Federal Register / Vol. 62, No. 200 / Thursday, October 16, 1997 / Notices 53847

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

2These parties have entered into an agreement

dated as of June 18, 1997.

3A more detailed description of these proposed

arrangements is contained in Exhibit 2 to the filing.

A copy of the filing and all exhibits are available

for copying and inspection in the Commission’s

Public Reference Room.

4The Commission has modified the text of the

summaries prepared by DTC.

5The term ‘‘same-day funds’’ refers to payment in

funds that are immediately available and generally

are transferred by electronic means.

the total cost of compliance for transfer

agents is $4,500.

Rule 17Ad–13 requires approximately

200 registered transfer agents to obtain

an annual report on the adequacy of

internal accounting controls. In

addition, transfer agents must maintain

copies of any reports prepared pursuant

to Rule 17Ad–13 plus any documents

prepared to notify the Commission and

appropriate regulatory agencies in the

event that the transfer agent is required

to take any corrective action. These

recordkeeping requirements assist the

Commission and other regulatory

agencies with monitoring transfer agents

and ensuring compliance with the rule.

Small transfer agents are exempt from

Rule 17Ad–13.

The staff estimates 200 registered

transfer agents take approximately 175

hours annually to comply with Rule

17Ad–13. Therefore, the total annual

burden is 35,000 hours for transfer

agents, based upon past submissions.

The average cost per hour is

approximately $60. Therefore, the total

cost of compliance for transfer agents is

$1,300,000.

An agency may not conduct or

sponsor, and a person is not required to

respond to, a collection of information

unless it displays a currently valid

control number.

Written comments regarding the

above information should be directed to

the following persons: (i) Desk Officer

for the Securities and Exchange

Commission, Office of Information and

Regulatory Affairs, Office of

Management and Budget, Room 3208,

New Executive Office Building,

Washington, DC 20503; and (ii) Michael

E. Bartell, Associate Executive Director,

Office of Information Technology,

Securities and Exchange Commission,

450 Fifth Street, NW., Washington, DC

20549. Comments must be submitted to

OMB on or before November 17, 1997.

Dated: October 8, 1997.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27435 Filed 10–15–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39222; File No. SR–DTC–

97–16]

Self-Regulatory Organization; The

Depository Trust Company; Notice of

Filing of a Proposed Rule Change

Relating to a Decision by the

Philadelphia Stock Exchange,

Incorporated To Withdraw From the

Clearance and Settlement and

Securities Depository Businesses

October 8, 1997.

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

Securities Exchange Act of 1934

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

August 5, 1997, The Depository Trust

Company (‘‘DTC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change (File No. SR–DTC–97–16) as

described in Items I, II, and III below,

which items have been prepared

primarily by DTC. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change involves

proposed arrangements relating to a

decision by the Philadelphia Stock

Exchange, Incorporated (‘‘PHLX’’) to

withdraw from the clearance and

settlement and securities depository

businesses. Parties to the proposed

arrangements are DTC, PHLX,

Philadelphia Depository Trust Company

(‘‘PHILADEP’’), Stock Clearing

Corporation of Philadelphia (‘‘SCCP’’),

and the National Securities Clearing

Corporation (‘‘NSCC’’).2 The proposed

arrangements as they relate to DTC will

provide for the following:

(1) DTC will offer sole PHILADEP

participants an opportunity to become

DTC participants if they meet DTC’s

qualifications;

(2) DTC will make certain payments

to PHLX, PHILADEP, and SCCP; and

(3) In general, for a period of five

years PHLX, PHILADEP, and SCCP will

not engage in the clearance and

settlement and securities depository

businesses. However, this prohibition

will not apply to PHLX’s equity

ownership interest in The Options

Clearing Corporation. In addition, SCCP

may provide limited clearing and

margin services to PHLX equity

specialists for their specialist and

alternate specialist transactions and for

their propriety transactions in securities

for which they are not appointed as

specialists or alternate specialists and to

certain PHLX members that are not

PHLX equity specialists for their

propriety transactions in securities.3

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

DTC included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments that it received on the

proposed rule change. The text of these

statements may be examined at the

places specified in Item IV below. DTC

has prepared summaries, set forth in

sections (A), (B), and (C) below, of the

most significant aspects of such

statements.4

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

PHLX has announced that it is

withdrawing form the clearance and

settlement and securities depository

businesses in order to focus its

resources on the operations of the

exchange. The proposed arrangements

have been designed to permit PHLX to

achieve this objective while affording

qualified sole PHILADEP participants

an opportunity to become DTC

participants and to transfer their

securities to DTC. DTC believes that the

proposed arrangements will result in

substantial risk reduction and in

increased savings for DTC participants

and the securities industry as a whole.

