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Self-Regulatory Organizations; Stock Clearing Corporation of Philadelphia; Notice of Filing of a Proposed Rule Change Relating to Ex-Clearing Account Transactions

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Information about this document as published in the Federal Register.

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This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble January 8, 2004.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] notice is hereby given that on December 26, 2002, the Stock Clearing Corporation of Philadelphia (“SCCP”) filed with the Securities and Exchange Commission (“Commission”) 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 persons.

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

The proposed rule change would amend SCCP Rule 11 (Ex-Clearing Accounts) to include a transaction in an ex-clearing account whereby both sides have agreed not to transmit the transaction from SCCP to the National Securities Clearing Corporation (“NSCC”) for clearance and settlement.

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 such statements.[2]

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

The purpose of the proposed rule change is to facilitate the efficient clearance and settlement of securities transactions by SCCP participants that have made their own arrangements to transmit such transactions directly to NSCC. SCCP anticipates that certain members of the Philadelphia Stock Exchange (“Phlx”) that participate in Phlx's program to trade Nasdaq securities will make arrangements for the clearing and settlement of their Nasdaq securities trading at Phlx directly with NSCC. SCCP intends to offer such Phlx members the use of an ex-clearing account for this purpose. Currently, SCCP uses ex-clearing accounts in situations where both sides have agreed to settle a transaction outside any registered clearing agency mechanism such as NSCC. This is in addition to other accounts offered by SCCP, such as a RIO account [3] and a margin account.[4]

SCCP now proposes to amend SCCP Rule 11 to add transactions whereby both sides have agreed not to transmit the transaction to NSCC for clearing and settlement via SCCP. Accordingly, both sides could agree to submit a transaction directly to NSCC instead of SCCP doing so. A SCCP ex-clearing account would then be available for the following two scenarios, where both sides have agreed to settle a transaction: (1) Outside of NSCC and (2) at NSCC but without SCCP submitting the transaction there.[5]

SCCP believes that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act [6] which requires that the rules of a clearing agency be designed to promote the prompt and accurate settlement of securities transactions, to remove impediments to and perfect the mechanism of a national system, and to protect SCCP, its members, investors, and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

SCCP does not believe that the proposed rule will impose any inappropriate burden on competition.

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

SCCP has not solicited or received written comments on 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 the 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, including whether the proposed rule change is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street NW., Washington, DC 20549-0609. Comments may also be submitted electronically at the following e-mail address: All comment letters should refer to File No. SR-SCCP-2002-07. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, comments should be sent in hardcopy or by e-mail but not by both methods. 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 NW., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at SCCP's principal office and on SCCP's Website at​ exchange/memos/SCCP/memindex_sccpproposals.html. All submissions should refer to File No. SR-SCCP-2002-07 and should be submitted by February 4, 2004.

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For the Commission by the Division of Market Regulation, pursuant to delegated authority.[7]

J. Lynn Taylor,

Assistant Secretary.

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2.  The Commission has modified parts of these statements.

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3.  RIO means regional interface organization, which is the system through which SCCP transmits to and receives trade data from NSCC. In a RIO account, SCCP records, confirms, and transmits transactions to the RIO participant's NSCC account or its correspondent account that ultimately settles directly with NSCC. SCCP makes no trade guarantees respecting RIO account transactions. SCCP is solely a trade recording, confirmation, and transmission agent of RIO account participants' transaction activity.

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4.  Phlx specialists, alternate specialists, and other Phlx floor members may be specifically approved by NSCC to effect trading in a margin account. SCCP will provide margin accounts for margin members that clear and settle their transactions through SCCP's omnibus clearance and settlement account at NSCC.

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5.  The use of ex-clearing accounts as proposed in this proposed rule change is not limited to trading in Nasdaq securities and may be used in any situation that otherwise meets the criteria for the use of ex-clearing accounts in this manner.

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6.  15 U.S.C. 78q-1(b)(3)(F).

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[FR Doc. 04-800 Filed 1-13-04; 8:45 am]