omnibus clearance and

settlement account, SCCP will have one

composite settlement per day with

NSCC. SCCP will maintain line of credit

(‘‘LOC’’) arrangements with one or more

commercial banks sufficient to support

anticipated funding needs of the

underlying margin accounts. SCCP

currently is negotiating with lending

institutions to replace its existing LOCs.

During the past four months, SCCP has

not exceeded an aggregate $6 million

debit with respect to the margin

members targeted to remain in SCCP

following the closing date. In order to

cover all such margin debits, SCCP

anticipates obtaining an aggregate of $5

million in committed and $5 million in

uncommitted LOCs from each of two

separate lending institutions, totaling

$20 million.

SCCP proposes to amend SCCP Rule

14 (formerly SCCP Rule 15) to provide

that mark-to-market funds may not be

used to finance margin members’

account activity. SCCP also is amending

Rule 14 to provide that any mark-tomarket funds collected by SCCP will be

segregated and invested in accordance

with analogous procedures set forth in

SCCP Rule 4. Under the amended

version of SCCP Rule 13, SCCP will pass

through any buy-ins submitted by NSCC

to SCCP or by a SCCP participant to

NSCC in accordance with NSCC’s buyin rules and procedures.

To ensure that margin members have

an efficient way to obtain securities

depository services after the closure of

Philadep’s depository service, NSCC

will sponsor SCCP in opening a

depository account at DTC to benefit

margin members. In the event that

margin members carry out trades in

securities not eligible for custodial

services in DTC’s book-entry system,

SCCP will utilize NSCC’s direct clearing

service to settle the transactions. SCCP

will continue to perform bookkeeping

and reconciliation services for the

omnibus clearance and settlement

account and its related DTC custody

account pursuant to SCCP procedures.

In accordance with NSCC’s

participants fund formulae, SCCP, as a

NSCC participant and a sponsored

participant of DTC, will be required to

provide NSCC and DTC with

participants fund contributions for the

omnibus clearance and settlement

account. With respect to SCCP’s own

participants fund formulae, SCCP will

delete its participants fund formulae

applicable to inactive accounts, full

service CNS accounts, and layoff

accounts. SCCP proposes to establish a

fixed $35,000 contribution for each of

the following account categories:

specialist margin and non-specialist

margin. No changes will be made to the

RIO account formula. Accordingly, RIO

account participants will continue to be

subject to a contribution of $10,000 to

$75,000 depending upon monthly

trading activity. SCCP will continue to

use its current procedure under which

participant engaging in more than one

account type activity will be subject to

only the formula that would generate

the highest participants fund

contribution.

SCCP may allocate any portion of its

participants fund to satisfy NSCC’s

DTC’s participants fund requirements

with respect to the omnibus clearance

and settlement account. Any excess

SCCP participants fund cash not used to

fund SCCP’s NSCC and DTC

participants fund requirements will be

segregated and invested by SCCP in

accordance with SCCP Rule 4. At the

present time, SCCP estimates that its

revised participants fund formulae will

generate participants fund contributions

in excess of the amount required to fund

SCCP’s participants fund contributions

with NSCC and DTC. If SCCP’s

participants fund formulae do not

provide for contributions that equal

those which would be required

pursuant to the NSCC and DTC

participants fund formulae, SCCP

reserves the right to collect from each

participant an additional pro rata charge

to meet any such deficit.

SCCP proposes to amend SCCP Rule

4 to specify that no participants fund

contributions may be used in financing

margin members’ margin account

activity.10 In addition SCCP proposes to

amend Rule 4 to provide for the

establishment of SCCP and Philadep of

a reserve fund that will be used to

provide a liquid fund to draw on as

necessary to meet certain specified

expenses. The reserve fund will be

funded with deposits of $1,000,000 by

August 11, 1998; $1,000,000 by August

11, 1999; and $1,000,000 by August 11,

2000. The reserve fund will be held and

invested in accordance with the same

procedures set forth in SCCP Rule 4 for

the holding and investment of the

participants fund. Amounts drawn from

the reserve fund must be replenished

within sixth days following the date of

each such withdrawal. SCCP Rule 4 also

will be amended to provide that no

portion of the reserve fund may be used

in financing margin members’ margin

account activity.

