On June 20, 2003, the Stock Clearing Corporation of Philadelphia (“SCCP”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”). Notice of the proposal was published in the Federal Register on October 30, 2003. No comment letters were received. For the reasons discussed below, the Commission is approving the proposed rule change.
This order permanently approves SCCP's business whereby it provides limited clearance and settlement services.
Through an agreement dated June 18, 1997 (“Agreement”), among SCCP, the Philadelphia Stock Exchange, Inc. (“Phlx”), the Philadelphia Depository Trust Company (“Philadep”), the National Securities Clearing Corporation (“NSCC”), and The Depository Trust Company (“DTC”), Philadep and SCCP transferred most of their depository and clearance services to DTC and NSCC. As a result, SCCP stopped providing its continuous net settlement (“CNS”) system for conducting settlements between SCCP and its participants and its cash settlement services attendant to Philadep's same-day funds settlement system and the Philadep settlement process. However, pursuant to the Agreement, SCCP continued to offer Start Printed Page 75014limited clearing and settlement services to Phlx members.
In December 1997, the Commission approved proposed rule changes that implemented the Agreement. These rule changes reflected Philadep's withdrawal from the depository business and temporarily approved for one year SCCP's restructured and limited clearance and settlement business. Subsequently, the Commission has extended the temporary approval several times so that SCCP could continue to offer restructured and limited clearance and settlement services.
B. SCCP's Proposed Rule Change
In its current rule filing, SCCP proposed that the Commission permanently approve SCCP's limited clearance and settlement business. SCCP believes that its restructured operations have functioned consistent with its original proposed rule change and are functioning well under actual working conditions.
Accordingly, because this proposed rule change would not result in any substantive or textual changes to its rules or its restructured operations, SCCP will continue to offer the same services as it has been since the 1997 rule changes took affect. Specifically, SCCP will continue to offer trade confirmation and recording services to Phlx members effecting transactions through what SCCP refers to as regional interface operations (“RIO”) accounts and ex-clearing accounts. SCCP will not provide clearing guarantees for these transactions. In addition, SCCP will also continue to provide margin accounts for margin members that clear and settle their transactions through SCCP's Omnibus Clearance and Settlement Account at NSCC.
Section 17A(b)(3)(F) of the Act  requires, among other things, that the rules of a clearing agency are designed to promote the prompt and accurate clearance and settlement of securities transactions. The Commission finds that SCCP's proposed rule change is consistent with SCCP's obligations under section 17A(b)(3)(F) of the Act because permanently approving the rules relating to SCCP's restructured business should eliminate any uncertainty about and therefore provide greater confidence in SCCP's long-term ability and commitment to provide prompt and accurate clearance and settlement services to the securities industry. In addition, since the proposed rule change does not alter any of SCCP's rules or structure of its services and in light of SCCP's actual performance since 1997, SCCP should be able to provide for the prompt and accurate clearance and settlement of securities transactions.
On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of 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-SCCP-2003-04) be, and hereby is, approved.Start Signature
For the Commission by the Division of Market Regulation, pursuant to delegated authority.
Margaret H. McFarland,
3. This Agreement was executed in connection with Phlx's withdrawal from the securities depository business (offered by its wholly-owned subsidiary, Philadep) and Phlx's restructured and limited clearance and settlement business (offered by its wholly-owned subsidiary, SCCP).Back to Citation
4. Securities Exchange Act Release No. 39444 (Dec. 11, 1997), 62 FR 66703 (Dec. 19, 1997) [File Nos. SR-TC-97-16, SR-NSCC-97-08, SR-Philadep-97-04, and SR-SCCP-97-04].Back to Citation
5. At that time, the Commission stated that “because a part of SCCP's proposed rule change concerns the restructuring of SCCP's operations to enable SCCP to offer limited clearing and settlement services to certain Phlx members, the Commission finds that it is appropriate to grant only temporary approval to the portion of SCCP's proposed rule change that amends SCCP's By-Laws, Rules, or Procedures. This will allow the Commission and SCCP to see how well SCCP's restructured operations are functioning under actual working conditions and to determine whether any adjustments are necessary. Thus, the Commission is approving the portion of SCCP's proposal that amends its By-Laws, Rules and Procedures through Dec. 31, 1998.”Back to Citation
6. Securities Exchange Act Release Nos. 40872 (Dec. 31, 1998), 64 FR 1264 (Jan. 8, 1999) [File No. SR-SCCP-98-05]; 42320 (Jan. 6, 2000), 65 FR 2218 (Jan. 13, 2000) [File No. SR-SCCP-99-04]; 43781 (Dec. 28, 2000), 66 FR 1167 (Jan. 5, 2001) [File No. SR-SCCP-00-05]; 45227 (Jan. 3, 2002), 67 FR 1259 (Jan. 9, 2002) [File No. SR-SCCP-2001-11]; and 47016 (Dec. 17, 2000), 67 FR 78556 (Dec. 24, 2002) [File No. SR-SCCP-2001-12].Back to Citation
7. For a detailed discussion of the clearance and settlement services SCCP will continue to provide, refer to the notice, supra note 2.Back to Citation
[FR Doc. 03-31811 Filed 12-24-03; 8:45 am]
BILLING CODE 8010-01-P