Where there are interfaces among the

securities depositories, same-day funds

settlements 5 exposes each depository to

certain risks, such as the failure of

another depository to settle its net

payment obligation because of a failure

by one of the participants of such other

depository to settle with it or because

such other depository is experiencing a

major systems problem. These risks

cannot be entirely avoided with existing

and available risk management controls.

PHLX’s withdrawal from the securities

depository business will eliminate the

exposure of DTC and its participants to
53848 Federal Register / Vol. 62, No. 200 / Thursday, October 16, 1997 / Notices

6 17 CFR 200.30–3(a)(12).

the payment system risks associated

with the DTC-PHILADEP interface.

In addition, the proposed

arrangements should result in

substantial savings for DTC participants

and the securities industry. In

connection with this proposal, former

sole PHILADEP participants may

become DTC participants if they qualify

under DTC’s participant standards. An

increase in the number of DTC

participants will result in higher DTC

transaction volumes there by reducing

the per unit service costs that must be

recovered through DTC participant

service fees.

Moreover, interdepository interfaces

involve the maintenance of substantial

facilities, communications networks and

account and inventory reconciliation

mechanisms. As a result of the proposal,

the substantial costs incurred by both

DTC and PHILADEP in operating an

interface will be eliminated.

DTC believes the proposed rule

change is consistent with the

requirements of Section 17A of the Act

and the rules and regulations

promulgated thereunder because the

rule proposal will help reduce the risk

associated with having interfaces,

provide for more efficient and less

expensive clearing and depository

services, and thereby facilitate the

prompt and accurate clearance and

settlement of such transactions. In

addition, the proposal will provide

qualified sole PHILADEP participants

with access to DTC’s facilities and will

be implemented consistently with the

safeguarding of securities and funds in

DTC’s custody and control.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

DTC does not believe that the

proposed arrangements will have an

impact on or impose a burden on

competition. Securities depositories

registered under Section 17A of the Act

are 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 respond to

regulatory requirements.

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, PHLX’s

withdrawal from maintaining

depository facilities should reduce costs

to DTC participants and thereby remove

impediments to competition. Finally,

PHLX’s ability to focus its resources on

the operations of its exchange should

help enhance competition among

securities markets.

Despite the dominant market position

that DTC will acquire, DTC believes that

the current regulatory scheme and the

very nature of the clearing and

depository industries provide

appropriate checks on the operations of

DTC. DTC is owned by its members that

utilize its services and its board of

directors is comprised of its members.

DTC must assure a fair representation of

its members in the selection of its

directors and administrators. DTC’s

service fees are reviewed by its board

and subject to public notice and

comment. Lastly, the existence of

independent depositories for special

securities and the potential for new

clearing agency registrants offer

significant checks on DTC’s power.

(C) Self-Regulatory Organization’s

Statement on Comments on the

proposed Rule Change Received From

Members, Participants, or Others

Written comments on the proposal

from DTC participants or others have

not been solicited or received. However,

the proposed arrangements are

consistent with recommendations made

to the boards of DTC and NSCC by the

Vision 2000 Committee (‘‘Committee’’),

a committee on industry representatives

of the two boards. The Committee’s

Report dated September 1994 states:

The industry currently owns a number of

utilities that provide services related to the

comparison, clearing, settlement and

safekeeping of U.S. (and to a lesser degree,

international) securities. These utilities

overlap in two ways. * * * We believe that

the industry’s and, as important, the

investors’, overall costs can be reduced and

safety and soundness can be enhanced by

eliminating these overlaps where there is no

clear advantage to having specialization or

competing development.

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 DTC 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, 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. Copies of such filing

will also be available for inspection and

copying at the principal office of DTC.

All submissions should refer to the File

No. SR–DTC–97–16 and should be

submitted by November 6, 1997.

For the Commission, by the Division of

Market Regulation pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27321 Filed 10–15–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39220; File No. SR–NSCC–

97–08]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing of a

Proposed Rule Change Relating to a

Decision by the Philadelphia Stock

Exchange, Incorporated To Withdraw

From the Clearance and Settlement

and Securities Depository Businesses

October 8, 1997.

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

Securities Exchange Act of 1934 (the