SCCP is amending its schedule of fees

to delete those fees associated with
53684 Federal Register / Vol. 62, No. 199 / Wednesday, October 15, 1997 / Notices

11 15 U.S.C. 78q–1. 12 17 CFR 200.30–3(a)(12).

services no longer to be offered. SCCP

also will charge RIO Accounts the

applicable value fees of $0.05 per $1,000

of contract value.

SCCP believes the proposed rule

change is consistent with the

requirements of Section 17A of the

Act 11 and the rules and regulations

thereunder because the restructuring of

SCCP’s business as contemplated by the

proposed rule change will promote the

prompt and accurate clearance and

settlement of securities transactions by

integrating and consolidating clearing

services available to the industry and

will assure the safeguarding of securities

and funds in the custody or control of

SCCP or for which SCCP is responsible.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

SCCP does not believe that the

proposed rule change will impose any

burden on competition not necessary or

appropriate in furtherance of the

purposes of the Act. Securities clearing

agencies registered under Section 17A

of the Act are not conventional

businesses but utilities created to serve

members of the securities industry for

the purpose of providing certain

services that are ancillary to the

businesses in which industry members

compete with one another. Operating a

securities clearing agency requires a

substantial and continuing investment

in infrastructure including

telecommunications links with users,

data centers, and disaster recovery

facilities in order to meet the increasing

needs of participants and respond to

regulatory requirements. To date, other

exchanges, including the Boston Stock

Exchange, the Pacific Exchange, and the

Chicago Stock Exchange have

substantially terminated the operation

of their securities clearing corporations.

After consummation of the proposed

arrangements, securities industry

members shall continue to have access

to high quality, low cost clearing

services provided under the mandate of

the Act. The overall cost to the industry

of having such services available may be

reduced thereby permitting a more

efficient and productive allocation of

industry resources. Furthermore,

because most of a clearing corporation’s

interface costs must be mutualized,

thereby requiring some participants to

subsidize costs incurred by others,

SCCP’s withdrawal from maintaining

clearing facilities should reduce costs to

participants and thereby should remove

impediments to competition. Finally,

PHLX’s ability to focus its resources on

the operations of the Exchange should

help enhance competition among

securities markets.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

Written comments were neither

solicited nor received with respect to

the proposed rule change.

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 finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which SCCP consents, the

Commission will:

(A) By order approve such 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.

Persons making written submissions

should file six copies thereof, with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of SCCP. All submissions should

refer to File No. SR–SCCP–97–04 and

should be submitted by November 5,

1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27278 Filed 10–14–97; 8:45 am]

BILLING CODE 8010–01–M

U.S. SMALL BUSINESS

ADMINISTRATION

[Declaration of Disaster #2983]

State of Florida

Hillsborough County and the

contiguous Counties of Hardee,

Manatee, Pasco, Pinellas, and Polk in

the State of Florida constitute a disaster

area as a result of damages caused by

severe thunderstorms, excessive rains,

and flooding which occurred September

26 through 28, 1997. Applications for

loans for physical damage may be filed

until the close of business on December

4, 1997 and for economic injury until

the close of business on July 6, 1998 at

the address listed below or other locally

announced locations: U.S. Small

Business Administration, Disaster Area

2 Office, One Baltimore Place, Suite

300, Atlanta, GA 30308.

The interest rates are:

Percent

For Physical Damage

Homeowners With Credit Available Elsewhere ........................ 8.000

Homeowners Without Credit

Available Elsewhere ................ 4.000

Businesses With Credit Available

Elsewhere ................................ 8.000

Businesses and Non-Profit Organizations Without Credit Available Elsewhere ........................ 4.000

Others (Including Non-Profit Organizations) With Credit Available Elsewhere ........................ 7.250

For Economic Injury: Businesses

and Small Agricultural Cooperatives Without Credit Available

Elsewhere 4.000

The number assigned to this disaster

for physical damage is 298306 and for

economic injury the number is 961500.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008.)

Dated: October 5, 1997.

Aida Alvarez,

Administrator.

[FR Doc. 97–27166 Filed 10–14–97; 8:45 am]

BILLING CODE 8025–01–P

SMALL BUSINESS ADMINISTRATION

[Declaration of Economic Injury Disaster

#9612]

State of Idaho; (And Contiguous

Counties in Montana and Washington)

Bonner County and the contiguous

Counties of Boundary, Kootenai, and

Shoshone in the State of Idaho; Lincoln

and Sanders Counties in the State of

Montana; and Pend Oreille and Spokane

Counties in the State of Washington

constitute an economic injury disaster