[Federal Register Volume 61, Number 130 (Friday, July 5, 1996)]
[Notices]
[Pages 35291-35292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17147]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37382; File Nos. SR-Philadep-96-08 and SR-SCCP-96-04]


Self-Regulatory Organizations; Philadelphia Depository Trust 
Company and Stock Clearing Corporation of Philadelphia; Notice of 
Filing and Order Granting Accelerated Approval on a Temporary Basis of 
Proposed Rule Changes Requesting Permanent Approval of the Adoption of 
Article 8 of the New York Uniform Commercial Code To Govern Certain 
Transactions

June 28, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 30, 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-96-08 and SR-SCCP-96-04) as described in 
Items I and II below, which Items have been prepared primarily by 
Philadep and SCCP. The Commission is publishing this notice to solicit 
comments from interested persons and to grant accelerated approval of 
the proposed rule changes on a temporary basis through December 31, 
1996.
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    \1\ 15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organizations' Statement of the Terms of Substance 
of the Proposed Rule Changes

    Philadep requests permanent approval of the adoption of Rule 32 and 
the amendment of Rule 1 of its rules, and SCCP requests permanent 
approval of the adoption of Rule 41 and the amendment of Rule 1 of its 
rules governing the choice of law to be elected in certain transactions 
effecting Philadep, SCCP, their participants, and pledged. On January 
26, 1996, the Commission temporarily approved through June 30, 1996, 
Philadep's and SCCP's proposed rule changes adopting Article 8 of the 
New York Uniform Commercial Code (``UCC'') as their choice of law 
governing certain transactions.\2\
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    \2\ Securities Exchange Act Release No. 36781 (January 26, 
1996), 61 FR 3958 [File Nos. SR-SCCP-96-01 and SR-Philadep-96-01] 
(order granting accelerated approval on a temporary basis of 
proposed rule changes to provide for the application of Article 8 of 
the New York UCC).
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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 Organization's Statements of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Changes

    Philadep and SCCP propose to permanently adopt Rules 32 and Rule 
41, respectively, and to permanently amend Rule 1 of their rules to 
codify their decision to elect certain New York commercial code 
provisions 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 time to time. The 
definition of ``security'' under Rule 1 of both Philadep's and SCCP's 
rules was amended to cite to New York UCC Article 8 as opposed to 
Pennsylvania UCC Article 8.
    Philadep and SCCP note that uncertainty exists whether New York law 
or Pennsylvania law may apply to any particular transfers and 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 broker-dealers, 
banks, and other institutions which are participants in The Depository 
Trust Company (``DTC'') and National Securities Clearing Corporation 
(``NSCC'') systems), 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. Philadep and SCCP, therefore, 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

[[Page 35292]]

provisions governing their extensive dealings with Philadep and SCCP, 
their participants, and pledgees in this area as the former New York 
based groups already are subject to New York law.
    Philadep and SCCP 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) \3\ of the Act requires the rules of a 
clearing agency be designed to foster cooperation and coordination with 
persons engaged in the clearance and settlement of securities. The 
Commission believes the proposed rule changes are consistent with these 
requirements because 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.
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    \3\ 15 U.S.C. Sec. 78q-1(b)(3)(F) (1988).
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    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. The Commission 
finds good cause for so approving the proposed rule change because 
accelerated approval will enable Philadep and SCCP to continue to 
choose Article 8 of the New York UCC as the governing law for certain 
transactions, thus enabling Philadep and SCCP to continue to settle 
without any disruption securities transactions between U.S. broker-
dealers and Canadian broker-dealers. Currently, the West Canada 
Depository Trust Company (``WCDTC'') and the West Canada Clearing 
Corporation (``WCCC'') act as a corresponding depository for and 
conduct clearance and settlement with Philadep and SCCP, respectively. 
With WCDTC and WCCC as participants of SCCP and Philadep, transactions 
in certain Canadian and U.S. securities between Canadian and American 
brokers will continue to be cleared and settled through the facilities 
of Philadep and SCCP. The staff of the Board of Governors of the 
Federal Reserve System has concurred with the Commission's granting of 
accelerated approval.\4\
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    \4\ Telephone conversation between John Rudolph, Board of 
Governors of the Federal Reserve System, and Chris Concannon, Staff 
Attorney, Division of Market Regulation, Commission (June 28, 1996).
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    The Commission is granting temporary approval of the proposed rule 
changes because the Commission believes the adoption of Article 8 of 
the New York UCC should continue to be examined before the selection of 
such governing law is permanently approved. The Commission will 
continue to analyze the developments and the application of Article 8 
of the New York UCC including the effect of the choice of law 
provisions upon third parties. For these reasons, the Commission is 
temporarily approving the proposed rule changes through December 31, 
1996.

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, N.W., 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. Sec. 552 will be available for inspection and copying in 
the Commission's Public Reference Room, 450 Fifth Street, N.W., 
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-96-08-SR-SCCP-96-
04 and should be submitted by July 26, 1996.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule changes (File Nos. SR-Philadep-96-08 and SR-
SCCP-96-04) be, and hereby are, approved through December 31, 1996.

    For the Commission by the Division of Market Regulation pursuant 
to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12) (1995).
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Jonathan G. Katz,
Secretary.
[FR Doc. 96-17147 Filed 7-3-96; 8:45 am]
BILLING CODE 8010-01-M