[Federal Register Volume 61, Number 106 (Friday, May 31, 1996)]
[Notices]
[Pages 27379-27380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13695]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37245; File No. SR-SCCP-96-03]


Self-Regulatory Organizations; Stock Clearing Corporation of 
Philadelphia; Notice of Filing of a Proposed Rule Change To Establish a 
Separate Participant Category for Inactive Accounts

May 24, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 8, 1996, the Stock 
Clearing Corporation of Philadelphia (``SCCP'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change (File No. SR-SCCP-96-03) 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 persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1) (1988).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of the proposed rule change is to amend SCCP's rules of 
establishment a separate participant category for inactive accounts and 
to amend the participants fund formulas with respect to such inactive 
accounts. Specifically, the proposed rule change will define the term 
``Inactive Account'' and will set forth the mechanism for detecting a 
change in a participant's status from inactive to active for the 
immediate collection of the additional required participants fund 
contribution at such time.

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 they received on the proposed rule changes. 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 such statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    SCCP proposes to amend its rules with respect to the minimum cash 
deposit contribution of its inactive participants to be set at the 
uniform rate of $5,000 instead of at the previously approved rate of 
$10,000.\2\ ``Inactive Accounts'' are proposed to be defined as an 
account which conducts de minimis activity, currently established to be 
twenty or fewer trades per month.
---------------------------------------------------------------------------

    \2\ Securities Exchange Act Release No. 36875 (February 22, 
1996), 61 FR 7846 [SR-SCCP-95-06] (order granting partial temporary 
approval and partial permanent approval of a proposed rule change).
---------------------------------------------------------------------------

    SCCP proposes to adjust its Inactive Account contribution to the 
participants fund from $10,000 to $5,000. In proposing this amendment, 
SCCP recognizes that Inactive Accounts pose virtually no risk to the 
clearing corporation so long as they remain in such inactive status. In 
this regard, SCCP has established procedures to detect a change in a 
participant's status from inactive to active and for the immediate 
collection of the additional required participants fund contribution at 
such time.
    SCCP will monitor its participants' account activities to assure 
that all participants post the requisite participants fund 
contributions. SCCP evaluates the nature and financial integrity of all 
participants of SCCP, even if they initially establish only Inactive 
Accounts. SCCP evaluates prospective participants develops a customer 
profile, assesses the firm's capital adequacy, determines the initial 
participants fund contribution, contacts the firm's Designated 
Examining Authority for a review of its regulatory history, and 
presents any and all pertinent information collected to SCCP's 
Admissions Committee. The Admissions Committee ultimately makes the 
determination about whether to admit the participant and directs 
management where appropriate to gather additional information so that 
the Committee can make such a determination. After admission, SCCP 
monitors participants' account activities to assure that the proper 
participants fund contribution is being collected from each 
participant.
    Specifically with respect to Inactive Accounts, SCCP's Finance and 
Administration (``F&A'') Department

[[Page 27380]]

will identify for SCCP's Operations Department which specific accounts 
are currently inactive. Thereafter, the Operations Department will 
monitor on a daily basis purchase and sale blotters for each Inactive 
Account. Trade activity detected from Inactive Accounts will be 
compiled on a separate report identifying cumulative activity in each 
Inactive Account during a monthly billing cycle.\3\
---------------------------------------------------------------------------

    \3\ This report will be distributed on a daily basis to SCCP 
management and SCCP's compliance officer.
---------------------------------------------------------------------------

    In the event that an Inactive Account exceeds ten trades, but fewer 
than twenty-one trades, for a particular month, the Operations 
Department will immediately notify the F&A Department and SCCP's 
compliance officer. The F&A Department will verify this activity and 
will immediately call and send letters to the affected participants 
requiring the wiring of the additional participants fund contributions 
associated with an active account by the next business day in order for 
such participants to conduct further account activity during the month. 
If a participant has exceeded 20 trades for any given month, the 
participant must wire additional participants fund contributions 
associated with an active account by the next business day. A 
participant's failure to timely wire any additional participants fund 
contributions due subjects the participant to a $500 fine for the first 
offense and a $2,000 fine for the second offense during a calendar 
year. If the participant does not wire the additional participants fund 
contribution for SCCP by the next business day, SCCP will disallow any 
further business in the account beginning on the next business day 
after the additional contribution was due. Accordingly, an offense as 
contemplated by the foregoing fine schedule refers to the number of 
times that the account was inactivated from conducting any further 
business for failure to furnish SCCP with the additional contribution 
during the calendar year.
    Once active, an account will be routinely subject to the normal 
review and update process on a monthly basis, and the F&A Department 
will recalculate each participant's participants fund deposit 
requirement at the end of each month based upon the participant's 
previous three months activity, prior to the most recent month.
    SCCP believes the proposed rule change is consistent with Section 
17A of the Act and the rules and regulations thereunder because the 
proposal should help to safeguard securities and funds in their custody 
or control or for which they are responsible and foster cooperation and 
coordination with persons engaged in the clearance and settlement of 
securities transactions.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    SCCP believes that the proposed rule change will not impose any 
burden on competition not contemplated within the parameters of the 
Act.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    No written comments relating to the proposed rule change have been 
received. SCCP will notify the Commission of any written comments 
received by SCCP.

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 Room, 450 Fifth Street, N.W., Washington, 
D.C. 20549. Copies of such filing will also be available for inspection 
and copying at the principal office of SCCP. All submissions should 
refer to the file number SR-SCCP-96-03 and should be submitted by June 
21, 1996.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\
---------------------------------------------------------------------------

    \4\ 17 CFR 200.30-3(a)(12) (1995).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-13695 Filed 5-30-96; 8:45 am]
BILLING CODE 8010-01-M